SHORT SALE AND BANK OWNED PROPERTIES
The Matt Evans Team is experienced in short sale and REO bank-owned property sales. We have completed both listing and buyer side sales with our clients.
What is a short sale? A short sale is the sale of a home where the proceeds from the sale will net less to the lienholder than the lienholder is due to receive from the current payoff amount (balance) of the loan or loans outstanding. A short sale may be an attractive alternative to foreclosure for the Seller. It is also an attractive choice for banks, because during the short sale process the asset is typically better maintained by the Seller. Every Seller's situation is unique, and not everyone qualifies or is a good candidate for a short sale. Sellers and Buyers should consult with a real estate attorney regarding possible outcomes of each alternative, and possible tax and debtor consequences of the proposed short sale.
The five requirements of a good short sale candidate include...
- Loan must already be in default (missed payments)
- There must be a contract to purchase or purchase agreement with Seller and Buyer
- Sellers and their family should have few other free and clear large assets
- Buyer must be patient as many short sales take up to 90 days for approval from Lender
- Seller must be willing to move on or already has moved on and house is vacant.
A short sale requires the approval of the lienholder(s) (lender) of the contract and the proceeds they will receive from the sale. Negotiation of that amount is either up to a third-party negotiator or the REALTOR, with approval from the Seller and the Buyer of the final settlement. Any property listing subject to short sale must be disclosed to both parties by using the proper Indiana State Forms. The lender will have to review the preliminary and final HUD prior to approval of the short sale and closing.
Bank owned properties (REOs) are properties a Lender now owns and has received back as an asset thru the foreclosure process. Foreclosure and recovery of an asset is typically a time consuming and expensive process for the bank, and most banks favor short sales to protect their asset and keep it from entering a portfolio. The Seller in the REO is the bank, and purchase offers are reviewed by the asset managers. Some banks are able to respond within a day or two, others may take a week. Each listing is different, so we always consult with the banks and listing agents to find the proper response period.
Homes loans that were provided thru the FHA many times are reclaimed assets that become HUD homes, which are dispensed back to the public sector thru the HUD (Housing and Urban Development) sale program. HUD performs an online bid process on these government owned properties, and we have the expertise to help clients bid on these properties. Buyers must realize the number of HUD homes is still pretty limited in Northwest Indiana, although that supply could always increase if more mortgage defaults occur.
As of April 2010, the Federal Government is enacting a new program to provide cash reward to the Seller and loan servicer for a short sale, while further protecting the Seller from future lender lawsuits on the unpaid balance of the loan. In the everchanging world of distressed assets, we encourage our clients to keep in touch with the Matt Evans Team and stay up to date on pending changes.
