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National Mortgage Rates 16 May 2012
| Loan Type | Today | +/- | Last Week |
|---|---|---|---|
| 15 yr fixed | 3.06 |
|
3.04 |
| 30 yr fixed | 3.78 |
|
3.75 |
| 5/1 ARM | 2.69 |
|
2.72 |
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Are Short Sales A Good Bargain?
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- JR Hevron - MortgageLoan.com
In this economy, where many homeowners are desperate to sell their homes, short sales can be a great bargain for the well-informed homebuyer.
“A short sale,” according to Greater Minneapolis/St. Paul realtor and real estate blogger Tom Sommers,“is when the seller is saying to the bank, “we can’t afford to stay here due to financial hardship. Can you let us sell it for less than we owe?” That’s what creates the short.”
The bank often agrees to the short sale because it guarantees, even at a loss, a larger percentage of money back. Also, the bank doesn’t have to go through the expense of the foreclosure process and doesn’t have to kick anyone out of their home.
A short sale can also keep the property in better condition than a foreclosure, which is good for the bank and the homebuyer. “Lots of times short sale homes are in better condition,” says Sommers, “because the people are still living in them and are not wrecking the house.”
Many homeowners who face foreclosure take out their frustration on the lender by damaging the property. This might include expensive but easily repairable damage like removing valuable appliances or fixtures, but can also include breaking windows, cutting up carpets, and in some extreme cases—dumping powdered concrete down drains and toilets!
The best way to take advantage of the benefits of a short sale is to find an agent who understands the foreclosure process. The timeline may change from state to state, but the facts are essentially the same. A person can try to sell their house as a short sale at any time. However, if a house is in foreclosure and there has been a sheriff’s sale, there is a six-month redemption period for an inhabited property between the sale and when the property gets turned over to the winning bidder.
Any time during that redemption period, the homeowner can try and sell it. An owner can try to pay what they owe and get the house out of redemption and keep the home. Most people want to try to short sale it, though. However, the minute that redemption period is up, it’s fully foreclosed. It doesn’t matter if a buyer has a purchase agreement on it or not because the seller has no right to it anymore.
“The earlier that you can get to a property in a short sale situation before a sheriff’s sale,” says Sommers, “the bank is going to be more willing to go through the short sale because they haven’t invested as much money to go through the foreclosure. So, it gives you more time to have a successful process so that you can have a close.”
This all highlights the need for an agent who has a deep understanding of the process and knows just when to jump in. “Let’s say you have three houses that are the same price, same area, same amenities and everything,” says Sommers. “One of them is not even at the sheriff’s sale yet, the second one is halfway through the redemption period, and the third one’s only a month from redemption. Even though all three look alike, the first one that hasn’t even hit the sheriff’s sale is your best bet.”
It’s also important to have a knowledgeable agent when it comes to understanding the terms of your purchase. “You have all of these other contingencies like the short sale contingency addendum that you not only need to understand before you sign, but you also want to make sure that you have all of the necessary information in front of you. If you’re not used to doing short sales, you could call and not get the information that you need.”
In addition, you should also speak to an attorney and a tax person to review any documents and give you advice before you sign anything. “As a real estate agent, that’s something I can’t do,” says Sommers. “I can’t give you legal advice and I can’t give you tax advice.”
Lastly, it is the nature of the short sale that sometimes, no matter how talented and experienced an agent is, a deal can fall through. “There are so many great agents out there who do wonderful work on short sales,” says Sommers,”but their hands are tied because the bank or an investor or whomever makes a decision and just says “no.””
A homebuyer who is shopping for a short sale should expect the whole process to take at least four months. Ultimately, this wait is worth it. “I think that short sales wonderful,” saysSommers, “as long as you go into it knowing that you have to be patient, because it’s the patience that pays off.”
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