Clearing the confusion around Los Angeles, CA short sales
Posted by Jenny Durling on Saturday, July 14, 2012 at 10:33:06 PM
By Jenny Durling / July 14, 2012
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In spite of the fact that Los Angeles short sales have been around for the last 6 years or so, confusion about the process still abounds. So let's take it from the beginning…
The first step in a short sale is completion of the short sale package.
Jenny Durling
Broker Associate
L.A. Property Solutions
info@LApropertySolutions.com
One point of confusion centers around short sale pre-approval by the bank.
Under the HAFA program a Los Angeles homeowner may become pre-approved, with a selling price already agreed upon by the lender. However, this is not a condition of all short sales.The next point of confusion involves the seller's position in the transaction.
Contrary to what many still believe, all offers are submitted to the homeowner, not the bank. Only after the homeowner accepts an offer will it go to the bank for approval. In a multiple offer situation it is the homeowner, not the bank, who chooses which offer to accept. Multiple counter offers are not uncommon so be ready to compete for an L.A. short sale as much as you might for a standard sale.What constitutes a strong, clean offer on a Los Angeles short sale?
In general, a strong offer is one that is not less than 70% of the balance due on the mortgage. It's also an offer with a price in keeping with the prices of recently sold comparable properties. Although short sales are good buys, the story that banks will accept pennies on the dollar just to clear out inventory and avoid the expense of foreclosure is a myth. Next, a clean offer is free of all but the most basic contingencies and accompanied either by a letter of pre-approval from a recognized lender or proof of funds for all cash offers. Either way, it should include proof of funds to cover the down payment and closing costs. In short, a strong clean offer gives verification to the seller that you can purchase the home once the lender has approved your short sale offer - and that you aren't making demands that the bank will not approve. A strong offer is also accompanied by an earnest money deposit – normally in an amount equal to 3% of the purchase price. These funds will be placed into escrow within 3 days of written approval from the bank, so make sure that your funds are available. Your offer will be even stronger if you agree to put a portion of your deposit into escrow at the time off acceptance by the seller. Even though esccrow will probably be willing to accept a personal check for earnest money, it isn't unusual for the bank request funds in the form of a cashier’s check or wire transfer.Next comes negotiation
Is a Los Angeles County short sale worth the time and effort?
Yes! A short sale allows the seller to walk away without a foreclosure on his credit record while it rewards a patient buyer with a good deal on the house of his choice. Also, if the sellers had a second mortgage, it protects them from a deficiency judgment that can occur if the property is foreclosed on rather than sold short.A Los Angeles short sale is a win-win situation for everyone!
If you are in a tight position and are not sure if you qualify for a short sale in Silver Lake or surrounding areas, please contact me directly at 213-215-4758. I'll be happy to go over the specifics of your situation with you and make recommendations on your best course of action. For more information on shorts sales in Los Angeles County and buying or selling property in Silver Lake, Echo Park, Los Feliz, and surrounding areas, contact me directly at 213-215-4758.
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