In our real estate market there are 3 types of sellers.
By far, the 2 primary ones are short sales and bank owned homes.
A ‘normal’ sale where the seller has enough equity in the home therefore a
short sale is not needed. Negotiations are conducted directly with the seller,
and no lender approval is required.
A short sale is a sale which the proceeds from the sale fall short of the
balance owed on a loan secured by the property being sold. With a short sale,
the lender agrees to accept less then full loan payoff due to an economic or
financial hardship on the part of the mortgagor (seller). A short sale must be
negotiated through a bank's loss mitigation department.
With a short sale, the lender has the right
to approve or disapprove of a proposed sale. Extenuating circumstances influence
whether or not banks/lenders will discount a loan balance. These circumstances
are usually related to the current real estate market and the borrower's
Real Estate Owned or REO is a property owned by a lender or bank, after an
unsuccessful sale at a foreclosure auction.
A bank will typically set the opening bid at a foreclosure auction for at
least the outstanding loan amount. If there are no bidders that are interested,
then the bank will legally repossess the property. As soon as the bank
repossesses the property, it is listed on their books as REO – Real Estate
Owned – and is categorized as an asset (non-performing).
What happens when you submit an offer on a home
being sold via short sale or that is bank owned?
Offer Accepted (Any counter offers between buyer & seller were done before
HUD closing statement ordered for Short Sale (SS) file
HUD closing statement received
Offer and HUD statement added to SS file
SS file forwarded to lender
SS file received by lender and processed into their computer system
Appraisal/BPO is ordered at this point
This is a general overview of the time line to get
a short sale approved. Some short sales are approved quicker. It all depends on
who the lender is, some are more efficient then others.
SS processor assigned to review file for completeness
Appraisal/BPO completed and into lender
SS processor has completed review of file and if complete the SS file is
assigned to a negotiator
Negotiator reviews the file and will either accept the offer, counter the offer
or reject the offer. Once there is agreement the negotiator will forward the
offer for final approval to the ‘Investor’.
Investor receives file for review and final approval
Short Sale approval escrow can now officially be opened
Owned Home Timeline
Most banks respond to offers within 2 – 10
days. If there are multiple offers, a bank will typically reply back to all
buyers who have an offer submitted to send in their highest and best offer. At
this point you can stay with your original offer, bump the offer price or change
some of the offer terms to make your offer a bit better. If your offer is
selected by the bank, they will then send out their addendum package. Once the
addendum package is signed by all parties there is a contract to sell the home.
Escrow is then opened and will proceed normally from this point. . . inspections
are done, your lender begins to work on completing the loan and the tile company
begins working on title transfer.
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