How does a realtor make money on a short sale
Selling a home for less than the amount the current owner owes the mortgage company is called a short sale. Buying a home that is a short sale is different from buying a property that is actually owned by the bank, known as an REO, or real-estate owned property, or a property that is in foreclosure. This spring, real estate sales began picking up in many U.
But not all sales have been proceeding smoothly. As a rule, sales involving foreclosures and short sales take longer than usual to close because of their inherent complexity. Still, they represent a significant portion of sales activity.
In February, these transactions made up 45 percent to 50 percent of all sales, sometimes more in parts of the country where the foreclosure rates were particularly high, according to the National Association of Realtors.
How can you get in on a good short-sale deal? It takes a certain amount of fortitude and patience, plus a lot of luck.
Get prequalified for a mortgage today. A short sale can be a good deal for a buyer, and it can help the seller avoid having a full foreclosure on his or her credit record.
In a short sale, the proceeds from the transaction are less than the amount the seller needs to pay the mortgage debt and the costs of selling. That makes short sales complex transactions that move slowly and often fall through.
The program will spell out a short-sale process and provide standard documents, the U. Most of the time, the seller has already fallen behind on the mortgage, but occasionally the seller is current but unable to continue to pay because of ill health or job change. This is particularly true in parts of the country where home prices have fallen significantly.
Before you rush in, consider the issues. The advice below comes from Scott Thompson, senior vice president of Mortgage Resolution Services, a distressed sales consulting company, and Vicki Vidal, associate vice president of government affairs for the Mortgage Bankers Association. Know what you are getting into. Under the best circumstances, short sales take a long time to close and may require extra effort on the part of the buyer.
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Walking blindly into a short sale can be a losing and distressing proposition, so push for disclosure before you get involved, Thompson says. This is not a do-it-yourself project.
Find a real estate professional who understands the territory. Having a real estate agent on your side who knows how short sales work and who has negotiated others will increase the chances of closing the deal. Their game often involves negotiating a low price with the lender, charging the buyer more money — often significantly more money — and pocketing the difference.
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Be wary of the condition of the property. If the seller is in financial distress, chances are the home may not be well-preserved. The seller also may be reluctant to reveal serious maintenance issues. Proceed cautiously and get the property inspected by a knowledgeable person before you commit. Below are items that most lenders require from a short seller.
Home Buying: Do real estate agents get less commission for Short Sales? Or is there some other reason why they often avoid them? - Trulia Voices
If there are first restricted stock options startup second mortgage liens, the question becomes: The seller and the real estate agent should have a plan that is more sophisticated than crossing their fingers, Thompson says.
In the best of all possible worlds, the seller will be willing to contribute to paying off the second lien, so average salary for a stockbroker first lien holder gets the full amount from the sale. If there is a third mortgage lien, reaching any deal is very iffy. Deal killers include child support liens, state tax liens and homeowners association liens.
If they exist and there are no obvious solutions, walk away, Thompson says. Often the mortgage insurer will simply go silent. No response, no approval. Bankrate offers several articles on the topic of foreclosure.
Another factor is the increasing number of government programs aimed at keeping people in their homes — about 50 percent of defaults never go as far as foreclosure, according to the Mortgage Bankers Association.
If the lender turns down the offer without countering, unusual options trading the restriction disappears. As is true with any of these deals — REOs, short sales, foreclosure auctions — make sure you have money lined up. Cash is the best financing alternative in these cases.
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Get Advice Tracking down your tax refund Tax tips for new homeowners 10 often overlooked tax breaks States with no income tax: Free credit report myBankrate open. How to navigate a short sale Jennie Phipps jennielp June 12, in Real Estate. What is a short sale? Get prequalified for a mortgage today Finding a good deal A short sale can be a good deal for a buyer, and it can help the seller avoid having a full foreclosure on his or her credit record.
The seller must explain why he or she cannot continue making payments. The sadder the story, the better. Proof of income and assets. If the seller has money in the bank, including retirement funds, it is unlikely that the lender will let the debt slide. This package of information must include income tax and bank statements, going back at least two years. Sometimes sellers are unwilling to produce these documents because they conflict with information on the original loan application, which may have been fudged.
This packet of information should include a list of comparable properties on the market and a list of properties that have sold in the past six months or have been on the market in that time frame and are about to close. A list of liens. There may be more than one, so determine how many liens are on the property. The good news is that since latethe IRS has been willing to release a federal tax lien.
The IRS is not forgiving the back taxes that homeowners owe; it is just no longer requiring that the lien be paid off before the property can be sold. And a single mortgage lien is an easy problem to solve. Be realistic The bottom line: The 10 best and real work-at-home jobs Career. Capital gains tax on real estate Taxes. States with no income tax: Better or worse to live there? Current mortgage interest rates.
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