As of this writing short sales make up approximately 30 percent of the housing market inventory in wine-growing country, Temecula, Calif. The reason for this is that many homeowners lost equity in recent years from the mortgage meltdown in 2008. Lost equity has resulted in homeowners owing more than the market value of their home, or having what is termed an “underwater mortgage.”
A short sale is like a standard sale, except the homeowner’s lender must approve a short payoff. The waiting period for a short sale lender’s review and approval can take up to several months. This is one of the caveats of why short sales have a negative reputation. The other is that a lender is not obligated to approve a borrower’s short sale, so the decision could result in a lender’s “denial.”
However, buying a short sale can be a great opportunity for a first-time homebuyer – if she is willing and able to wait out the short sale approval process and willing to move on if the seller’s lender denies short sale. Investors also have discovered that buying short sales are a great opportunity to accumulate rental properties to generate cash flow.
Tips for Buying a Temecula Short Sale
1. Be prepared to wait.
2. Be prepared to buy the home “as-is.” Lenders will not agree to pay for repairs unless the home has documented safety and/or health issues.
3. If buying as a primary residence, buyers should consider all mortgage loan options available to them and choose the best one that fits their needs before attempting to buy a short sale.
4. Have a loan preapproval letter and recent proof of funds to close escrow to be included in the offer.
5. Your offer should be as “clean” as possible. In other words, don’t ask the seller to pay for everything as if it were a standard sale. In the world of buying short sales, less is definitely more.
The number one obstacle for buyers using a mortgage loan and getting their offer accepted by a Temecula homeowner, before it ever reaches the bank, is tough competition with investor, all-cash buyers. Mortgage-loan buyers can beat out investor competition by doing one or more of the following:
1. Buy in a community that has a homeowners association and/or in a community that has special assessments, such as Harveston, Paseo del Sol, or Temeku Hills. Investors tend to stay away from buying properties in areas that have HOAs and special assessments.
2. The contract purchase price should be market value, not below or above. Investors tend to low-ball on purchase price. A contract price above market value could raise appraisal issues later.
3. Plan on paying your own closing costs, or stack them in the contract purchase price. Investors pay their own closing costs.
An experienced and knowledgeable local real estate agent can assist homebuyers with specific property taxes and determining market value.
Considerations When Selling a Temecula Short Sale Listing
A homeowner who is underwater on his mortgage and wants to keep the home should explore other options first before short sale, such as loan modification – either under the Home Affordable Modification Program (HAMP), or their lender’s in-house loan modification program – or the recent Home Affordable Refinance Program ( HARP).
Before a Temecula homeowner decides to list her short sale, it is also broker recommended that she consult with an attorney for legal and tax consequences of a short sale or for other options that may be available to her.
The benefits of a short sale to the homeowner are:
1. You are able to stay in the home to the close of escrow.
2. The short sale costs you nothing as the lender pays the seller customary costs and fees.
3. You may be able to receive funds from the lender at the close of escrow, either as a short sale incentive or, if lender participates in the Home Affordable Foreclosure Alternatives (HAFA) Program, owner-occupied, primary residence relocation fees of up to $3,000.
If a homeowner does decide to short sale, he must be prepared to provide to his lender financial documents, such as tax returns, bank statements, pay stubs, financial statement, and hardship letter. An experienced and knowledgeable real estate agent can market and sell a home as short sale, assisting the homeowner through the short sale process to close of escrow.
Written by Pamela Seley, REALTOR®. Pamela specializes in residential Temecula short sale listings in Temecula Valley, Calif. and can be found blogging on ActiveRain.