Hi my name is Lance Mohr and thank you for watching this video on short sales
and foreclosures in this video I'm getting over the definition of process
and some things you need to know when buying a short sale / foreclosure first
let's go over foreclosure because a lot of people get the word foreclosure
confused foreclosures actually the legal process that debate goes through when
they're trying to take back the home now once the bank has foreclosed on the home
owner then the property is vague owned or REO real estate out when you see a
short sale
pretty much all short sales are foreclosures it's in the foreclosure
process so they're really hand in hand now short sale is just that it's when
the bank agrees to sell the property short of what's owed on example a few
years ago someone bought a house for three hundred thousand now maybe the
home is worth 200,000 and they don't have the money to bring into closing
their falling behind in their payment and they have to go to the bank the bank
has to agree to sell it short of what's owed on it now though it is pretty easy
to do a short sale
there are some sellers just can't qualify much like when you buy a home
you have to qualify for the loan when you do a short sale as a homeowner you
have to basically unqualified there's a lot of documentation you have to fill
out so keep in mind what a short sale is in 10 foreclosures
now the process it basically works like this
the banks really are not doing anything on the property until they get an offer
they don't stop the listing price the listing prices set by the cell where in
the homeowner don't have to be careful because sometimes they do the paints
which they put it real low to get someone to write an offer in on it but
the banks don't set the price
what happens is when a buyer makes an offer on the property the agent the
listing agent usually is a person who's handle
they get the offer and they have to submit to the bank they have to submit
the West End agreement they have to submit the offer and they have to send
submit all the information to the bank that the bank's requesting for the short
sale package now any of that documentation is missing the bank is not
going to do anything on it sometimes it could take several weeks before the
agent gets all the documentation from this seller so it's good to know where
the cell where is with all their documentation if they have it all turned
in already or accused when you submit the offer to your lady for once they're
all the documentation is turned and it goes to a set of department this setup
Department make sure everything is turned in and then they simply set it up
and their computer system they ordered the BPO for brokers price opinion or a
parade appraisal this to trying to find out what the value of the property as
once that's done and now let me say this
the bigger the bank the longer this could take example they give america is
the biggest bank out there and they take the longest other banks like Wells Fargo
Wachovia the chase city they say they could take quite a while as well
small little danger credit unions generally won't take that long so there
once it goes out it gets done the BPO's and instead of department it didn't get
turned over to negotiator again depending how busy the negotiator is
there going to negotiate the deal once they look at the BPO or appraisal will
have an idea on what the value of the property is now this is the
misconception that a lot of people don't really understand it's generally not
thank who owned the note it's a company like Fannie Mae Freddie Mac
pay private mortgage insurance maybe investors like hedge fund company and
they all have their guidelines so let's use what you had for example so Bank of
America has gone through the process and now they see the property and let's say
you the properties worth $200,000 and HUD owned the note Heights guidelines
state that they have they could only take 85 percent now so after everything
is paid off all the attorneys fees
the back taxes the homeowners associations the Commission's the
recording fees the title insurance the deeds dance after everything is paid off
it cannot exceed 85 percent net if it does the investor just won't do the deal
so you have to really have an idea what the value of the property is so if you
see something in its you think it's worth 200 and its for sale for $60 and
you know you might want to think twice about putting an offer that could be a
bait switch now most short sales or take anywhere from probably around two and a
half months 24 months if they did bigger banks like Bank of America it could be
anywhere from three and a half to six mines a lot of people say well why don't
these banks get it done quicker
well here's the problem the banks like Bank of America Wells Fargo Wachovia
they don't know in the notes there the servicers they're running to drag this
out as long as humanly possible because they're getting service seen these on it
so it doesn't behoove them to get this done right away and that's the problem
right there that's why a lot of these short sales don't work out so here's
some things that you need to keep in mind when you're buying a short sale
there's a couple questions first make sure you hire an agent and you're
working with an agent to really understand short sales because a lot of
agents out there
a lot of them do that still a lot of fun down some of the questions they're gonna
want to ask for ID is there anything that the seller's gonna take out of the
house because the last thing you want to do is put an offer on a home and then
all the sudden find out did a week before closing the store stripped down
took either everything are a bunch of stuff and what are you gonna do to
someone who's already getting sued by the bank so it's a good idea ask that
the second thing I always ask is are they paid up on the water bill and if
not how far behind are they
because if there are a couple with few months behind the water company most
likely when you put a lock on that water meter and if it has a lock on it
someone's going to have to pay for that walk to get off in order for that water
company to turn the water on and it's not going to be the homeowner in those
cases so it's usually gonna be left up to you that you the buyer so you'll keep
in mind that it's a good idea to know where they stand on their utilities
there's a there's a lot of other things you want to keep in mind the number one
reason why boschwitz seals don't work out is simply the time factor the second
is the main just won't agree on the price it's just too well maybe it was
just a real well Walker and it was accepted or maybe the listing agent in
the cell where the homeowner put a real low price target to sort of bait switch
people time to get the offer in certainly a lot of other things you'll
need to keep in mind
example this sometimes this seller will have to sign and no a promissory note
and they refused to do that so the deals dad if
there's a 1st and 2nd mortgage company and always have your Realtor find this
out if there's a 1st and 2nd mortgage company who are they and what's the
situation of it because a lot of times the 1st and 2nd mortgage company they
don't work well with each other and sometimes the first mortgage company
will say well let me give you $3000 the second mortgage company says no we 18
and the deals did so there's a lot of things you need to keep in mind
look at the house and the overall condition of the house if it's just
destroyed and things start stripping out of it you know that are stripped out of
it you know you might want to wonder hey is this someone who you really want to
buy a home through it could appear to be a good deal that if they put concrete
mix down the pipes things happen so you really need to keep in mind again get a
hold of an agent sit down with the agent in having explained this to you because
I had a lot of buyers have come to be after the fact and watch my videos and
they've ordered more on these videos in their agents over holding because I've
been doing short sales for a long time for over 10 years now so you want to
make sure your agents experienced and keep in mind when you're reading on the
internet it's good that the information is only as good as the source and
there's a lot of great sources out there but there's a lot of really bad sources
out there as well I hope this helps if you have any questions don't hesitate to
give us a call or shoot us an email have a great day