This is a wall of text, apologies in advance. Just a rundown of our experience in purchasing a short sale house in the off chance that anyone in the future explores this as a purchase option.
I'll TLDR here to summarize. Know when you make an offer that the house is a short sale or not. Verify that the seller's realtor is aware if it's a short sale or not; the seller's realtor's inexperience has almost cost us the property multiple times. Verify that a title search has been performed by the primary mortgage holder so no unexpected liens come up in the 11th hour. Hire a real estate attorney immediately to be your go to for negotiations. Be prepared for the process to last months, especially if the property was Fannie Mae/Freddie Mae backed.
We officially submitted our offer on 6/28 of this year and we're still trying to get through this process. Anything and everything that could have been an "issue" has been.
When we first looked at the house and made our offer, it wasn't disclosed to be a short sale listing. Wouldn't have made a difference for us, but we would have researched more in the beginning what to expect. The seller's realtor didn't even know it was a short sale. The seller's realtor was/is brand new and does this part time. Luckily our realtor has been involved with these types of sales in the past and had a clue of what was coming down the pipe. Unfortunately, the inexperience of the seller's realtor has almost cost us the property several times. Delays in paperwork submissions, incorrect paperwork submitted, incomplete communications with the lien holders, etc. has almost pushed this property for foreclosure several times.
We make our offer and then the 1st and 2nd mortgage details come to light. It took approximately 2 months of the 2nd mortgage holder digging the loan details out before we could move forward in a settlement statement. The 2nd loan was so delinquent, they had closed the mortgage and had to reopen it, which took forever, but allowable.
We think we have this sorted in mid October and we're lining up home inspections and about to reapply for a mortgage, because our pre approval had expired. Then a 3rd lien comes to light from a private vendor. We spend 5-6 weeks negotiating with Fannie Mae, the two mortgage holders, and the lien holder to get everyone a payoff they could agree on. The 3rd lien holder walks away from the negotiations because they feel they're getting a bad deal in the breakdown of funds and the house purchase is dead in the water and we're planning on purchasing at auction...fine.
A week after it's dead in the water, the 1st mortgage holder comes back and has some plans to satisfy all the debt holders requests, but it's going to take some creative mortgaging if we can get a lender on board with doing the loan for us that way. Essentially we agreed to pay the amount requested from the 3rd lien holder at closing if they would release the property from the lien.
Here we are now, the week of Christmas, and the lender we found that is working with us on the purchase is driving me insane. We've been very clear in our communications (i.e. relaying to them there was a specific time during a specific day that we were not available to talk and that's when the lender called to discuss the mortgage). I've had to submit and resubmit paperwork several times this week (they've requested the same documents twice now that I've sent). I had to pull tax forms from our lender for our current residence (we're keeping that property and the new lender needs details); I pulled them from our lender's site and it shows all the needed information and the requester has come back now asking for it to show the lender's logo.
We have an inspection next week. We have a closing date. We have jumped through every hoop in this entire process, and this lender we're trying to use (who came recommended from our realtor who I trust immensely) is making it so much harder because they're not paying attention to the details. We're going to get through this, and then I plan on sharing with our realtor to maybe not recommend this group again, and detail our experience with them.
I hope this very high level rundown of our experience can help someone in the future decide if a short sale is best for them.
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source https://www.reddit.com/r/RealEstate/comments/rma9iy/purchasing_a_short_sale_home_in_ky_and_this_is/
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