Dear Michael: Why are some banks unwilling to actually sell a short-sale home? Don’t they need the money?
Answer: In a short sale, the bank does not own the house. The owner is attempting to get the bank to settle for a shortage on the mortgage payoff and still allow the buyer to get a clear title. Banks can change course, even at the last minute, just before closing (and sometimes do). They are not a party to the contract and, therefore, are not obligated to anything. They may believe they will be better off agreeing to a short sale than foreclosing on the property. Banks will send a BPO (broker price opinion) to agree and determine if the sale price the seller has accepted is within the area’s comparables. They will also review the original purchase contract to see if the seller is related to the buyer. This is called an Arms Length Transaction. No party to the short sale contract can be a family member, business associate or a person who shares a business interest with the seller. Short sales can take up to six months for lender approval, and, thus, may not be suitable for some buyers.
Dear Michael: I am selling my house and my tenants are being uncooperative by refusing my Realtor to show the home to prospective buyers. What can I do to get them to cooperate?
Answer: You’re in an unfortunate situation. Tenants are required by law to let your Realtor show your property if they have received 24-hours notice. Unfortunately, there is not much you can do if they don’t cooperate. Consider giving your tenants a 60-day notice to move out, which is the amount of time required by law. This way, after they have moved out, your Realtor will have full control of showings and can market your home effectively. You may be out of rent income for each day your property is vacant, but this is the price you have to pay for an effective sale.
If you’re in a rush to sell your home, you can entice your tenants to leave early by reducing their rent. Selling a home in today’s market is challenging enough for Realtors; dealing with uncooperative tenants can only make things dreadful. If your tenants are not cooperating with the sale of your home, wait until they move out before putting your home on the market.
Dear Michael: We are buying a home with all cash. Are there any advantages for us by not getting a loan?
Answer: If you can buy a home with cash, you are in the minority and are in an advantageous position for bargaining. There are many benefits of buying a home with cash, and few drawbacks, but consider both before deciding. Here are some factors to consider:
- Bargaining power: Most prospective buyers will have to finance their purchase with a mortgage. That means there is always a chance that their financing will fall through. Sellers want to know themoney is there, and that they have a guaranteed sale.
- Faster closing: If you pay for a house with cash, you can usually close in two weeks, as long as the title is clear, as opposed to at least 30 days with a mortgage.
- Not subject to appraisal: When you pay cash for a house, you and the seller decide on a fair price. If you have to obtainfinancing, the bank will require an appraisal, and will cap the mortgage at the appraised price.
- No interest: Interest can double or triple the amount you pay for your house over 30 years. If you pay cash for your house, you pay the purchase price and nothing more.
- No mortgage payment: When you pay cash for a house, you free yourself from a mortgage payment. That allows you to find other uses for a large chunk of your income each month.
Michael Kayem is a Realtor with Re/max/Execs, serving Culver City and the Westside since 2001. Contact Michael at (310) 390-3337 or firstname.lastname@example.org.