Tuesday, September 8, 2009

Lake Wylie Foreclosures and Short Sales

You've probably heard a lot lately about foreclosures and short sales in the real estate market. Depending on the market and source, you may have heard that "half of current real estate sales are foreclosures or short sales".

I can tell you that on Lake Wylie, according to the MLS, about 20% of waterfront sales in 2009 to date have been short sales or foreclosures. Some other sold properties had probably been heading in that direction, with actual sales price falling below 75% of original price, but only 20% have actually been classified as such.

You may be wondering about the difference between a short sale and foreclosure. A bank owned (or REO, real estate owned) property is in foreclosure, and its asking price will be accepted by the bank. You may make an offer below asking price, and it will likely be countered. Banks want to demonstrate to their shareholders and auditors that they tried to get the best possible price. Offers must be approved by several individuals or a committee, so it takes up to 5 days for a decision. Rarely is any business done on weekends or after hours!

Foreclosures may or may not be a good value. Often a distressed home will have repair issues, which will have to be funded by the buyer. The sales price should be carefully measured against comparable sales in the market as well; as the bank is attempting to cover the defaulted loan as well as associated costs. Compared to the original asking price (if the home was on the market prior to foreclosure), it may seem like a good deal. However, it is possible that the home was overpriced originally. Ask your realtor for a fair market analysis.

In a short sale situation, property is headed towards foreclosure. The buyer has missed a few payments, but the lender has not started the foreclosure process. The idea behind a short sale is to convince the lender to accept less than what is owed as payment in full, in order to avoid the expense and hassle of a foreclosure.

In a short sale, the property owner offers the property for the amount he thinks the lender might accept. It must be disclosed to the buyer that the offer is contingent on approval by the lender, as a "full price" offer may not, in fact, be accepted. Once the seller has a written offer, he then presents that offer to the lender, along with a hardship letter on why he cannot pay his loan.

Short sale negotiations are usually handled by a loss mitigation department, which may not communicate with the collections department. Decisions are made by committee, and it often takes weeks to even receive acknowlegement of an offer. Acceptance of an offer usually takes even longer. An appraisal is generally ordered for the committee to evaluate the offer. They need to determine if the seller is truly unable to pay. The committee may also delay a decision to see if better offers are received. Remember, the bank did not solicit the offer in the first place!

It is not unusual for the short sale process to take 6 months or more. It all depend on the lender, the area, and the individual situation. I've had one short sale that flew through as quickly as a traditional home sales transaction, but that was outside the norm. Most of the time, it is a process that tries the patience and the nerves.

Also be aware that both foreclosures and short sales for properties are typically in "as is" condition. Certainly have the home inspected, but don't expect the bank to foot the bill for repairs. Make sure your budget has room for some incidentals.

If you're in a hurry, a short sale opportunity is probably not for you. But if you have some time flexibility and are mentally prepared for the process, you may end up with a very good value.

Visit Lake Wylie foreclosures for a list of waterfront property currently in foreclosure or short sale. For more information on Lake Wylie real estate and waterfront properties currently for sale, please visit TheLakeWylieMan.com.

1 comment:

Novermyhead said...

Good information, thanks for posting.