Non-investor Short Sale Oppurtunity. Don't Know Where To Start.

I'm not an investor. I'm a first-time home buyer looking for advice on a short sale. And I've only just discovered this forum while trying to learn more about how a short sale works. I'm hoping that some of the more knowledgeable members can point me in the right direction. Here's my situation.

I'm a first-time home buyer and the house I'm interested in is up a short sale. I understand the basic definition of the term, but not how to get the best deal or how I should approach my offer. I don't know much about real estate, so please bare with me.

When I called the listing agent about the home, they informed me it was a short-sale. I don't have a buyers agent as of yet, and the listing agent is suggesting I enter a dual agency with them. So my first question is: is this the right thing to do? Without a buyers agent can I negotiate a better price?

I like the home, and would like to make an offer but don't know where to start. The home is listed at $175,000, and has been on the market for a couple months. I don't know much more than that, other than what it last sold for ($189,000) and when it was sold last. I obtained that information from Zillow. From the looks of the updates, the seller put about $20K into the house after the purchase.

What else should I find out and how do I go about getting that information?

Also, how to I determine what to offer? I think the house needs between $10,000 or $20,000 worth of work to the exterior to make like the neighbors, which are very similar, yet not for sale.

Do I get an estimate of the repairs I think are needed, and submit them with my offer to justify it? Do I submit photos? What about if the seller accepts it? Does the sellers agent try to convince the bank why they should sell it for a lower price? How would they do that? Or is that something I should do?

And if it matters, I'm in Michigan so the market is on the decline.

I realize I'm a total newb and this is probably the wrong place to be asking all this stuff, but I'm not sure where else to go. All I can find elsewhere is information about the headaches and timeframe to expect with a shortsale. I don't know the real estate vernacular, so maybe someone can recommend a book where I can start.

Any information would be greatly appreciated. I apologize if a posting like this is out of line. If it is, please direct me to the appropriate forum.

Thank you.

Hi Doubledunny!

I just bought a 2 flat that was a short sale. I am also pretty new, but have been thru this in dec and am trying to get another this month.

Here is my definition. The ower bought the place for more than what the bank sells it for. So this means for example I bought a place for 200K last year, defaulted etc, bank took the home, and puts it on the market for 100K. At closing you will see that they write off the difference between the outstanding loan amount and the sales proceeds. So far, I picked up a 2 flat that was listed in 2007 and bought for 260K, I got it for 150K. Needed repairs etc, but only 10K worth.

This is a great place to get answers, just be patient.

Good luck.

Sunny8,

Once the bank owns it, it is an REO rather than a short sale- a short sale is when the bank accepts less for the loan than the payoff amount.

DoubleDunny,

Every Realtor hopes for double agency. The problem is that a double agent can't do anything to reduce the amount the seller receives, such as suggesting a lower offer. It is a tricky ethical situation, where all the Realtor can really do is try their best to make the sale go through. For an experienced investor, double agency offers an opportunity to reduce the commission, making the net offer to the bank a little higher, but in your situation I would advise finding another Realtor with a lot of short sale experience to represent you.

Chris

As to the dual agency...

Do you feel comfortable w/ the person?

Since the seller is paying the commission, it doesn't hurt to have your own agent. In a hungry market like MI, you might even be able to negotiate that your agent give you back some of the commission.

The good thing about dual agency in my experience is if it's a short sale, REO, pocket listing, other hot opportunity, is that they know exactly what the other side is looking for, and can help you in negotiating the price.

It's unethical/illegal for the to tell you the price outright, but they can coach you in the negotiation.

Dear Newbee, the bank has already taken the property back through foreclosure, so all prior liens and debts have been "cleared off" the property. So figure the total costs for your re-hab...don't hold back, new kitchens, baths etc.,
YES! the MI market is very "soft" so allow for further decline in prices even with the value added rehab you are planning. Est. the re-sale value once work is done. Subtract the rehab costs AND subtract the PROFIT (your return on investment) you want to make. Then you have the amount you will offer on the property. You really don't need another agent to rep. you and the fact that the listing agent will get the whole commission would be added incentive for him to work with you. TheShortSaleGuy

[ Edited by TheShortSalePro on Date 05/07/2008 ]

So would you suggest I enter the dual agency agreement? Will the listing/selling agent be able to tell me everything I need? Like how many mortgages or on the property? Who the lender is? And will they be able to work with me on getting an estimate for repairs, or is that my responsibility?

DD,

I would spend an entire day finding a buyers agent who has lots of experience in short sales. Dont just take their word for it either. In todays market, every realtor thinks they are a SS expert.

Once you find yourself a competent buyers agent, he should be able to supply you with a viewing of the property in which you can have his contractor walk you through and place bids, or you can thumb the yellow pages and find your own GC.

Your buyers agent along with the contractor will be able to walk you through the properties "as is" value in which you two will then establish YOUR maximum offer to the bank.

Ask a lot of questions. Bring a notebook and a digital camera. Visit your courthouse and dig up everything you can about the property. Mention this information you've aquired to your agent to let him/her know you're not a dummy and that you are serious about closing on the property.

Hope this helps.

P.S. Track down the Notice of Default(NOD) it will provide you with some very usefull info.

[ Edited by davidstyles on Date 05/07/2008 ]

I'm confused. Some people are telling me I don't need a buyers agent, while others are saying I do.

I've already been to the property and determined what needs to be done to fix it. I've also taken a ton of photos of the damage to the exterior and the other concerns inside. I just don't know how much everything would cost.

Does my offer depend on how much the seller owes on the mortgage? Is so, is it possible to find out how much that is.

What will I find at the courthouse about the property that will help me? They willingly give that stuff out? Keep in mind, I know nothing about real estate. I don't plan on investing. I just want to make sure I make an informed decision in my the purchase of my first home. The more replies the better! I'm looking for all the advice I can get.

It is really up to you whether or not to hire a buyers agent. I dont see why you wouldnt, personally. It's not going to cost you a thing. Plus, you are going to need somebody to be negotiating with the bank on your behalf. This is why I suggest shopping around for an agent with SS experience.

If you feel that your assesment of damage is accurate, then just bring your list to home depot and start pricing things out or work your way through the yellow pages and get bids.

What the seller owes is not what you will have to pay. The very definition of a SS is when a lender agrees to accept less than what is owed as payment in full. So, depending upon how much is owed and what the lender thinks the property is worth, the bank often will take a percentage of that(depending greatly on what type of loan it is. FHA, convetional, VA, if it has PMI, etc.) minus repairs.

As far as visiting the courthouse goes, just head down to the recorders office and tell them about your situation. Let them know that you are wanting to find our any information on the property that is available in public records. Hell, you can probably find this on the county website for free right from your computer.

take care

[ Edited by davidstyles on Date 05/07/2008 ]

I would recommend you to get a buyers agent... no cost to you...

Now, for you repairs... if you do not know how much it might cost... you can do the following...

Go to ****Must participate a while before posting URL's***
- make a list of all the repairs in the "online order" area - this will give you a ball park - the round UP
- You can also get a contractor to give you quotes...


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Consult your "buyers agent" but include an addendum like this...

"offer is subject to buyers approval of pest control, roof and/or home inspection within 15 days from final acceptance. If buyer disapproves of any report, buyer may rescind offer without liability... blah blah blah"