Well we finally received a word from the lender. After 11 months of waiting they have declined the short sale for the property. What does this mean? At this point the property will go to Sheriff Sale. The Buyer can bid on the property at the Sheriff Sale but will be responsible for outstanding liens over and above the lenders “upset figure.” If the lender takes the property back it will then be listed for sale. This process can also take months. Anyone looking at a short sale needs to be prepared, not only to wait for responses but also to realize that they may not get the approval/house. In the meantime mortgage commitments and appraisals are a cost to the Buyer. It is important to know the property and its’ encumbrences. Time, patience and committment are requirements for a short sale with all parites including a realtor. Ask questions, do your homework and be prepared.
The investment house is “officially” ours. I say officially because the contract is out of the attorney review period (3 business days in New Jersey). Since we are purchasing the house in “as is” condition, we will not be having a home inspection, although I did have our contractor look at the house prior to the end of the attorney review period so that we could get out of the contract should something been terrifically wrong.
I have sent the contract to the title company. The first thing they will do is a search to make sure that there is clear title to the property. That means no one that owned the house in the past, or a relative, has a claim of ownership against the house. They will also run a search against the Buyers and Sellers to make sure that there are no liens against them that would need to be paid with the proceeds from the purchase. New Jersey has become very strict about back alimony and child support. I think it’s a good thing.
The title company will also pro-rate the taxes to the day of settlement and in this case the water and sewer bill. Because we are paying for the house with cash, we will not be required to show proof of insurance. Insurance is usually required by your mortgage company because they want to know if something happens to the house, that you will be able to re-build and keep up with your mortgage payments. We will get insurance even though it is not required because my husband will kill me if we don’t have it. We will not be required to have flood insurance. That is also a requirement of your mortgage company, not the title company.
By paying cash, we will significantly lower some of our immediate out of pocket costs. There is no mortgage application fee, appraisal fee, credit check fee, flood zone check fee, flood insurance required or hazard insurance. (Although we are planning to get insurance on the house.) Also, the mortgage company usually requires a Buyer to pay 1 full year of hazard insurance and then they escrow three additional months of payments. They will also escrow three months worth of taxes. It does add up to the cost of buying a house.
We will have to pay, title insurance, to record the deed, pro-rated taxes, water and sewer. Also there is usually a charge for holding the settlement and the cost of the settlement officer to notarize all documents.
As I said, it is almost ours…..
Well, we negotiated the price. They wanted us to go up $10,000.00. My partners wanted to hold at our offer. They felt as Buyers, we are in driver’s seat. Hold firm, they’ll back down. If they want a fast closing they’ll come to our number. All of that may be true, but we want the property. The price is good, and we also need to settle soon to begin the necessary rehabilitation to make the property in rental condition by the summer. We came up $5,000.00 and they met us in the middle. Negotiations are about give and take. The bottom line is did we really want to lose this property over $5,000.00?
So, according to the terms of the contract, we are now in the Attorney Review phase. This allows both parties to have the Contract reviewed by their respective attorneys. During this period, either party can withdraw from the Contract for no reason. Attorney review runs three business days. It begins the first business day after all parties have received a fully signed copy of the contract. Our Contract was signed on Wednesday, so our Attorney Review period is Thursday, Friday and Monday.
I am meeting with my contractor on Saturday at the house. Because we plan to do work to the home, we agreed to buy it in “AS IS” condition. As a realtor, I do not generally recommend purchasing a home without a home inspection. Our contractor will be giving us some raw quotes and will do a quick inspection to make sure it is structurally sound.
I think I might want a miter saw for Christmas this year.
Well, I decided to take my own advice and buy an investment property. My husband waved his hand and said “good luck”. Not the heartfelt endorsement I was hoping for, but not an “Are you CRAZY?” either. So, I got together with my two girlfriends, two of my children, three of her kids and we are forming a LLC (Limited Liability Corporation) and are putting an offer in on a single family home in Cape May that we hope to fix up and rent by this summer.
The first thing that happened was a call came in from the other realtor saying the Seller had accepted our price. I called my other 7 partners and my stock broker to get the ball rolling. The Seller wants to settle by the end of the month. Then I got a call from the other realtor saying the Seller misunderstood the price, and could we raise our offer $10,000.00?
A sign of things to come? I’ll let you know.
A short sale is where the owner of the property has listed their property for sale at an amount less than they owe the bank or mortgage company. Many times, the bank has not agreed to this reduction ahead of time. This can add months to the negotiations. The banks and mortgage companies are overwhelmed with the sheer volume of short sales taking place. Be prepared for what could turn out to be a long process.
The short sales that I have been involved with have been second homes for the Sellers. Due to some financial burden, they have put the home up for sale, but prices have dropped and the house is no longer worth what the Seller paid for it, or owes the mortgage company. The Buyer comes in at a low price, the Seller signs the contract and then it goes to the mortgage company for their acceptance. What goes on behind the scenes is, the mortgage company sends out an appraiser. They also look to see if the Seller has another property, usually their primary home, that they can put a lien against for the difference. Often, the mortgage company will respond with a counter offer. There are long periods where the Buyer may not hear any news at all. When the mortgage company finally responds, they will expect a quick settlement, so the Buyer must be prepared financially. The Buyer will most likely buying this home in “as is” condition. Banks and mortgage companies are not in the business of doing home repairs.
A short sale isn’t for everyone. What often happens is the short sale property receives an offer and it lingers out there in “mortgage land”. The Buyer becomes frustrated, sees other properties come on the market and withdraws their offer and moves on to the next property that is not in short sale but has reduced their price to compete.
The best advice is get yourself a realtor that has done some short sales and foreclosures. Their knowledge will prove valuable as they help you negotiate not only the price, but the pitfalls and benefits of what could prove to be a great deal at the shore.
If you are thinking about buying a home, now is surely the time to buy! Whether your 1st home ( $8,000.00 Tax Credit-limited time), a second home ($6500.00 Tax Credit -again limited time) downsizing or change of location this is an opportuity you can not afford to miss.