By now, I am certain any reader of this blog has heard the horror stories about purchasing a “short sale” property. In this Sundays Napa Register, the lead story taking up 1/2 the front page is one of the best I have read from the buyer’s perspective. First-time homebuyers surmont challenges to buy in Napa by Jennifer Huffman has written an in depth article which I feel any short sale buyer, especially first time buyers, should read. Here a few excerpts from her article.
Back in August 2008, when the median price for a Napa home was $472,000, the idea of owning a home in Napa seemed far out of their reach. Katie Stith is a probation officer for the County of Napa. Her husband, Phil Stith, is an EMT for Piner’s Ambulance.
“We both figured that we would possibly have to move out of county, get some equity and try and move back,” to Napa, Katie Stith said.
But when home prices started falling in 2009, the Stiths began to realize that maybe, just maybe, they could afford a home in Napa after all….
Over the next couple months, the couple made offers on several homes but each was rejected. Because many of the homes the Stiths looked at were “short sales” (the home is listed for sale for less than the seller owes on the mortgage) and foreclosures, the couple realized they were also competing against yet another group of buyers — investors paying all cash for a home…..
The couple qualified for a Federal Housing Administration loan, allowing just a 3 percent down payment. But with that lower down payment came additional scrutiny from FHA lenders.
Often, homes in the most affordable price range had been altered without city building permits, a big sticking point for FHA underwriters, Katie Stith said….
“It took quite a while,” Katie Stith said. “It was nail biting for us because at that point it was completely out of our hands. They weren’t looking at us as buyers. They were looking at what was best for them in a business sense. There was nothing we could do about that.”
More than seven weeks later, the holder of both loans, which happened to be the same company, approved the short sale.
Next, the Stiths began moving forward with their own loan approval process, including the appraisal, which became yet another stumbling block. Because the garage had been converted to an unpermitted living space, an initial appraisal came back at below the selling price of the home….
Yet obstacles continued to pop up for the couple. During all the negotiations and appraisals, the foreclosure process on the home continued. The home was scheduled to be sold on the courthouse steps, regardless of the Stiths’ offer….
“We had almost every hurdle thrown our way,” including a short sale with two loans on the property, critical time frames and a foreclosure sale right around the corner, she said. “You are racing around the clock, yet your hands are tied.” …
Hope you enjoyed reading this as much as I did and for someone trying to buy a short sale, it helped prepare you for what is to come.