Buying an Indianapolis area short sale

Buying a Indianapolis short sale can be a very long, anxiety ridden, nail biting, disheartening process.

Short sales are not for the faint at heart.  You need to be very patient, have alot of time and understand the process.

A short sale is not a bank owned property.  Its still owned by the owner who is asking their Mortgage Company if they can sell the home for less then what they owe.   The owners of the property are under water.  The home if on the market won't sell for the current value in the current market.  The sellers for what ever reason are behind on their payments and can't afford to catch up or pay future payments.  Their only alternative is short sale or foreclosure.  

A short sale is sold as is because the owner has no funds to repair, thats why they are in foreclosure.  A short sale bank doesn't own the home but owns the note on the property and they won't do any repairs.  The only slim chance that the short sale bank will repair is if a buyers appraiser notes a significant issue and the buyer can't purchase the home unless the items are repaired or they lose their financing.  If the appraiser notes issues with the home the under writer at the buyers bank will want repairs or they won't do the loan.  Its a real problem with short sales as the Bank generally will not even then do any repairs.  

Once the repairs have been noted and the buyers lender says they must be repaired there are only a few ways to complete the transaction. 

The easiest for all concerned the bank completes repairs before closing.  If this happens thank your lucky stars and you then can close on this home you have waited patiently for months.

If the bank says no to the repairs then hopefully all the pieces can come together still on your purchase.  Don't hold your breath though purchasing a short sale with repairs adds greatly to the possibility of not being able to close.   There are a few ways you can might make it happen if your willing to take the risk.

If your going conventional there are no escrow loans or repair loans available so if the seller can't do the repairs you will need to switch loans to an FHA with repair escrow(repairs below $5000 or an FHA 203k if the repairs are higher.  

FHA you can do an escrow loan if the repairs are under $5000.  In escrow (your cash funds), the funds are held til the repairs are completed after the closing.  Repairs have to be completed by a licensed FHA general contractor and paid invoices submitted to the lender within a certain amount of time  and repairs completed after the closing.

FHA 203K loan is much more complicated.  Your time line to close will need to be much longer, usually 60 days and the short sale bank will need to agree with the extension.  The short sale bank may refuse to extend, if they do refuse to extend you have run out of options to purchase the home.   

The cost of doing an FHA 203K can be significantly more.  You would need to have a couple appraisals, an "as is" appraisal and an appraisal with FHA general contractor approved invoices for the repairs needed to be completed. Its time consuming and something can go wrong after spending all the extra money it takes to do an FHA 203K loan.  I have seen a bank sell the loan at the last minute to another bank.  If that happens the buyer would have to start the short sale all over again with the new bank.   Short sales unfortunately are complicated and only a buyer willing to wait for sometimes months should consider trying to purchase.  


 Shannon Thomas Real Estate Broker

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