Short Sales- any advice? To do or not to do?

Question

Any advice on short sales? I am a new investor. Properties are going so fast on the market this past year and now current year. I found a short sale that is offering a USDA loan. What is everyones thoughts on Short Sales as well as Usda loans? If i go through with the purchase, any advice on the process. I hear it can be long and grueling. Thanks in advance!

Jonathan Greene · Answer

@Charlie MacPherson nailed the most important thing about short sales. The listing price is not the price, that's the agent's price to get eyes and business on it (often too low for the bank). Once a contract is agreed on by the seller, then the bank will review and do their own BPO (Broker Price Opinion) and that often times will adjust the price up. Once that's done, that is usually the price until three more months go by. They can take months to complete, especially now. The best short sale to buy is one that was under contract for six months and then falls apart because the buyer gets tired of waiting. Those you can slip right into, the numbers are all verified, and close quickly because once the bank gets it that far, they are motivated to close.

Charlie MacPherson · Answer

@Theresa Mack Short sales and USDA loans are two completely separate topics.

Eligibility for USDA lending hinges on location, condition and price. Search "USDA Eligibility Map" to see if your location is eligible. The property must pass the appraisal for both value and condition and the condition requirements are strict.

Short sales are slow and difficult. Unless the price is listed as "approved", you have no idea what the final sales price will be. "Approved" means that the lender has agreed to that price, which is less than is owed. There may be other loans and liens to deal with as well.

The last short sale I did took 9 months. The closing date was pushed back 5 times and at the last minute, the 2nd lien holder decided that they wanted an additional $5,500, which had to be paid in cash. If it was part of the new mortgage, the 1st lien holder would just take it as they were still being paid less than was owed.

Short sales are usually not the right answer for an owner occupied house due to the uncertainties in cost and closing dates. If you're buying it as an investment it can work - but don't forget that USDA single family home loans are for owner-occupied properties only.

Theresa Mack · Answer

@Charlie MacPherson That answered my questions! Thank you so much. It is available for a USDA loan but I would not be moving into it so that crosses that off my list. It would be an investment property flip. I had no idea that there can be extra costs associated with it in addition to the actual purchase of the home. Would they tell me this information upon me putting in an offer or prior to placing an offer?

Short Sales- any advice? To do or not to do?

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