Belt Auction

CA Real Estate - If you are in foreclosure, what are the benefits to Short selling your home?

Believe me I know this is a long shot but I am considering trying to contact homeowners who are in Pre-Foreclosure in attempt to try and find a good deal on a home for my family. We are approved for a loan but keep getting beat out by cash offers. We do have a Realtor, we are willing to close quickly, and we are willing to overlook certain defects in order to keep our family in the town that we love. I was wondering if there are any advantages for someone who is in Pre Foreclosure, Foreclosure, etc. to try to get out ahead of the home being sold at auction so long as they have no hopes of a loan modification or other salvation. What are the pitfalls for us? Any tips on how to get the bank to accept a short sale price? Please no rude answers. I really don't know that I can bring myself to contact people in this situation, particularly people that I know being that we are trying to stay in the same town. I am simply exploring all options that I can think of since a conventional "place an offer, wait for acceptance" is not working right now.

Public Comments

1. benefits to a seller is it is less damaging on credit. they will be able to obtain another home loan in 2-3 years vs 4 or more if they allow foreclosure to occur. home will sell for a little more also if they care about neighbors. many will not care but some sellers might. banks accept if they feel foreclosure is a real threat and they will net more in short sale.
2. Well, there isn't a huge advantage for the seller, with regard to their credit, between a short sale and foreclosure. About all they get out of it is maybe some dignity in the process. Having to get a loan will generally always lose out to cash buyers, even with preapprovals. You still have a longer closing process, and there is still some chance the financing may fall through for some reason. Have your realtor help you decide what a fair price for the home is. What you are willing to pay and what the market conditions are dictating. Lenders won't accept ridiculously low offers; as much as they don't like to foreclose (regardless of what you hear) they end up slightly better that way as opposed to just giving it away. Be prepared for a short sale to take much longer to consummate than a foreclosure. One of the main reasons for this is that the seller often has to provide financial information to the lender to prove they really, really can't afford the loan or modification, and sometimes sellers drag their feet on this. The lender is also going to request and wait for a couple of broker price opinions so they can determine the apparent value of the home, and these may be long in coming in. With a foreclosure, they have already done this and established an asking price. As you noted, you will have to overlook some piddly defects because they are not going to offer allowances or concessions. These decisions are all made by committee, by overworked and understaffed departments. For the above reasons, I tend to prefer to seek foreclosed properties instead of short sale opportunities, since all the hard work on the part of the lender has already been done. Once you find your offer has been accepted, expect them to demand a really tight closing schedule. You will need to ride herd on your lender to get to closing on time or suffer per diem penalties.
3. I don't see anything wrong with this but... I have a few friends that are doing this and their wait is usually 6 to 8 months before the bank even gives then a response. I believe it is because there are so many short sales going on. I do believe it is a lengthy process. Maybe you should seek out fsbo( only not necessarily short sales) people that are trying to get the payoff and walk away.
4. I won't be rude, but I will be straighforward. In ANY shortsale, the lender involved has done background work to ascertain current market values. Will they accept considerably less ? Not a chance. The lender knows that its chances of getting a sale price close to market value are just as good after foreclosure, and the property is placed on the open market. Can you get a decent deal on a short sale ? Sure, because the lender knows it will not have to incur the expenses involved in a foreclosure action. If you engage in a short sale offer, insure that all your bases are covered. Such arrangements can often approach the six month term of closing afer an accepted offer. Proceed with HEAVY caution. If you are thinking that you can contact the involved lender to 'push them along' forget that idea. The lender involved will barely talk to you.