Posts Tagged ‘approval letter’

I spent Thursday morning with a few hundred realtors at Bank of America’s short sale class.  Over the past several months, BofA has made changes that have eased the process.  I have been pretty vocal about my criticism of Bank of America; however, this morning, I was very excited and impressed with the changes they are implementing over the next few weeks.  In the past, it was difficult to get a short sale approved unless you had an offer in hand.  They are now making it much easier to get the short sale approved without an offer, and they will give us their approved sales price, so that we can accurately price the property.  Typically, the agent and seller set the price of a short sale, and then we hope and pray that the bank will take it, or at least counter back with a reasonable price.  Now we will know their bottom line before we ever put the property on the market.  Every 21 days, the property will be reviewed and if no offers are forthcoming, they will most likely reduce the asking price.
Also in the past, first the short sale agent submitted all of the sellers’ documentation to the bank, i.e., bank statements, pay stubs, mortgage statements, hardship letter, etc.  Once that step was completed, the bank would go forward with the valuation process.  After that was done, they would submit the package to the investor(s) for a response to the buyers’ offer.  Now, they will perform these steps concurrently, rather than consecutively.  This has the potential to save us a lot of time and makes more sense.
B of A is implementing many other new steps to streamline the process, so don’t dismiss short sales.  I have people say to me all the time “I hear short sales are really bad,” or “I hear you shouldn’t buy a short sale.”  That’s not at all the case.  If you have to find a home immediately, I would avoid short sales, but if you have a little time, a short sale could very well be the way to go.  Because people don’t want to wait, fewer offers are made on short sales, so you as the buyer have less competition.  If the seller receives 3 offers, and yours is the best, your offer will be the one sent to the bank, so within a few days of making your offer, you’ll know if your offer is the one the bank is considering.  If you can be patient, your patience could very well pay off in you purchasing a beautiful short sale home.
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Short sales are receiving a bad rap in today’s market.  In many ways, rightly so.  They take a lot of time, and there’s no guarantee you’re going to get the house on which you’ve placed your offer.  However, purchasing a home via short sale can have its advantages.  As long as you don’t have to move right away, a short sale could be the way to go.  Short sale homes receive fewer offers than bank-owned homes, thus you have less people competing for the same property.  In fact, yours could be the only offer they receive.  First, it will take a few days to receive a response from the seller, but that’s the easy part.  The first thing you want to know is if the seller accepted YOUR offer.  If the seller had more than one offer, and accepted another offer, and your offer is in a backup position, then you want to keep looking for a home.  However, if the seller accepts your offer, and we know that yours will be the one submitted to the bank (the bank only wants to see one offer at a time), then you have an excellent chance of getting the home.  The most important thing in a short sale is that you must have patience.  Understand the banks are drowning in these homes.  Each bank negotiator is assigned hundreds of files, and every negotiator is different, some more competent than others.  The listing agent must put together a large package of seller documentation, along with your offer, and forward it the bank.  Once they have the complete package, the bank must establish the value, and it will send either an appraiser to appraise the property, or an agent to complete a Broker’s Price Opinion (“BPO”).   After value is determined, they must forward the entire package to each lienholder.  If there is a first and second loan, both of these banks must agree to the terms.  If there is mortgage insurance, that company must sign off as well.   Once they’ve deemed your offer acceptable, they will issue an approval letter, setting forth the terms to which they agree, such as price, escrow period, what they will and won’t pay, etc.  Then we open escrow, and proceed as normal.  Prior to receipt of the approval letter, the bank’s process could take weeks, it could take months.  However, if you know they’re working on your offer, the best thing you can do is sit tight and be patient.  You have a very good chance of getting that home.  While yes, you have to wait for a period of time, it could be much less competitive than attempting to purchase a bank-owned property and bidding against several other prospective buyers.