Carlsbad Real Estate News and Views: Buying a Short Sale

Good info, they aren't the easiest transactions to do, but they are very worthwhile and your clients will appreciate the extra effort!

Thank you so much for the information.  Our area too will be seeing these and I have asked some of the more experienced agents in our office and no one seemed to know what I was talking about.  As as seller I did a short sale in 1999 in CA (Mojave area), but as a Realtor I was not sure how to cover it.

Thanks for the tips.

Damion - Thanks for your comments. It seems that the timing also depends a good bit on the particular bank. I have seen some here that are moving quickly and others where the bank either is in no rush, can't decide, is overloaded, has a change in staff, etc. (in one case there are offers that have been on the table for a month). The recommendation I have had from several agents is that here in CA we need to plan on 45 - 60 days unles it is a cash buyer. But like anything else there are exceptions. Your last paragraph makes an excellent point.

Deneen - thanks fro your comments. Feel free to share anything you learn. This is new for many folks.

Jason - thanks. Sounds like you have had some good experiences with them.

Jeff

I have had one short sell on one of my listings and I am in the process of trying to do another one.  My frustration is how long it takes the bank to respond to us.  You really  have to have a patient buyer.  We lost the first buyer because it took so long and are now trying to negotiate with the bank again but again the process is slow.  If you have any ideas please let me know; although I think it is probably the nature of the beast.

Jeff, I bet there are a lot of people on here who do not know that you have to go through all that, this should prove to be very useful to them.

Damion - many thanks for your continued comments and education. Very helpful

George - Thanks. That is why I wrote this. We certainly are seeing many of these in my area

Marchel - good luck. I understand your frustration. Damion's comments are well taken.

Jeff

I am not a realtor, so feel free to redirect me to a more appropriate source for my questions if necessary. My husband has an inactive license but he's never done a short sale and we are gathering some info on how to make the next step.

We just made an offer on a short sale. The bank is willing -- they have the hardship letter and have assigned the file to the first person who gathers info on current value (the appraise comes out today). Supposedly then it all goes to another person at the bank, the actual mitigator who will negotiate with us.

we offered 600. The property was on the market for 3 mo at 695 with only one offer of 565k. I believe the 695 price would have covered the loan and seller's costs, but I don't know for sure the $note remaining. We think 600 is a good number for the market -- the house needs tons of repairs. But our area is in a volatile time so the appraisal could come back anywhere really.

My question -- how do we best negotiate with the bank for our 600k offer? We have pics of the repairs needed, a cost breakdown of the repairs needed....what else? When do we present this info? Now, while the bank is gathering info, or later when they counter with a possibly higher offer?

Hi Christine:

I don't know where you are. so there could be specific things that you need to do there. Generally negotiations on repairs don't occur until after there is an accepted offer. In my experience, though, because there is a hardship the bank MAY direct that the home is to be sold AS IS and the seller will not do repairs. You will still be advised to do your own inspection so you know what you are getting into.

Also, it seems that the lender will usually do their own appraisal up front, so if that says the house is worth X, then no matter what the seller wants the lender will not approve until it is in the range they find acceptable. Make sense?

I don't know your market so cannot comment any on market value, etc. If you would like to talk personally, don't hesitate to give me a call (760-840-1360)

Thanks for stopping by. Good luck!

Jeff

We are near San Luis Obispo in Calif -- coastal area simlar to north co San Diego (We used to live in Solana Beach!) Has seen huge RE value increase in last 8 years and a strong slow down in the last 8 mo.

 Our offer of 600k AS IS was accepted by the seller. The bank has ordered and received the appraisal and the mitigator has  the file open. Says it will take 2 weeks plus to repond to our offer. We know our offer is fair for the amount of repairs that are needed. The house was mid-remodel and needs lots of surface work and some repairs. We plan to live in the house and do the repairs over the next 2 years and sell at that point (better market we hope, no cap gains, etc)

We don't know whether the appraisal will be realistic to the value we see in the house. The market here is in such flux -- some people are holding on for the price they want, others are selling low to get out, etc. So we have put together some info for the bank to show what we think needs to be done and why the house is not in move in condition like the comps they may be looking at. Do we send them this info now during the 2 weeks we wait for them to respond? Or do we wait until they show us their cards and tell us they think it's worth 650k and then we argue our case? That's my question?

thanks, Christine

Christine:

Thanks for your note back. I wanted to give this some thought.

Since I am not involved (boo hoo) it is harder to assess the overall situation and make a recommendation. I don't know that specific market, nor you, and without knowing the nature of the repairs it is hard to say how significant all that is. I also don't know who you are dealing with at the other end - I assume the bank itself?

Anyhow, at this point, it may be best to simply wait for their response. You don't know what it will be so why play your cards if you don't need to. If they come back with a different $ you can provide a detailed rationale, based on a review of the comps and the extent of the repairs. If you can get some estimates of the cost for the significant repairs that will help you build your case, rather than simply pulling a number out of the sky. Replacing a broken furnace is very different than repairing lots of holes in the walls.

Bottom line... they may still feel they need to get a certain number to cut their losses, based on their appraisal. Take a close look at all the recent sales, and perhaps call those listing agents to get a feel for the condition of those homes.

Good luck and please keep me posted.

Cheers,

Jeff

 I've been doing some research  on short sales myself recently, as I have been wanting to use them as a way to  invest in real estate. I was under the impression that you should submit a breakdown of repairs needed when you return the short sales package to the bank along with all the other documents that are requested by the bank. This would help substantiate your offer, or is it better to wait until they counter your offer and than present repair estimates?

Well, I think you can approach it either way. It might have been best to submit the repairs WITH the actual offer, but now that they have it it may not make a difference. It certainly can't hurt to submit a letter staring your rationale for the offer. As you probably know the bank will  not likely authorize any repairs to be done - these homes, at least in my area, are all sold AS IS. I think the seller would normally submit the repairs list along with their full package so the bank knows the condition of the home, but the bank probably doesn't care, since they will base their price on an appraisal. Their price is AS IS and I doubt they would then subtract from that because of repairs you feel are needed. But I am learning that each bank and situation is different. Some are more hard-nosed - they could say $X is the price and that's it, no negotiation. Not sure I am really being terribly helpful here, but I don't think there is a right or wrong answer with these houses. The other question might be to find out if the appraiser went in the house or was it simply a drive by and pulled comps from the MLS. If the latter, knowing the repairs would have more impact since the appraiser might not be aware.

Jeff

Hi

Im really in a hole right now!!!  I am involve with an agent who has been offering me short sale home/ forclosures. i so far have put out a very large amount of deposits for 30 properties. It has been 6 months and i havent seen anything.  i feel like i have been scam. :(  But i still have hope in the back of my head.  This is the process i am going through... please let me know if this is the correct way.

My agent says he works for he bank n gets a list of properties . i then purchase them but all i see is a purchase contract... so far.  (i give him a deposite along with the contract) Days pass n he comes back n says we have a buyer n i sgn a seller contract i guess u call it.  Months pass now n he keeps telling me that money is getting wired to my account from escrow but i still havent seen it.  Then theres the daily problem of contacting him because he says he goes out to court everyday to fight for the home and to get the judge to sign off on it. he's not a lawyer so i have no idea what the hell he thinks he fighting with!!!

With all this going on i question the deed to the home when i first bought it to the transfer of it to the buyer.  He says i dont need it. its taken care of at title.

HELP HELP am i dealing with a crazy idiot or a genius who's making me a lot of money down the line?

Kim:

It sounds to me, without knowing the whole story, that there are some issues here.

Are you a buyer who is seeking to buy short sales and are you, as a result, completing the appropriate paperwork  to do so? It is also not clear to me whether you are dealing directly with a listing agent, or whether the person you refer to is a buyer's agent who should be representing your interests,

And are you getting a signed contract or not? If there is nothing in writing then you do not have a legitimate, binding contract to buy a short sale. and the seller has no obligation to you either. But if there is a signed agreement you may have recourse (see an attorney's help on this).

If there are actual purchase contracts that are executed by both buyer and seller (you should be getting a copy of anything you sign) you need to investigate who is handling the actual transaction (e.g., an escrow company or an attorney). They should be able to tell you who is doing what, the progress of the transaction, and the details needed for the funds to get wired. That is not the agent's role since s/he does not handle the funds at closing. The agent who handles the closing would be responsible for wiring funds to the appropriate account.

Again, it sounds to me as if you need an attorney to assist you in this process. It is not clear that you are getting the representation as a buyer (or a seller) that you should be getting. There appears to be much more going on here.

Jeff

Short Sales are a great place for buyers to find a deal. But as with other special type transactions an experienced agent is the best bet. I've had a number of listings this year come to me in a short sale situation. It seems to me that banks I've worked with are requiring a very detailed financial statement from the seller and have become very picky looking at offers. The banks that have made all these re-fi's at 105% - 125% are finally figuring out they are destroying the American dream of home ownership through predatory lending. I really feel bad for the consumers who have to learn to late that some lenders are interested in one thing.

Where's the best source for getting a pre-foreclosure list.

Foreclosure.com provides information but I can't swear as to the accuracy of the data nor how up to date it is.

You can also look at Realty Trac as well as the real estate listings on Yahoo, for example.

If you are interested in working with an agent, s/he can search the MLS for listings that are listed as being short sales or pre-foreclosures.

Jeff

 

Hi Jeff!

My name is CheL. I have listed a property on ShortSale. My listing will expire in a couple of days and the lenders have not responded to the ShortSale package we have sent them. The property has been file NOD. Every single day, I have been calling the bank, the Work-out department Supervisor, the Negotiator, and I all I end up with is a Voicemail box! The purchaser for this property is on a 1031 Exchange, and yet is the best offer so far! They are ready to draw the cancellation/withdrawal of offer very soon. We do have a back-up offer w/c is of course lower than the 1st one. I have the Supervisor and the Negotiator's direct line, but it seems that they are just taking their sweet time. Any advise on how to get past these negotiator/supervisor who is not in charge in making the decision anyways? How do I get them to respond to my plea?? Its getting very frustrating. By the way, the 2nd home for this (property on Shortsale) homeowner is also upside down, serviced by the same bank.

Any advise is greatly appreciated.

Thank you much!

CheL, Irvine CA

CheL - the best advice I can give you is to be in touch with the person who actually is in a position to make a decision. There is likely a committee that meets to discuss the portfolio and activity on any offers.

Unfortunately I am hearing more and more about banks who are not taking action on short sale homes and are letting things go to a trustee sale (or however it happens in your area), and the homes end up in foreclosure. I would also send a letter and a copy via fax. You might even drop in, if it is a local bank and see if you can have a discussion with the right person to get a feel for what is happening and how you can facilitate them getting this property off their books. They may be overwhelmed with inventory, or at the other end, have no clue what they are doing. For many this is a pretty new experience and it may not be a priority.

Not sure this helps, but your story is one I have hard numerous times.

Jeff

 

I know that this an odd question

I'm a referral agent for two different short sale companies.  (its a long story)  If a short sale company  doesn't go thru for one company.  Can I submt it to the other company.  figuring out what went wrong in the first place, so it doesn't happen again. 

 

 

 

Hi Jeff-

Is there potentail in making money by doing short sale? 

Kelly:I would guess that you could unless there is some sort of contractual obligation that prevents you from doing so. But the lender is the one who has to approve the SS and they would likely decide who gets to represent the sale. I am not sure that answers your question - hope so.

Jeff

Many people assume that they will be able to get a short sale at a great price, but I can't say that that is what I am seeing, at least in my area. The banks want to get as much for the house as possible and will generally do an appraisal. So based on market value they will approve an offer or not. So it is not likely that you will get it for much less than the comparables, but there are exceptions.

Plus there is typically competition so the price gets driven up by competing offers - everyone wants a good deal these days. It is possible to get a fixer and after putting money into repairs, to sell at a profit. But with the market (most areas) your profit will not likely be in the short term. The days of buying and flipping, in most areas, no longer exist. Your profit will depend on appreciation, and, of course, how much money you need to put into the house to fix it. Some SS properties are in very nice shape and some need thousands of dollars of cosmetics and repairs.

Hope that helps.

Jeff

We put an offer on a home being sold as a short sale (pending bank approval) TWO MONTHS ago.  Bank is Wells Fargo, so we thought they'd have a system for dealing with these down pat.  Ha!  Several times they've told the listing agent "We're going to try to get you a decision today" only to not call back and not return calls for weeks.  It's so ridiculous.  Things would be much easier if this home was a straightforward sale.  Like you mentioned Jeff, we're not even getting a steal on this house, it's just one we happen to really want.  There have been mutliple offers on it b/c it's had a lot of attention as a short sale.  At this point, we are the highest offer (or so the listing agent tells us) and the only offer the bank asked to have faxed over.  How long do we wait?  In the meantime, several other houses we liked have come onto the market and been sold already.  Any way to hurry the bank along?  Our agent says we aren't allowed any contact with the bank.  Would it help to write a letter threatening to walk and have the listing agent forward it to the bank?  Or do banks refused to be rushed in these situations?  The bank is really only looking at losing about $40k on this.

Erin:

Well, in my experience there is not much you can do. Unfortunately I hear this sort of thing all the time. Some banks move quickly, others do not. It could be who is handling the process, the volume they are dealing with, changes in staff or other factors. I am a little surprised with Wells Fargo given the size, but I also know that they have a huge volume of these properties in our area adn perhaps elsewhere.

You could let the agent know in writing that you need to have a response in writing by a certain date (e.g., a week from now) provided you are willing to walk if a response does not come. It may or may not have an impact, especially in the case of other offers. If you are missing homes that suit your needs by waiting, then IMO you need to decide how important this one house is to you. I feel for you - it is very frustrating. You need to keep focused on your personal situation - if you can afford to wait, despite being frustrated, then great. But if it really become a burden, then a decision must be made. I would think that if the offer was not acceptable that they would have countered, even at full price, but that lack of response could be part of the overall manner in which they are handling things.

Good luck! Let me know what happens. These experiences are helpful to share with other buyers.

Jeff

I am in the same boat as Erin but we're tired of waiting and just want to withdraw the offer.  Are we at risk of loosing our earnest money or is waiting 30 days a good enough reason to request a withdraw.

By the way, we put $1500 earnest money down hoping to encourage the bank.

AZ Buyer - I would check the contract to see what it says. Was there an expiration date for the offer? If there was, then if that date has passed the offer has expired. Or there may be a default date (In CA it is 3 days if there is not specific expiration date put in the offer by the buyer)/ If not it will depend on what your contract says. Do you have an agent who helped you with the offer?

If you need assistance with finding a home, or perhaps want to talk to an agent who can perhaps give you some advice in AZ, let me know - I know a number of people there. I cannot be sure since I am not licensed there so my advice is really based on CA contracts. If there is a doubt about being able to get it back you might want to consult a real estate attorney.

Jeff

I've made an offer on a short sale 2 weeks ago with offer 10% down, 4k in earnet money, pre-qual'd and now in the process of pre-approval for my loan (all in hopes that my offer w/ back up will be the best). I understand this will take time, which is fine because I'm in a lease. My concerns are the house getting snatched up by other buyers. Today there was an open house and when I stopped in (to see it again), the agent wasnt aware of any offers on it at all. I've been told that the seller accepted my offer and we have to hear from the bank about some conditions. But how many offers can the seller accept and send to the bank for thier approval on the sale? Are other offers just kept as backup in case mine falls thru? I was told by my agent that there was another offer in, but they selected mine to take to the bank. I call my agent, but don't feel like I'm getting a total answer.

SCB - thanks for stopping by. You raise some good questions and concerns.

Keep in mind that a contract must be in writing in order for it to be legally binding. While you appear to have verbal approval by the bank, unless you have a signed copy of the accepted offer in your possession yo do not have a binding contract. In that event other offers could be submitted to the bank and one accepted.

Offers that are submitted may be kept as back-up offers if yours has been accepted and is in writing. The bank can accept back-up offers until the time of closing. You need to obtain a copy of the offer signed by the bank, if in fact it has been, or get clarification on where things stand.

Good luck

Jeff

How do you go about getting a short sale approval with the lender prior to a offer?

Can anyone tell me

Thanks

My husband and I are in the process of purchasing a short sale.  This is our first home purchase on top of all of it.  On our purchase offer we did do a contingency of the bank responding by a certain time.  We are already pre-approved for the loan and all those papers, etc. were sent to the lender too along with the sellers needed documents.  We only have a few days left.  I call the agent every other day and always the same answer that they haven't had a return call from the lender.  The property was listed for 104k and our offer was 103k.  According to the agent it was listed last year at 119k and not sold.  The owner had an appraisal done recently and it came in at 118k so I am concerned that the bank won't accept the offer.  There are no other offers on the table with the lender, only ours.  EMC Mortgage is the servicer.  We live in Iowa.  I feel like Im being kept in the dark here and don't know what to do.   Any help here what we can do?

Thanks!

Hi:

Anybody has any experience dealing with wells fargo on short sale? we put an cash offer on a property we are intersted in, however, there are other offers higher than us but with mortagage contingency.   our offer is 825k, the higher offer is 910k with 15% down. the house asking price is 969k.  Which offer will the bank accept?  how much is the cash offer worth these days?

 

Great tips... after working with nothing but shorts for the past 18 months (my area is flooded with them) I absolutely agree with everything you have posted above. Keep doing what you do and best of luck.

Frustrated:

I can understand your pain. But with a short sale it's all about the money, IMO. The bank wants to recoup as much as it can, or rather to approve a sale for an amount as close to the amount owed as possible so they don't have to forgive a large portion of the loan. They will look at an appraisal and the market value and that will likely determine what they, and the asset manager, wiill approve. And there is a significant difference between what you are offering and the other offer.

Keep in mind that just because you are offering cash does not mean it is a good offer if it is not near or at market value. Would you sell YOUR home for 10% or more below market just because someone gives you cash and does not have to go through an appraisal and loan process? Probably not. 

However, in a situation where there are two similar offers cash may likely be more appealing to a seller.

Hope this helps.

Jeff

Vincent:

Sounds like you have some pretty good experience in your area. Best of luck, and thanks for the support.

Jeff

Jeff:

Thank you for your response.  We can put another cash offer of 880k, which is only 35k away from the 915k/15% down offer.   Do you think that is a competitive offer?

also, do you know if wellsfargo negotiate or do they just do a yes/no?   Just trying to figuring out when to put the next offer.

 thanks

Frustrated.

Frustrated:

Hmmm. Well, these are great questions, and you should discuss with your agent. I don't have any information about the area, your market, the home or anything that would allow me to make any sort of recommendation. And I can't interfere if you are working with another agent with regard to what you should or should not do.

My sense is that conditions vary from location to location and much will depend upon the asset manager involved who can make the decision about what to approve or not. And banks operate in different ways - some seem to counter offer, although that is often at the price they are willing to accept. Or they may simply accept an offer that is close to what they feel is market value. It is difficult because so often it is hard to get specific information about how they work and what they are looking for.

Jeff

If a homeowner has two properties and needs to do a short sale on one, can the bank for the shor sale come after the other property?

Shelly:

Good question. The whole point of a short sale is that the homeowner is in a hardship situation and unable to make the payments. The lender, in order to approve a short sale, will require financial information and documentation around the short sale need. They will not approve a short sale simply because someone wants to get out from under a big mortgage, so the hardship must exist.

You will need to check with your bank. But if there is another property I would think they would look carefully at the overall financial situation to determine if there is, in fact, a hardship. Each case is different so I would start with a conversation with the lender.

Good luck.

Jeff

Hi Jeff - my husband and I have put an offer on a short sale property. A couple of questions....

 The listing price was $269,000 - in a short sale, is the listed price typically what is owed on the home or will they sometimes list it higher? If listed for more than what is owed on the property what happens to that profit? 

 Second - I read recently that its hard to get a short sale property if you offer less than the listing price.  Is this true?  I was thinking that with so many properties going into forclosure ( I live in Denver with one of the highest foreclosure rates in the country) that this might not neccessarily be the case.

 Would the bank ever consider taking an offer less than what is owed on the home? 

And finally - with the market as it is, i understand that sellers are now covering costs that the buyers would usually pay - ie. closing costs and fees.  Is it realistic to ask the short sale bank to pay these costs? 

Hi Georgann - well, those are good questions.

First. a short sale IS when the amount owed is more than the home can be sold for, so, yes, offers will be less. But the lender will decide how much less they are willing to accept, and generally they will look at an appraisal to determine market value. I doubt a bank will accept a short sale offer of only 80% of the amount owed. The asset managers seem to be the ones who makes the decisions.

List price can vary depending on who the listing agent is and what the seller wants to state as the list price. I often see list prices on short sales for lower prices than market, which seems to be to encourage multiple offers. The bank does not have to accept a full price (list price), especially if it is less than the market value. However if the MLS list price is market price there is a better chance that they will accept it. But there are always exceptions.

So often I see sale prices on short sales (and foreclosures) higher than the price that was listed in the MLS. I would advise any buyer in this sort of situation to be working with knowledgeable agent in that market so you can better understand how shorts are being handled, and the market value of comparable recent sales. Also things may be different in your market there than here in California. I can't really advise you any better since I don't know your particular market nor do I want to interfer with any relationship you already might have with an agent.

If you don't have an agent you are working with and need a referral let me know - I know a number of folks there in Denver, Colorado.

Because a short sale represents a hardship for the seller, whether the bank will approve other costs being covered, or repairs, depends on the individual lender. Asking for these costs could make an offer less competitive as compared to a similar offer that does not request any concessions.

Hope this helps.

Jeff

Can you successfully make an offer on a short sale if that offer is contingent upon the sale of your current home?   Or do you need to sell first before you can make an offer on a short sale property? 

Potential Buyer:

Good question. You can make an offer any time you wish, with or without a contingency. The issue will be is the offer going to be viewed as a competitive one, given there is a contingency. Sellers are typically concerned that the buyer's house will not sell, and they may not want to take their home off the market  with that being a possibility. It may also depend on what is going on in your market. If things are selling quickly it may be less of an issue. I would guess that a bank may be more reluctant to accept a contingency offer, since they generally want as clean an offer as possible. I have been told specifically that they are looking for offers with no contingencies.

Hope that helps.

Jeff

I had a problem with Wells Fargo and could never get an answer.  I went in and emailed ever VP I could find through the Internet and explained what was going on.  Within a couple of hours, I received a phone call from someone that was able to make the contract work.  She also set me up with one person I could deal with instead of whomever answered the phone.  It took some digging in finding the VP's names but it worked!  You might try it.

Thanks, Sharon. Seems like the Loss Mitigation Manager is often the person who is involved and can make decsions. Also the Asset Manager.

Jeff

I am about to make an offer on a short sale that is $10K more than the listing price.  It has been on the market for 222 days (not a typo).  I'm a little nervous about the process, but I am pre-qualified and want the seller to pay closing costs.  The seller's agent doesn't seem to eager to sell the property.  He has a hohum approach to the prospect of an offer.  Is his approach typical and a ruse, or because of the low percentage he will get?

TigerMorris - well I am just guessing here since I do not know the situation. Short sales tend to be rather difficult and that could impact an agent's attitude because of frustration in dealing with the lender or other matters, but as far as knowing if this is the reason, I have no idea.

Just as in any sale, agents vary in terms of their attitude and professional demeanor for a variety of reasons. Obvously  any listing agent will get more if they sell a place than if they don't, but beyond that I cannot really say what the issues might be. Ultimately the decision is up to the bank in terms of accepting the offer adn other terms anbd conditions.Good luck in moving your offer along.

Jeff

Thanks for getting back with me so quickly.  Based on information I learning on your blog page, I had my Realtor find out who the lenders are on the property.  The first mortgage holder is New Century Mortgage.  I think this is the New Century that filed for Chapter 11.  They are reorganizing and are in the process obtaining the Bankruptcy Court's permission to sell their loans to Greenwich.  I'm not quite sure if this puts me in a better negotiating position or not, but, its good to know in any event.

Also, my research has shown that the property was pending on the MSL four different times this year and each time it went back on the market.  That may be the reason behind seller's realtor's hohum attitude. (The property is located in San Diego.)  Also the listing price has been reduced $60,000 from the original listing price.  Current listing price is $240,000.

I want to thank you and all of your readers/writers for the valueable information that I obtained from reading you blog.  I feel armed and ready to go....

 

TigerMorris - that sounds like a good plan. Good luck. I'm glad to hear you are using an agent - smart thing to do in these situations.

It is not uncommon for short sale deals to fall apart for various reasons and for them to be relisted. It become frustrating for all concerned, including the sellers.

I'm glad you found this helpful. The intent WAS to provide information that would be useful to buyers. But since shoprt sales can be so difficult and the process varies depending on the lender, having feedback, questions and information from folks who are going through the process is helpful to all of us.

Please keep up posted and feel free to share information that might be helpful to other buyers.

Jeff

Here are my questions!

 There is a short sale house listed at 300k.  The seller is in debt 265k + 50k home equity = 315k

 The house is really nice and in the developement they are going for 310-350 depending on the house.

 I put in an offer for 290k, close in 30 days, with a morgage commitment, and willing to take on a Chase morgage if Chase can offer me the same terms as BankofAmerica.

 The listing agent told my agent she has a full price offer already.  So I put in a full price offer also at 300k.  I am hoping the bank sees my 300k and his 300k and decides who offer has better terms.

 I don't want to bid higher, as that will make me him outbid me. 

 My questions are, Will the listing agent lie and say she has a Full price offer when really she doesn't?  And if there are two offeres, do you think Chase will counter above full price or just pick one of the offers?

 Thanks!

Jack:

I hope you are working with an agent who can look out for your interests. It is questions llike these that really need that sort of assistance and guidance.

Banks are looking for the best financial terms and the cleanest offers (those with few or no contingencies). It is impossible to know what the reality is but one hopes that the agent is being honest. You might ask if that buyer is hers or represented by someone else, although she is not obligated to share that information. Will the bank counter or not? Hard to say. If they have an offer that meets their requirements they may simply want to make that happen.

It is hard to advise without knowing the situation, and certainly if you are working with someone I cannot interefere with that relationship. It is precisely these situations that make short sales so difficult and frustrating. Good luck.

Jeff

Jeff-

 Thanks for the info.  I am working with a Buyers Agent.  I trust her.  What I dont trust is the listing agent.

 The day I saw it, I put the 290 bid in, and the listing agent told my agent she had a bid last week that is at full price.  So I then raised my bid to full price.  So we will see.  Hopefully Chase will take forever and this guy will back out.  I know I cannot afford more, of course I can afford like 1k more, but I doubt it will come to that.  I will out bid him, he will outbid me, etc.  I am just going to keep my stance at full price and hopefully I get it. 

What do you think is an unreasonable amount of time?  I mean I am prepared to wait and my agent says to keep looking we could always withdraw the bid. 

 Is there anything I can do to pressure the bank?  My terms are perfect, first time buyer with morgage commitment can close right now if possible. 

I believe writing an offer on a "short sale" is a foolish endeavour.  Most "short sales" get foreclosed on.  If the seller has assets you can't just sell short.  You have to have nothing else and prove it to the bank.  Even then, the second trust may not want to play ball with the first trust.  You'll write an offer, weeks or months go by, and then the house gets foreclosed on.  If you have a hot prospect to buy, sell them a house.  While they're waiting for the "deal" of a short sale, the house of their dreams will have come and gone.  If the seller can document that the bank has approved a short sale, then go ahead.  Usually, bad agents are happy to have a listing and don't know the waste of time and money they're getting into.  The deal?  Not really.  If they couldn't pay for their house, what makes you think they take care of their house.  I ramble a bit about this topic but it's near and dear to my wallet and I've learned the hard way but losing buyers because I let them write on a short sale, not get the house because of foreclosure and then fire me for not doing my job.  Stay away.  There's too many good house to sell to worry about "short sales."

 

I just got a Real Estate Professional  that has been specializing in Short Sales since the 1970s to do a 70 minute Audio Recording for my site, AnonRecordings.com

Each disc is only $3.  On the recording he says that RE Agents can do great in this market, if they are actually WILLING TO WORK.

Anonymous - Sorry about the delay, we have been somewhat busy with the fires, etc. here in San Diego.

The timing is really up to you, of course. Some folks are willing to wait several weeks, others not. Your agent seems to be on the ball and giving you some reasonable advice. As in any purchase it depends on what it is worth to you personally. Banks are going to move at their own speed but the listing agent can play a role in moving things along.

Jeff

MArk - they ARE difficult transactions and not right for everyone. I don't find that they are necessarily a good deal financially - buyers can do far better in many cases in negotiating with sellers who are not in a short sale situation. A number of the homes out here have ended up in foreclosure and then become REOs. It does appear that things are getting better as some banks are getting a better handle on moving out the short sale inventory, but it is a slow process.

Jeff

Baghead

Handling a short sale is complicated, time consuming, and often frustratingl. it is NOT right for every agent. Those who are experienced and who are willing to put the work into making them happen, and who understand the process can be more effective. If you do not know what to do, and are not willing to work you cannot do the best job for your client (either the buyer or seller) and probably should not be involved. Thanks for your comments.

Jeff

Oh yes short sales can be a great deal but take tons of work and a lot of times I am finding that buyers are willing to sit around and wait. We were at the beginning stages of starting the short sale process with the bank I advised the agent of that. She writes the offer with the acceptance date of the day after she presented. I explained it is going to take a couple weeks for the bank to simply input the paper work from the seller before we even get a loan negotiator so it may take a few weeks to please be patient, well of course a week into it I called to update and her buyer has already moved on. Can be a little frustrating dealing with it but if everyone can hold tight it can work great for all parties.

Thanks, Heather - I think you said it well. It takes tenacity and lots of patience. Some deals go fastr than others depending on the lender, the people involved (the loss mitigator and the asset manager) and so on. It's tough on teh buyers, the sellers, and the agents on both sides. And some banks are overloaded and short staffed.

Jeff

Great information!  Much of what has been said here is mirrored by "Agent 23,"  a real estate agent specializing in Short Sales, said on my site.  See what an angry real estate agent has to say about short sales (the way out of this quagmire) and the casey mess.  It's a 70 minute free recording.

AnonRecordings.com

Jeff, loved the post. You're absolutely right - it may not be a deal afterall.

Baghead - well it is certainly a challenge. For some it can work out well, but no so for others. It becomes an important personal financial decision for every buyer. I'm not sure that ranting about it does any good, thought - best strategy is to fiugure out how to make it work with the bak if you can. But there are certainly many stories from frustrated buyers, sellers AND agents.

Jeff

Thanks, Vincent. I let every buyer know about the possible pitfalls so they can decide for themselves what makes the most sense. It's difficult since some banks seem to be able to work through these deals pretty effectively and others cannot. you just never know. I am happy to help anyone who wants to work through such a deal as long as they understand the issues they face. It's all part of being informed and doing your due diligence.

Jeff

Is it possible to buyout a spouse in a short sale process, if the buying spouse is NOT currently on the deed, loan, etc? Would love to find a way to salvage the property even if the marriage will not be.

Well that sounds like both a legal question (which I cannot asnwer since I am not an attorney) and one to ask the lender. The bank will have to approve the short sale, which means that financial hardship will have to be shown in order for a short sale to be complete. IF there is no financial hardship the lender will not approve a short sale. Keep in mind there may be tax implications for a short sale too.

It may be that simpy buying out the owner through a normal purchase and sale process, provided pricing can be agreed on based on market value, is the best route.

We're considering purchasing a short sale home. We really like the house but the potential for problems seems a bit overwhelming.

 First off, it is my understanding that agents not disclose the amounts that have been offered for a particular home. Does this hold true for short sales as well? We've been told that this house in particular has been approved for sale by the lender for a certain amount. However we were told they've had an offer for a lower amount and what that amount was. Again, I thought we were not supposed to be told of other offers.

 

So anyways we've basically been told to either offer more than the other offer or not even try?

 

Is this correct?

 

KC 

KC:

Laws may vary from state to state, and have to do with the fiduciary responsibilities of agents to their clients. What that means, in general, is that agents must preserve confidentiality - they cannot reveal information without their clients' approval, which would include offers. If the seller say it's OK there is no reason why the agent cannot reveal the presence of offers. But it could jeopardize negotiations, so often the details are not shared (they may say they have other offers) or they might say an offer must be higher than X.

Hopefully you are working with a qualified agent who can guide your through the process. Generally with a short sale the bank is looking for the best offer (typically the highest) but that could depend on the details of the offer. But since they want to minimize the amount of the loan they are foregoing (for the seller) the highest number will often be the best offer. Knowing that one offer is X, per the agent, is a suggestion that any other offer must be higher in order to be accepted. But ulitmately the seller (the lender) can do what they want. Put yourself in the bank's shoes as the seller - what would YOU do?

Hope that helps.

Jeff

I have two bids in on two short sales.  One from 10/20 and one from 11/4, the one from 11/4 the seller signed, sent it to the bank and the bank ordered an appraisel.  That is where that one stands. 

 The other from 10/20 is just stalling, nothing is being done.  They have two full price offeres, mine and another.  So we will see which one the bank takes. 

 I honestly think today, banks are not prepared for this and they are understaffed.  Remember a couple of years ago no one heard of this as people were selling with big profits.  But those days are over, the banks need to hold training sessions, and employ the neccessary staff to deal with this.  Otherwise they are going to lose billions when they could of lost only millions.

 

Mike - I think staffing IS a big issue, along with how the process is being managed by the loss mitigation person. I suspect the asset manager in many cases may be holding out. Your comments refect what others have experienced as well. Thanks!

Jeff

Hi,

I live in Miami, FL and as most of you  know it is one of the largest forclosure and short sale markets currently.

I have found an amazing own for "short sale" it is controlled by the bank at this point. the listing price is $350,000, last years taxes shows the house is valued at $418,000, I was considering putting a offer for $320,000 is that realistic? or is the price their "bottom line" price?

power and water were off,  can I request them turned on for inspection?

any other insights would be greatly appreciated.

Thanx

Guy

 

Guyneutron - sounds like an interesting property.

The asking price is simply that - what the bank would like. You can certainly make any offer you wish. I don;t know how things work down there but here the asking price is often low in order to generate a bidding war, or at least multiple offers. Ultimately the bank will decide on an offer that meets with their approval based on an appraisal. If you really want the home you will have to pay what the bank will accept. The listing agent may have more information on the situation (are there other offers, will they even consider an offer lower than asking, etc.) that can help you decide what is reasonable. I have found that in some cases the bank will not counter, and in others they will...at full price. It depends on the bank.

As a buyer it is always prudent to do a full home inspection and test all the systems, including a pool, plumbing, HVAC, electrical, and so on. This is typically a contingency of the sale. Hopefully you are using an agent who can represent your interests in the transaction - short sales can get tricky and be very time consuming. If you need a recommendation I can refer you to some folks I know down that way - just let me know.

Good luck!

Jeff

Hi Jeff,

Thank you very much for your knowledge. We are currently in escrow with a short sale in RB (not too far from carlsbad so I'm sure you know where we are). We had an approx. closing date for the beginning of December but were notified last week that the bank(s) haven't "approved" the short sale. We didn't know this up front. The bank did their appraisal last week but now we're being told that it might not close until the middle of December ... I feel like I'm getting the run-around. We've already given 30 days notice to our current landlord, have ordered flooring (because the carpet is disgusting), etc. and now we're "on hold". I am about to pull-out. I had absolutely no idea it could possibly take months. I ask my agent what she thinks and she just gives me this "well we're dealing the bank and it could take longer". We've already paid out of pocket for the appraisal and inspection. We borrowed money for the ernest, thinking we could pay it back when we got it back from escrow the beginning of December. I'm soooo frustrated. We can't plan for anything. There is another house on the market that we originally wanted to buy that just came down $40,000, not a short sale but it is a little smaller and doesn't have the equity up front. I'm beyond frustrated. Thank you for reading ... I think I just needed to vent. I had no idea it would be pushed back like this and I really don't think our agent is agressive enough to put some pressure on the selling agent.

Thank you for the time you take to reply to all of us frustrated short sale buyers/sellers.

Have a great holiday.    

Anonymous:

Thanks for your follow-up. Unfortuantely your story is so common. So much depends on the agents involved, but even more so the bank. It is frustrating for all involved, and many buyers just decide to move on. I am not encouraging you to do this, but simply pointing out that some people make that choice at some point and others stick it out becuase the house is soemthing they really want.

While it can take months many deals do finally close. Good luck, and thanks for sharing your story - this can help other buyers who are thinking about short  sales understand what they might run into.

Jeff

"If they couldn't pay for their house, what makes you think they take care of their house..." Do not agree with this statement. Most of people facing short sell because they overinvested in their houses. You remember all those Returns On Investments numbers? What about agents coming and telling: Remodel your kitchen, Redo your Bath, add the addition, then sell it with more profit!  There are  a lot of people who got in those traps! I bought house in pretty bad condition for 530K in 2004. 3,5 years later and after investing in the house 200K (for remodeling of kitchen, 3 bathrooms, putting new floor trough out of house, changing 25 windows and all heating system) I bargained week ago an offer for 510K after 8 month on market. I lost all my savings, went deep to debt, and I short to mortgage around 100K as well.

Now I wait and see what bank will tell.   

   Apple.
 

Nice post...Something I didn't realize until I went through one, is the amount of time it takes to get an answer back on your offer.  The buyer needs to have some time on their hands and not be in a situation where they need a home in 30 days or less!  Thank you!

Jeff, thank you for your quick response. We pulled out of the house i was mentioning in my original post. We put an offer on the house that we really want. I learned a lot from your answers to all above. Thank you for this blog ... you helped us see the light and I am grateful.

I hope you have a wonderful holiday.

Thank you very much!

Anonymous in RB

Green Apple - yes, I think it is an erroneous assumption in some cases. However, there are some folks who run into problems and then trash the home, or fail to take care of it. Sometimes people run into situations beyond their control (loss of jobs, etc). that put them in financial jeopardy. Some people took out large equity lines and then spent the money, which also creates problems. Plus it is not be responsible as a homeowner.

I'm sorry to hear of your situation. It is, unfortuanately, a story we keep hearing over and over.

Best of luck.

Jeff

Joyce - that is the one thing we keep hearing...how very long it can take. And sometime you get no answer at all. Glad you made it through successfully. Some buyers cannot wait. They need to understand this potential risk.

Jeff

Anonymous - that's good news. Sounds like you made the right decision.

I'm glad this has been useful. It is a learning experience for many. I'm very pleased it has generated questions and stories from consumers. The more people share their stories, the more information will be available for those who are in, or getting into, short sale situations, or are considering doing so. Thanks for your continued support and best of luck. Please let us know how it all works out.

Jeff

Great info. Can my question be answered?  I already have a contract.  Can the bank pull out?  Realtors are telling me that if the house gets it with heavy tax liens, bank will not sell.  please clarify.

Great info. Can my question be answered?  I already have a contract.  Can the bank pull out?  Realtors are telling me that if the house gets it with heavy tax liens, bank will not sell.  please clarify.

Amarilis:

Good question. I am not an attorney so you may wish to consult a lawyer who specializes in real estate and knows about short sales.

It is possible, I think, that conditions could arise that might prevent the bank from moving forward (excessive liens on the property, a cloudy title  which prevents transferring clear title to you). I would review the offer to purchase contract to see what the terms and conditions are, your rights, etc. Presumably the bank knows, at this point, what the liens are and can determine if they are able to move forward based on creditors that are due money, including the bank's loan. There may be state regulations that govern what the seller can and cannot do, and how these issues can be settled, if, in fact, there IS a signed offer to purchase by both parties.

Good luck.

Jeff

So is a seller liable to report the amount shorted as income if a the bank approves the short sale?

I had heard that that was done away with? 

Alan - good question. My understanding was that the lender would report this and that a 1099 or similar form was issued to show theshortage/income. There are bills being dicussed to give these indivuals a break on teh taxes but as far as I know those have not been passed. The lender could choose to not reort the shortage, I believe. I would consult a tax professional and refer all questions from buyers and sellers.

Jeff

Why are short sale homes listed for much lower than the bank is willing to accept? We put in an offer of $525k (the asking price, which had dropped from the original asking price of 675k) over a month ago. We have not heard back, but they did drop the asking price to 475k. We were told the bank has our offer. Why doesn't the bank counter....even if they want 650k? How do they know I won't pay that?

Why are short sale homes listed for much lower than the bank is willing to accept? We put in an offer of $525k (the asking price, which had dropped from the original asking price of 675k) over a month ago. We have not heard back, but they did drop the asking price to 475k. We were told the bank has our offer. Why doesn't the bank counter....even if they want 650k? How do they know I won't pay that?

Mark: Those are good questions, and only the bank seems to know the answers. Listing the price low does tend to generate a lot of interest and multiple offers, which drives up the price. Some of the actions may be the doing of the listing agent. Sometime banks will counter...at full price. Other times they seem not to at all. It really is dealing with a different type of seller. I suppose the best tactic is to make the best offer you can right up front, based on market data from your agent, and leave it at that. The bank normally does an appraisal so they know what market value is. Jeff

Hi Jeff,

I have only today, learned what a short sale is. There is a lot of information online - some conflicting, some not. My situation is complicated, but I'll do me best to simplify...

I own a cabin on a mountain in southern ca. My neighbors (also cabin owners) stated they wanted to sell and move out of state. I expressed interest in their cabin and their agent came back to me with a price too high for me to even consider. I thought this price was outrageous so I politely excused myself from negotiation. One week later the agent called me again telling me it was listed at $70,000.00 less than the previous price they gave me and it was a short sale, subject to lender approval. She stated the owners were getting a divorce, wife had moved out and hubby wanted to walk. Last months mortgage was paid but he wouldn't make any further mortgage payments. He will stay in the cabin until it sells.  looked up short sales online and now have an understanding of what the deal is. I hope you can answer my questions.

1. With the morgage up to date at this point in time, won't it be at least 90 days before the bank would consider it in arrears? Or, could he plead hardship now, even though he's not yet behind in payments and the divorce isn't filed or finalized? I'm thinking it's not worth my while to make any offer right now, until the bank becomes sure that payment won't be forthcoming.

2. There are two mortgages on the cabin. Do we make an offer to each or them or one of them? If one, then which one? How does that work?

3. Is there a formula or equation that would help to determine what ball park our offer should be in, or is it basically a crap shoot?

 Thanks in advance

 Tracey

Tracey:

Thanks for visiting.

The bank WILL have to approve the short sale and the owners will have to demonstrate a financial hardship in order for that to occur.  Yes, the bank will normally wait for 3 months to payments to not occur and issue the Notice of Default (arrears), but a short sale can be approved before then based on hardship that must be demonstrated by an application, letter, financial documents and whatever the bank requires to satisfy them.

The bank may be willing to forgive a certain amount of the loan but they want to limit their losses too. So they typically will do an appraisal and use that for market value.

It is not uncommon for sellers to have a 1st and a 2nd mortgage, often a home equity loan. Or they may have taken out two loans to buy the property. One will be a primary creditor, the other will be second. Your offer will be based on what you believe to be the value of the property, whether that is the listing price or some other number and that has nothing to do with 1 loan or the other (I strongly recommend having your own agent to advise YOU and represent YOUR interests - your agent can advise you on pricing given comps that have sold and other factors).The bank will determine what offer is acceptable based on the appraisal and the loan amounts due. The second lender (unless it is the primary bank) will also have to be willing to take a hit.

Since the NOD has not been filed you can work with an agent. But since you are essentially an investor (you are not buying the home to live in as a primary home) an agent cannot represent you once the NOD has been filed because of the Home Equity Sales Act, or if it is close to being filed. That is true of the listing agent as well.

Hope this helps.

Jeff 

Thanks so much for your quick response, I appreciate it.

When you say that an agent can't represent me once the NOD is filed, are you referring to a real estate agent? Why would I not be able to hire someone to act on my behalf? That doesn't make sense to me.

My next question is - How difficult is it to prove hardship to the bank? I ask this because everything I'm reading tells me that a hardship letter and back-up financial documentation seem to be the only requirements. There seem to be a number of 'reasons' to qualify for hardship. They mostly apppear to be involuntary eg: losing your job, death, sudden serious illness etc. One of them however is voluntary ie: Divorce. Do you need to be divorced and provide documentation to the bank to prove your claim, or can you simply 'claim' to be getting a divorce, perhaps separate temporarily to make it look real - plead hardship based on one income - and then move out of state when the house is sold to resume your happily married life once again with your credit in tact. It seems to me that fraudulently claiming to be 'divorcing' would be relatively easy, just to save your credit... As a buyer, how do I prevent myself from becomin a part of something fraudulent?

Thanks again

 Tracey

 

Tracey:

Well I am not an attorney and cannot provide legal advice, but here is MY understanding.

If you are an investor purchasing a short sale property when the NOD has been filed, California law specifically precludes a real estate estate from representing you since the law requires that agent to obtain a surety bond equal to twice the value of the home and getting such a bond is nearly impossible (this is what I was told by our company attorney).  You can and should, however, hire an attorney to help. The law is in place, as I understand, to protect homeowners who are having financial problems and need to sell from being taken advantage of by investors seeking to obtain the property for the lowest price, then reselling the property for more money. If the NOD has not been filed then the law does not apply. although if it will be filed soon then it could be a risk. If you are buying a property to live in it then it is not applicable. I am not sure if buying the home as a second home is considered a personal residence or an investment but it likely since you will not be living in it full time (i.e., not your PRIMARY residence) and, theoretically, you could rent the cabin out for investment purposes when not using it. Worth checking on.

Here is the link to the details of the Act. 

In terms of hardship that will depend on the bank and what they require for proof. I would think they would require more than a simple statement from the owner that a divorce is occurring , e.g., letter from attorneys, filing of the divorce paperwork.

Once a short sale occurs the homeowner's credit will be impacted; it has nothing to do with the reason for the short sale but the fact that a SS had to be completed and the loan not paid in full. Certainly if fraud occurs the bank will likely take legal action against the person committing the fraud. And a buyer would not want to be a party to fraud either.

My advice, given the scenario you describe, would be to consult a real estate attorney (or call the Legal Aid Society to get a few questions answered.

Jeff 

Jeff, the cabin would be a vacation home, so would not qualify as a primary residence. We have no desire to resell or get the cabin 'cheap' we just want to pay a fair price for a weekend get away...your advice is invaluable. Thank you for taking the time to reply not once, but twice. I truly appreciate your time and will contact an agent this afternoon.

Sincerely, Tracey

Tracey - if you would like a referral to someone, let me know. I know lots of great agents. Just let me know what area the cabin is in and I will get you someone to work with.

Jeff 

Jeff, thanks - my agent (the agent I purchased my home and my cabin with) is overseas right now. I don't know what her experience with short sales is and I won't know until she gets back in a couple of weeks. I called a colleague of hers today and he agreed with what you told me.

To be honest though, I'm leaning towards walking away from this - I'm concerned there might be some eithical issues here. I want the cabin, but I want it only if I can purchase it fairly and honestly.

As I said earlier, the cabin is right next door to my own, so my neighbors are not strangers to me. I feel bad for them as they purchased when prices were sky high and they borrowed almost every dime it took to buy their place. With interest rates jumping as they did, the market in turn dipping, AND THEN the fires (which severely affected our mountain).....they're in so deep it's not funny. Nothing is selling up there - nothing has gone into escrow for many months - A lot of cabins are in foreclosure and/or are bank owned and still not selling. All these things work in my favor for the short sale, but being able to sleep at night is more important to me.

They're very newly married and wanting to move closer to family out of state - I think they thought they could recover what they paid until they spoke with their agent and the reality of the market hit them head on. The divorce is sudden and not in character. For someone who's 'moved out' she sure is there a lot. I really think they see this short sale as their only way out while keeping their heads above water, and while I love the cabin and want desperately to buy it, I don't think it's right to move forward when in my heart I truly believe they're being deceptive with the bank. I have no proof, but common sense is looking, walking and quacking like a duck right now.

Thanks again for your help, I think I'll just wait and see what happens. Someone else might buy it or it'll go into foreclosure and if that happens I can then buy it knowing that I wasn't part of any deception.

Tracey

Tracey - well, it makes sense to pass on this given the scenario. Sounds kinda risky to me. There will probably be other opportunities down the road. If the cabin does go to foreclosure and become an REO you would have a chance to buy it directly from the bank (again I would use an agent) but the situation will be much cleaner. Obviously the price has to work for you too.

Best of luck and please keep me posted. I appreciate the dialog as it helps others who are interested in these kinds of properties to learn about different scenarios and potentials risks. 

Cheers,

Jeff

Thanks for sharing your experiences. I hope you posted it out to localism.com. Buyers need to know that Short Sales are slippery snakes.

Vickie Nagy http://www.besttrivalleyhomes.com/

I think this info is great!!  I do a fair number of short sales.  More are coming as we all know.  You have a great working knowledge and I hope I can bounce some ideas off ya later.  Keep It Up!! ur da man!!

I always cringe when I write on short sales where the listing agent doesn't know what they're doing...they have always seemed to blow up and I've tried to offer friendly advice that was never taken.  I won't write on short sales anymore if the agent doesn't know what they're doing.

Vicki - thanks for your comments. The more information we, and buyers, have, the more effective the process. Many agents, and buyers, have no clue how complicated short sales can be.

Jeff 

Thanks, Ken. BUt you have some great experience, too. I'd love to hear what you have to say. Time for a post??

Jeff 

Felix - I think that can be one of the more frustrating parts of the process. Communication is important to keep things moving along, but of course the bank and their responsiveness can make a huge difference, either direction.

Jeff 

Jeff:

It's been my desire to get involved in short sales as an investor for over a year now. I have reading and reading about it, but never really made my move. 

So, I am learning that I can't be represented by an agent, as an investor, true?

Well, my realtor-friend, showed me a property that was asking for $554K, in Anaheim Hills, CA, and it has now been reduced for $399K, on a short sale.

The listing agent said, that she has accepted 7 offers on it. But will not disclose more information on it.

Here is the scenario:

The first loan is $400K + 2nd loan $117K =  $517K. Market value is about $499K.

There are other liens, such as Property tax for $ 5,600, HOA $ 1,200. Total encumberances =  $523,800

My question is:

1. If I put in an offer for $399K, who is responsible to pay for the rest of the encumberances?

2. When I am representing myself, can I deal with the bank directly, without depending on the listing agent? But then, I would still need the "owner" authorization, right? 

3. What would happen to my realtor-friend who introduced me to this property in the first place? She would get nothing from this transaction, if it does go through? 

 I hope you can shed some light. Thank you ,Jclassy

This blog will be ongoing and going, great tips and advice!!!Great Job

Ken - thanks. I think that is true. And that's what makes this sort of thing so valuable to so many. Truly a dialog among interested parties.

Jeff 

Jclassy - well, I am not in a position to advise you as buyer, or to tell you what to offer, etc.. And since you are an investor you cannot be represented by an agent if the NOD has been filed.

But here are some thoughts on your questions. The agent has a contractual agreement with the seller and that must be honored. So that means working through the listing agent as the seller's representative.  You would be smart to get an attorney to handle your representation in my opinion.

The bank will approve a differential between what is owed and what they are willing to forgive.  No one but the bank knows what that number is. It is likely that there are offers that are higher than the asking price but no way to know without asking what would make an offer appealing. So often where there are multiple offers (as there appear to be here) that folks are offering above the asking price. And an appraisal may be above the asking price as well.

Sometimes, as I understand, banks only want to see the highest offer or two, and other times all are presented. The listing agent could certainly represent a buyer in a dual agency situation, although this has its issues and risks, but that could be part of the mix.

I would advise your REALTOR friend to speak with his/her broker on this matter.

Good luck.

Jeff

Thank you so much for sharing ... incredibly helpful!

Short sales in todays market definetly takes patience since the banks do take a minimal of about a month for their review/ approval process for the sale. It days payoff when it actually closes though.

Nicole - you are welcome. We all learn by sharing these experiences with short sales.

Jeff 

Mike - well that is true. Some seem to go fairly well, while others never get resolved and go through foreclosure. You are right about having patience - for all parties involved I think.

Jeff

We just put in an offer on a short sale where the seller is going through a divorce which is contributing to financial hardship.  The seller agreed to all of our terms, now the offer is going to go to the bank.  We have plenty of time to sit back and wait for this process to run its course.  What happens if the bank decides to foreclose?  Will the house then be available for purchase directly from the bank?  If this happens, do they normally sell it at whatever the BPO came back as?  

GMB - Well good luck. It is possible the bank will not approve the sale even though the seller did agree, and will let it go to foreclosure. Depends on the asset manager and their willingness to sell at the price you submitted.

Depending on how things work in Nevada, it may go to trustees sale (I do not know the laws there but here in CA you normally have to put a substantially amount of money down if you buy at a trustee's sale). If it does not get sold the home becomes a bank owned property and would likely be sold by them directly on the market. The price the bank is looking for may be based on the current appraisal but could differ. Hard to know. 

If you need an agent to help you if this does not work, let me know - I know several top-notch REALTORS in Nevada.

Jeff 

We just got a title report profile for this house.  It looks like 2 years ago, the owner took out a HELOC on the house for nearly 60K.  So now we are dealing with 2 mortgages.  How does this work in the short sale p;ocess?  Will the second mortgage get cancelled out?  Can we legally buy the house if there is another mortgage on it?

GMB - yes you can. The second loan will be in place behind the first with regard to negotiations about what amount each will agree to take to settle the debt. There may be enough from the sale to pay off the first but not the second (in it's entirety). Thus BOTH will have to come to some sort of agreement in order for the closing to occurr, instead of just the primary lender approving the short sale.

I would advise you to discuss this sort of thing with your agent, who may be able to get more information from the listing agent.

Good luck.

Jeff 

Thanks Jeff for your blog.  I have learned alot, and need more info.  I am new to short sales.  I am looking at a short sale in Aurora, Colorado.  It is listed for $170k by an agent. Houses in the area may go for 180-210k.  The one I may put an offer on (needs inspection) I found info online that it was sold in June 2005 for $205k.  I also found the name of the possible seller that filed Chapter 13 on 03/2006.  Also Chapter 7 on his buisness too.  What would a fair (good for me in the end) offer be?  I would do carpet and paint right off, and live in my current home until done.  How low can I go with an offer to seller and lender?  Is there a basic percentage to go by?  Thanks again.

Hi Jeff, Thanks for the blog, I have been wasting so much company time reading through it! I am a buyer, with a question for you: I hear about the lack of communication from the banks, and I wonder, is it plausible that a bank will NEVER respond? Or take more than 60 days? I've had an offer in on a Lafayette, CA (short sale) home since January 2nd, and of course I am growing concerned that I won't hear for many more months. PS: Living with the in-laws. HELP.

Other facts omitted: -We've submitted a check for 10k -There are 4 total offers, we are "one of the top offers" -Realtor -Bank stands to lose almost 500k - due to severe foundation issues and the dramatic decline of the market in this SF Bay Area niche Please let me know if I can provide more details

Bill from Denver:

Those are good questions. However I am not representing you as an agent, nor am I familiar with that area and market (BTW if you want the assistance of an agent I can refer you to one I know well who is excellent) so I cannot give you any specific guidance. But here are some things to consider as a buyer.

Keep in mind that the bank wants to minimize their loss, and that they will do an appraisal to get an idea of the market value. That is probably what they are going to be looking for. It may be the listing price, but it could be lower or even higher. An agent who represents you could help gather more information from the listing agent (who represents the seller) and about the market to give you better guidance  as to a reasonable offer price. I always recommend to buyers that an inspection is prudent so you know what you are getting (short sale or otherwise) and what repairs might be needed. Often a bank is selling a short sale AS IS, so a buyer will need to take on repairs, etc.

Hope this helps!

Jeff

Jess - well that is the $64,000 question, and I sympathesize with you. Some banks are fairly communicative and others are not. I have heard of situations where the bank never responded to offers. Others, while they may take a while, eventually respond but slowly. It seems to depend on who the staff is that is working on off-loading property, how overloaded they are with properties, and so on. Sometimes the bank simply allows the short sale to go through foreclosure (even though that is costly) and then trying to sell it at a trustee's sale, and it then becomes an REO if it does not sell. Guess it depends on how badly you want the house and how patient you are. And how good the offer is.

The new information is interesting. I always recommend buyers have an inspection so they can uncover any problems. You mention foundation issues. I know of situations where banks have refused to loan money on a home where there are significant foundation issues. I of course have no way of knowing if that could be the case here since I am not representing you, and know nothing about the home or your financial situation. Fixing a foundation problem can get expensive and buyers are wise to have a qualified professional (including a structural engineer) look at this sort of thing to find out what it may cost to repair as part of the due diligence.

Hope this is useful.

Jeff 

Jeff,

I found a property on Movoto.com at the begining of January that we went and took a look at the house is in the city limits on 1/2 acre lot (rare for in the city limits).  It is offered as a short sale with the agent giving the purchaser 1/2 the commission. 

We put in an offer almost a month ago but have heard nothing.  I know that these sort of things take time but shoudl it take this much time?  They were asking 369K and we offer 290K becasue other house in the area are on the market for less than the 290K.  Also within a 1/2 mile radius there are over 6 bank owned properties for sale plus many others on the market by the owners. 

How much longer should we wait before we start to try to turn the screws?  Oh I forgot to mention that the current place we are renting had an NOD filed against the owner in January so we are up against the wire as well.  We have already gotten our funding certificate from ower mortgage broker for 373K.

Terri:

Are you working with an agent? If so they should be able to help. I can't really offer very specific advice since I am not involved in this deal nor do I know anything about the situation. I can understand how you are feeling, however.

Getting feedback from the bank seems to be one of the biggest frustrations, next to how long this can take. I know sales where it has taken weeks before there was any follow-up from the bank. If you are not working with an agent I would talk with the listing agent to see if they can get some information from the bank on the status and when an answer might be forthcoming.

Bottom line - how long are you willing, and able, to wait before you make another decision? That really is a personal matter and only you can decide how long you will wait. Many buyers do walk away because they are unable or unwilling to wait any longer, and there is no guarantee the deal will actually get finalized.

Jeff 

I call Short Sales "Fake Listings"

In our area, only 1 in 20 actually go to the closing table.

As a buyer agent, can we refuse to put offers on these?

Love to get your feedback on:

Short Sales Are Fake

Situation: We were looking at houses last year and found one we liked but, couldn't put in an offer at the time. Dumb, I know but, we contacted the listing agent to show us the house. Can we still get our own buyer agent? We just found out it is in pre-forclosure and they are going to do a short sale. I've been reading about short sales and they sound like a hassle but, this would be the perfect house in the perfect location for us. If we have to go with the listing agent are there any questions we should ask him about him and/or the process? Is earnest money usually an issue with short sale offers? Thanks.

Frank:

LOL. I wrote a post about When is a Short Sale NOT a Short Sale. It seems to be true here, too. Many do not make it to the closing table and end up as REOs. I suppose as a BA advising my buyers, I would not refuse but definitely would give them all the pros and cons so they can make an informed decision. Without knowing the bank involved and how quickly they are likely to respond, it really is a crap shoot. Working with a good listing agent can make a difference as well, but even their hands can get tied if the bank is not cooperative.

Jeff 

Chad:

You certainly have a right to request that you have representation by a buyer's agent. The other agent may not be happy about it. Make sure you disclose this to the agent you wish to have represent you so you can discuss the possible ramifications. The listing agent cannot represent your interests, as you know, but you certainly should ask as many questions as possible about the process, wh ois involved at the banw, how quickly things can be expected to move along, and more; The LA cannot advise you on the price to offer, but may have some information from the bank regarding what is needed as a minimum, especially if an appraisal has been done. 

Keep in mind that the bank is looking for the cleanest offer possible - a reasonable amount of money down, a pre-approval, minimal contingencies, expect the standard (mortgage, inspection). You will likely need to buy the house as is and an inspection would be very prudent so you know what you are getting.

Hope this helps. 

Jeff 

 

 

 

 

Hi Jeff,

I live in N.Nevada where the short sales and foreclosures on the MLS is normal.  Out of the 85 listings in my price range, about 80 are short sales or REO's.  This being said, I am a first time homebuyer, and an impatient one at that.  I have noticed that not all of the short sales are disclosed on the MLS.  I made an offer on a home in late Dec. that was a short sale, I was unaware of that until I was making the offer with my agent.  That offer fell through.  The bank seemed to think that the house was worth more than it was, and they weren't budging. 

I put in an offer on a different short sale yesterday.  The home was listed on 2/12 for $172k, the owner owes $214k.  I am only approved for $150k and that's what I offered, (I am the only offer so far). I know that the odds are against me, but at this point, since most of the homes in my area are in foreclosure or pre-foreclosure, what do I have to lose?  This home is lovely, one owner, but the husband passed away in '07 and now the widow is loosing her home.  It's a sad story.

BTW, thanks for all the info, it's been a big help in trying to make sense of this short sale mess.

 

I am interested in purchasing a short sale and turn into an investment rental property.  I've heard from others that I cannot do this, but don't understand why....can you help explain?  What are the time restrictions before I turn it into a rental property.

 

Jeff- I have have read all your blogs and learned alot on short sales. THANKS!!We put an offer in over a month ago and no response yet.on a short sale condo. Can we put another offer in with a deadline attached? or would this start the process over again? The property is a condo in Alabama, also can we find out what the Brokers Price Opinion is or is this confidential between the bank and listing agent? thanks so much!!!

Christina - well your story is just another example of how difficult the short sale situation is for buyers AND sellers. The bank holds the wild card in these situations and there is not much you can do. If they are not motivated to sell, or are overwhelmed with properties, or the asset manager insists on a certain price because that's what the appraisal says, then the home will just sit until it is foreclosed.  It does seem that, in general, banks are getting better about responding and moving some of these properties, but since we continue to see so many hit the market, they continue to struggle.

Certainly there is no reason why you cannot continue to put in offers, but the question is how long are you willing to do so because of personal time involved, mounting frustration, etc. I always recommend that buyers look at all properties that might meet their needs and price range, NOT just short sales, so you can make the best decision.Often the best deal is with a more traditional seller where you can negotiate a sale.

Good luck, and thanks for reading and commenting. The more people do this the more we all learn.

Jeff 

Christina - regarding your question...

The laws vary from state to state regarding these properties and protections for homeowners. Here in California an agent cannot, for example, represent an investor who is buying a short sale if the Notice of Default has been filed. This is to protect homeowners from investors from swooping in and buying the home at a much lower price for investment purposes. And a buyer who represents themselves as someone who will live in the home but then does not could run into issues legally depending on state laws, and the lender may also have requirements about the terms and conditions of a sale. I would check with a knowledgeable agent in your state and even an attorney on the issues you raise.

A mortgage may also have requirements that the home be owner occupied. 

Jeff 

Natalie - thanks. I'm glad this is helpful. We are all learning about these types of properties.

The laws in your state may dictate how and when offers expire. I would check with your agent. I do not know if making another offer is going to make a difference, and if it, too, expires, then you are no further along.

Here in CA an offer expires after 3 days if no date is included. At that point the buyer can walk away if they choose.  But if the bank comes back with an approval you can still move forward if you wish. Given how long banks take to respond the issue of expirations seems moot. It depends as much on your level of patience and your interest in your offer still being considered, or not.

You can certainly ask about the BPO but they are not obligated to share that with you, unless the laws dictate that this is not confidential. Some banks seem to be willing to state what $ they are looking for, or a range, and others will not be that forthcoming. it would, of course be nice to know what number they will accept so you could, if you wish, make an offer that meets their requirements. But then sharing this information would mean, possibly, multiple offers at the same number. Not sharing gives them the potential for a bidding process.

Jeff 

 

 

Thanks so much for this post!  I am currently working on my 1st short sale so this has been very helpful!

You are welcome, Lisa. There are some very knowledgeable people here regarding short sales so be sure to ask if you need help or have questions.

Jeff 

Hi Jeff,

My husband and I just put an offer in on a short sale about 2 weeks ago. We were the first offer but just a few days after the owner said another higher offer came in. She said the bank only wanted to see the highest offer. We wanted to know if it is true that the banks only want to see the highest offer and not all offers. The higher offer only has a 10% down and 50k higher than our offer. We have a 20% down and are willing to increase our offer another 30k-40k.

We think the owner might be trying to sell to a relative and pay them the mortgage payments and stay living in the house so they can wipe out some of their loan. The sister is the selling agent and she never picks up her phone. The house is still kept in great shape and beautifully decorated inside and doesn't look like the owner is distressed. Is this illegal if this is what they are trying to do?

Thanks for any info.

Hi Jeff,

I made a bid for a short sale and the bank came back with an addendum saying they have 90 days to set the sale price.  Can I counter that saying the have less time.  I dont mind waiting and was thinking of 45 days but 90 days is too long and will leave me in a situation where i have to find temporary housing.  Also I read somewhere that you can write in the contract that the buyer can back out of the deal until the offer is accepted by the bank.  That situation would be ideal because it would allow me to look at other houses.  I don't want to be locked into hoping I get a house and then 90 days from now find out I have to start the process over again.

Thanks,

Chris

 

AppleTree1:

Well as I understand, and have seen, the bank can do what they want. I have seen some that only look at offers 1 by 1, or the highest only, and others review them as they come in.  I know of situations where there are multiple offers that have been submitted to the listing agent but the bank is not reviewing them. There is no consistency. Do you have an agent helping you? If yes, I would suggest they get more information from the listing agent. If not, it is difficult since the listing agent represents the seller. And laws in your state may impact who can do what, etc.

The bank will require demonstration of hardship in order to approve a short sale - has the short sale actually been approved yet? Hard to know if there is something inappropriate going on.  As in CA, I suspect there are procedures in your state for filing complaints as a consumer if you feel strongly that there is something illegal or inappropriate happening. Not hearing from the Listing Agent can be very frustrating. You could also check with the brokerage firm itself to enlist their assistance, unless she is the broker.

Good luck 

Jeff 

CHris:

Well I am not an attorney, nor do I know what state you are in or the particular laws so I can't advise you specifically. Seems to me that until you have a signed agreement you can back out. But I would check the terms and conditions of the offer on this, or ask an attorney. If the acceptance date has passed without both parties signing then the agreement may be null and void...but could remain if you are willing to let it until the bank agrees to it.

You could possibly submit a request to change the 90 day period but the lender is really holding the cards here. 

There is nothing wrong with looking at other properties while you wait to see what happens. Maybe you will find something better. Again, if you do not yet have a binding agreement (the contract will probably state what determines that. say signatures by all parties and receipt of same) you would seem to have other options. If you do have an agreement that is signed then you will have to abide by whatever terms and conditions are in the agreement with regard to your rights and obligations. If that is the case I would definitely consult and attorney (sounds like you are not working with an agent, who could also advise you on this).

Good luck, This sort of stuff in these deals is very frustrating.

Jeff 

I am having trouble negotiating with the correct person for the credit reporting side of a short sale with WF.  I have an accepted contract by the bank and a close date but the reporting issue has been side stepped by the person I have been negotiating with.  I was told it would be reported as "settled for less than owed".  I would like more details and need to know who would give me answers regarding this issue. 

Thanks for the information posted.  Short sales are inevitable in our market today.

 Di NE OH

Di:

Sounds to me like you need to talk to that person's supervisor to better understand the process adnt he bank's reporting responsibilities.

Jeff

i've been reading the comments made and they are very helpful.

i am in the process of a short sale property in ny "as is".  when they indicate as is condition is their room for negotiations or do you have to just accept or not accept the conditions offered?

also on a short sale purchase, is it possible to request a sellers concession to purchase?

i have an attorny reviewing the contract, but i would like to know what my options are before hand.

 

GA:

Good questions. You can certainly ask that repairs, or some of them, be taken care of, especially those of a serious or hazardous nature. But they can still say NO since they did say AS IS. It may depend on the the nature of the problem since a serious issue will plaque them if you back out and another buyer comes along. There may also be some NY regulations regarding AS IS purchases, what this means, etc.

Becuase the seller is in a hardship situation getting a concession may be difficult. I have, though, seen buyers requesting closing costs to be paid, or a portion thereof, adn some banks approving this.

Good to see you have some legal advice. These can be tricky.

Jeff 

Thanks...

I think I'm just becoming impatient because this is a long drawn out process.

nothing short about short sale...

Well what can I say that hasn't already been said?  For the most part I try to avoid dealing with short sales, for no other reason than the headache.  I do and have counseled a few would be clients that find themselves in the need for a "short sale".  Unfortunetly most of them act too late to get anything done.  Not only does it take an extended amount of time to purchase a short sale, it tends to take an extended amount of time to set one up.  I have had several agents "list" a property as a short sale with $X dollars as the asking price, only to find out that they never had that price approved by the lender.  Their comment is almost always that they needed to get it on the market as quickly as possible.  My thought, if the lender is willing to take a short sale, then delaying the listing 30 days to get it approved is not a problem.  As long you are following the lenders "protocol" for setting it up, it should not be an issue. 

Hello this is great info. I have one question about a house I am looking at. I just went on he market for 230K in Patterson CA. It is a short sale the owner has only one loan fr around 300K. I want to put in an offer there is only one issue. My Realtor told me the bank has already set their schedule for this home. They will not even look t an offer till the home is on the market for 30 days. Then they will make their decision 8 weeks after that. That is 3 months and a long time to wait for  home that you might not even get. I was hoping to close something in around 30 - 60 days. My wife is having a baby and I could use the time after he is born to move. Is there any way t speed up their process?

 THX

Casey

Hi Jeff,

I previously posted on 2/21 about putting in an offer on a short sale listed at $172 and the owner owing $214.  I found out this last Thursday that my offer of $150 was accepted!!  I was/am so surprised.  Closing in scheduled for the week of 4/14.  The home was a Countrywide home, and I've heard they are a nightmare to work with.  I know it's not over yet, but they had an answer in 3 weeks, a miracle! 

Good points, Roger. I do think that some of the issues related to the short sale process are the fault of the listing agent, who does not know what they are doing.

Jeff 

Casey - well, I suspect you will not be able to change that. The fact that they have even communicated that much says something. If the timing is really an issue, given what you know, making a different decision might make more sense.  They could end up moving faster, or worse, take even longer. The other issue is that someone else could come along with a better offer and you would not get the home to begin with.

I suspect that in many markets there are other homes that are similar to the short sales and that buyers could find something they like equally well. Perhaps that is the case in your market as well.

Jeff 

 

 

Christina - well congratulations!! That is very good news. The timing is really not too bad in your case. Thanks for sharing. Now people know that it CAN happen, but also that is may take time to get the initial acceptance from the bank, as we have all been saying. BEst of luck. Let us know when you are the new homeowner.

Jeff 

We put an offer on a short sale December 30, 2007.  The seller ratified and sent our offer to their lender (ASC) and we have been waiting since for an answer.  We keep extending the inspection and financing contingencies and nothing yet.  The BPO has been done and we keep being told we'll get an answer this week which becomes the next and the next.  We did not put a deadline on our offer because at the time we had no clue what a short sale entailed.  Is it too late to now put a deadline so we can walk out?  or are we basically stuck until closing date (April 14, 2008)? Other houses are popping up in the market and if nothing is going to happen with this, I'd rather move on.

Thanks,

Tired of waiting (MD)

JC - Sorry it took me so long to respond. Ihave been real busy and away from the laptop a lot. Not a good excuse.

I don't know the laws in your state and since I am not your agent, nor an attorney. I can't really advise you. But it seems that without a signed agreement you can take other steps if you wish. I would review the agreement to see what it says. Some states have a default period after which an offer becomes null and void if not accepted by both parties (e.g., in California it's 3 days). You have chosen to continue to keep it active but you could make a different decision, or look at other properties. If you do want to move on it might be prudent to submit a request for the seller to perform, i.e., with a new time period, before you make that decision. Unless both parties have signed the agreement, or the laws otherwise indicate that you have an agreement, you should be able to make another choice that's better for you. You might also consult a real estate attorney.

Sorry this has gone on for so long. Unfortunately it seems to be a story we keep hearing over and over, and many buyers DO decide to walk away and do something else.

Good luck.

Jeff

No problem.  Thanks for the response Jeff, and for all the useful information in your blog.  It turns out we finally heard that the first mortgage holder approved our offer.  Now there's some negotiating to do with the second mortgage holder.  We've decided to stick to our guns and see what happens because despite other homes popping up in the market, nothing at the time compares to this brand new house (well a year and half old, but not lived in yet) at that price.  I hope the second mortgage holder falls in place - after all, it is my understanding they get nothing if the house goes to foreclosure.

 Thanks again,

JC

JC - Well that sounds encouraging. Hopefully the banks can negotiate and work things out so that the 2nd loan holder is satisfied and things move ahead. I will be interested to hear ho wthings move along, and finally settle. Best of luck - maybe you will be one of the statistics.

Jeff 

I've recently placed an offer on a property in shortsale that had been on the market for over 6 months.  The asking price, although comparable with recently sold properties, did not take into account the condition of the property and they had not received a single offer.  Because the house has been virtually destroyed mechanically and has severe structural problems, the offer I put in was well below even half of the asking price.  Much to my surprise, our agent called back a few days later and said "they took our offer."  There was one ratification to the offer to allow the lender more time than what we had previously allotted.  After all signatures have been made on the offer and the selling agent confirmed the bank had the document, the listing price was suddenly reduced by up to 30%..yet still listed at more than our offer.  Is this an obvious attempt to solicit more competitive bids or did they change their listing price to be more in line with my offer to help promote the sale when the bank compares the offer to the current listing price?  At this point, I'm growing suspect of the motives of the selling agent, and wondering if even having the signed acceptance to our offer is worth anything since the bank has the final say.  Can the seller sign multiple offers at once?  If there is increased activity now on the property because of the bargain listing, is it ethical for the agent to share "verbals of activity" on the propery while the bank is reviewing our offer? 

Typo....I mean "modification" not "ratification"  I had just finished reading "Tired of Waiting" (MD)'s post above and thought, wow,what a great word---you don't hear that much anymore and confused the terms...

As an added note, the seller should have some idea of what the bank will accept, correct?  It doesn't make any sense to me that they'd even entertain an offer, let alone sign it if the bank was only to reject it at a later date.  Do lenders typically communicate a range to the seller that they need to get in order to complete the short sale?

John:

Well some good questions here. I don;t know what state you are in, so I don't know the laws that govern what information can be shared about offers, and other issues related to this process. I also am not an attorney. In a short sale, getting the seller's signature is one thing, but until you actually have the bank's approval as well, it seems things are very much up in the air.

I had a situation where my buyers submitted an offer, which was signed by the seller, but another offer was submitted and also signed. At the time the bank had NOT issued an approval nor accepted a particular offer,sp both were viable. When you say the agent says "they took our offer" I asusme you mean the seller, not the bank itself. The laws vary by state but agents are permitted to share the fact that there are offers on the table, and with permission can share more details, such as what amount a new offer should exceed in order to be viewed as competitive. I would talk about these issues with your agent. It seems that banks can do whatever they want in these situations - accept whichever offer they want, counter whatever, view all offers or take them in order, etc.

With regard to your second post, normally a listing agent would conduct a market analysis to determine at what price a home should sell at, and use this to determine a list price. This information would be shared with the bank. This does not mean, however, that the bank will necessarily agree. They will do their own appraisal, or have a BPO (Broker Price Opinion) completed to determine what price is appropriate - this may be different from the listing price. Keep in mind that the bank wants to minimize their losses and price is likely to be the most important factor. What the seller wants and what the bank wants are likely to be at odds, unfortunately. This is what makes these situations so difficult for the sellers.

The other issue that a arise in the case of homes with severe problems, say structural or foundation, is that getting a loan approved may be a problem. A bank may not want to loan money on a home that is signficantlt damaged; after all, the property is the bank's colateral on the laon.

Good luck. Keep us posted. This is all good information for others involved in short sales, or thinking about them, to read.

Jeff 

John,

 This short sale business seems to be a game where banks try to win (or loose the least they can).  In our case we were at least told a percentate.  The bank was willing to accept 82% of the fair market value as determined by the BPO (Broker Pricing Opinion).  Of course, that is because they will most likely recover the rest from insurance.  It would be good for you to find out what the owners paid for the property (which is public record in most if not all states I think).  Also court records - public as well - should show you how much they borrowed and if there are several liens on the property.  This can give you an idea of what the bottom line is ($).  In our case, the owners had two liens with basically 100% financing which very likely means there is PMI (Private Mortgage Insurance) which covers the lender.

Regarding other offers.  In our case, I kept seeing the house advertised and was not happy with that because other offers could keep coming.  When we voiced our opinion about that, the seller noted the house "under contract" which took it off all the realty websites out there.  The incentive was that we put a 1% earnest deposit to show we were serious about our offer.

We are now waiting as I mentioned in a prior post for the second lender.  We found out last week, that they too want to do their own BPO!!! Urgh! Like waiting for one wasn't enough - not to mention the first one was supposedly done by a certified/independant appraiser, so beats me why the second bank can't use the prior BPO.  -------------Any thoughts Jeff?

 Thanks,

JC

Thanks for all the great info on this post.  My wife and I have a short sale situation that doesn't seem to be addressed and I'm wondering if anyone could help us.  We live in Pa. and bought a house at a standard public auction on 11/1/2007 .  To make a long story short, we came to find out about two weeks after the purchase that the sellers owed around $500,000 and we only paid $365000(we paid 10% deposit day of sale).  We had an appraisal done for the mortgage and it came back at around $450000 although not all repairs needed were figured in that appraisal.  Due to a divorce and some other business issues the owners decided to try a short sale.  According to our auctioneer Wells Fargo only received the short sale packet on 1/7/08 so it seems like we are still in the window of the normal waiting time.  I'm not sure what to expect due to the fact that we bought at at auction.  Will they counter offer? Will they view the auction as true market value?  Does anyone have a experience with this type of situation?  

Thanks....Aaron

 

Hi, Here's the story - this property we are interested in was listed at 695000. This was a good price in January. We put our first offer then and have been waiting. its been 4 months today. the seller came back asking us for a counter from the first offer - so we did that too. now our offer is at 670 for this property. According to the seller's agent - the bank that loaned 80% has approved our offer - but the other one has not. we are waiting on hearing back from the second bank. Meanwhile, we feel that the market has gone down even more and our offer could mean that we are paying a lot more. We now want to negotiate the offer - probably go back to our first offer of 655000. Can we do this at this time? We asked our realtor and she feels that we can wait till we hear back from the second bank and then negotiate. The exact comp a couple of streets next to this property sold a couple of days back - they were only asking 669000 and that house needed some fixes. What can we use to negotiate this offer ?

Jeff/JC:

I agree, and thanks for the input.  I've driven past the property 4 times since our offer was accepted and the property was relisted, and everytime there has been an agent and another car (likely buyer) viewing the house.  It's priced at a gross discount now, given the neighborhood and comps.  I've asked around and the feedback I've gotten was "there's really nothing you can do, they can relist at anytime."  I think it's borderline "shady" to have relisted at a much lower asking price than what was initially listed after receiving our offer.  Considering I put my money where my mouth is and put around 20% earnest money, I now feel I am justified in asking the agent to pull the listing from the websites until we are finished negotiating.  With my investigations of the public records before placing the offer, I did find evidence of the 80/20 deal that got so many lenders in trouble, and you made a very good point that there should have been PMI on a property like this and the lender is protected.  I believe for anyone in this situation, if your laws don't dictate in your own state otherwise, that in your offer letter on a short sale where the seller has agent representation, that you specify they can not "re-llist" or must show the property as "under contract" until you are finished with your negotiations.

 The last few postings on here have been very insightful, and I'll keep everyone posted as to  my progress.

I need to slowdown, proofread better and use a calculator!  Corrections to the last post.  ~10% earnest money was put in and the previous sentence to the earnest money should read "...and asking price than what was initially listed after accepting our offer."

I am in the process of listing a short sale for the first time and also have a Buyer interested in Buying one. I'm grateful for the first time experiance on both as I can foresee more of the same in our area. Is there a benefit in obtaining help with a short sale service to help facilitate with the bank? I was referred to one by another agent. In Oregon we have a simple disclosure form, not much else. I really want to protect my Buyers. Any suggestions?

Aaron - wish I could help you but I am not familiar with that situation. Guess I dn;t understand why it is not a done deal if you acquired the property at auction at a price the lender was willing to accept. I would contact an real estate attorney so you can understand the laws that govern property acquired this way as they vary from state to state. 

Jeff 

Walter:

Glad to hear you are working with someone on this.  It can be even more difficult when you have two lenders since the second one, of course, wants their money two, but the true value of teh home may not allow for both banks to receive what they wish and negotation with the second is essential. That can drag out the process. I am not comfortable suggesting what to do with regard to a revised offer, given the new market data, since you have a relationship with an agent. Perhaps you can explore the possible responses at this time with her. I would think there would be a counter offer from the second bank that could then itself be countered, but that may depend on how things are done in your state.

Jeff 

John - well good luck. It seems that banks are calling the shots on these properties. Often folk do request that the property be removed once an offer is"accepted" but I don't think there is anything legally wrong with what you saw occurring, but perhaps ethically. Since the bank wants as much money as possible they probably feel this is the way to obtain more competing offers. And the listing brokerage is possibly involved. Perhaps a discussion with a real estate attorney makes sense since laws vary from state to state. IF the bank has not formally approved YOUR offer in writing then all may be fair game. But I would think that once they approve your deal then the contract would be pending.

Keep us posted - all these stories are helpful and add to the information for everyone, so thanks for stopping in and commenting.

Jeff 

Marina:

First of all good luck. As you can see from all the comments short sales can be rather complicated and frustrating. Does you broker have any thoughts on this? I would think that provided you use all the correct forms for your state regarding the offer and disclosures your buyers will be protected. We have an addendum form to submit other terms and conditions on behalf of our buyers in short sale situations. Just make sure that whatever you and your buyers want to be part of the agreement is in writing, otherwise it is probably meaningless. And without a signature the contract is not binding.

As far as a short sale service I have no experience using them so not sure if that helps or not. Not aware that anyone here uses one. Perhaps further discussion with the agent that referred you to understand how it works, etc.

Good luck.

Jeff 

Thanks Jeff. This property is in Orange County, California. We have still not heard anything back from the bank. This property had a NOD on March 13. So, is there a possibility that this property can go into foreclosure if the bank delays a lot. What is the typical time for this process. How much longer should we wait.

When I purchased my "short sale" there was nothing short about the process! It took 6 months to negotiate it! I think that often, if there are 2 mortgages on the property, it may take a little longer - which was the case with the property I purchased. 

Darleen - thanks for the input. That is a sorry we keep hearing, although I know of some short sales that DID close in about 2 months. I also know of some that never DID close becuase the 2nd lien holder would not negotiate so everyone lost in the end when it got foreclosed.

Jeff 

Jeff,

I apologize, I should have clarified that it was two weeks after the auction that we found out our winning bid was $135000 less than what the seller owes.  Not two weeks after the purchase as I wrote(in my mind we purchased that day).  We never actually got to settlement.  The lender only found out about the auction after the fact.  Now we are waiting for the lender to approve the short sale based on what we bid at auction.  Any thoughts?  

 

Thanks, Aaron - it did not really make sense to me.

Normally, as I understand, the lender will base the value on a market analysis - an appraisal or a BPO (Broker Price Opinion). The auction price may or may not actually be a good indicator of the market value of the home
 and what the bank will accept. I seems to me that generally the auction would result in your then becoming the owner - they would have, presumably gone through the process of trying to sell through normal channels (here in CA they try to sell before the final foreclosure, buit if not it goes to trusee sale (an auction), but if not sold it becomes an REO.

I think sometimes sellers think they can sell faster and make more money at an auction and go that route, and perhaps this seller did not have any discussions with the bank, only to find out more is owed that was won at auction. Are their terms and conditions in the paperwork from the auction that may be relevant?

Once again this scenario indicates how complex these deals can become and that there is no rhyme or reason to the process, it seems.

Jeff 

Hi Jeff,

Thanks for this informative blog! Currently, I'm thinking of making an offer for a short-sale property. However, the listing agent thinks my offer is a little low and claims that she intends to keep the listing on the MLS even if the seller accepts my offer. While I understand that this is part of her duty to her principal, it does not seem to be beneficial to a buyer. Can I add an addedum to my offer withdraw the offer without penalty at any time prior to the lender giving approval in writing during the period in which she is still soliciting offers? After all the purchase and sales agreement is not enforceable without the lender's approval.

 

Thanks,

LP 

Great discussion on short sales. But has anyone had experience with short sales when there really is no hardship or late payments yet? I just wrote a blog about it, because I am very curious to know whether there is any way for a financially stable (but not well-off) customer to get out of being in negative equity on a house other than just going to foreclosure. Any ideas or experiences will be appreciated.

Hi,

I am renting a house that was saved from fourclosure for another couple. The couple have devorced, but to this day the morgage loan is still in they're name. The person who saved them from losing( Joe ) the house has a general warrinty deed in his name on this house. The ex-wife of the couple has called me and asked if I would be interested in buying this house through this short sale option.

My question is, Is it possible for the ex to sale the house out right if the deed is in someone elses name? I understand there is a long process, but I want to know this before I decide to dive into this investment.

Thank you

MG

Hi,   I am in a unique situation in So Cal where we have made an offer on a house where the owner is the agent.  We offered 20% down and are non-contingent with a great credit score.  It has been about 3 weeks and he has come back to our agent a couple times telling her that he has received other offers and the specific amount of the offers, which are substantially higher.  We raised our offer just a small amount because the house does need some work.  My many questions are, is an agent allowed to say they have an offer for a higher price to drum up competition when in fact they do not?  Can he hold back offers even if the lender wants to see all offers?   He mentioned holding off ours to see if we'd like to match the others, which seems to me that he hasn't even submitted it. Should/can we contact the lender to see if the offer has been submitted? How much does the owners approval matter? Lastly, is it total dollars that make the sale work or do you think the lenders look at the whole package?  I'm wondering if they ever accept lower offers for more quality buyers in this situation.  BTW he owes a ton of money on this house so he has a lot invested in this and we found out the first lender is defunct, in case this make a difference.   One last thing.  If an SS goes into foreclosure can you follow it to auction and buy it there?  how hard is this to do?

Great Blog...thanks!

Nice blog Jeff.  Had a quick question...  About a week ago, I put in a bid on a short sale home and it was acceptted by the seller that night.  Of course, we are still waiting to hear back from the bank (they're appraising today).  My concern/question is:  if there were other offers submitted, say over the weekend, is the bank able to see the amounts of those bids, and also, if one of those bids should be higher than mine, can the bank simply say they aren't accepting MY bid and not provide a counter offer, and simply decide to go with the higher offer.

Basically, it seems to undermind the system if they do not allow a counter offer from me.  Comments/ suggestions?  Thank you so much for your time.  It's great to have a place like this to come to.

 Justin

LP - I don't know what state you are in and there may be conditions in the offer that govern this situation. but until you have a signed agreement by both parties you should have the ability to retract your offer. Keep in mind the listing agent's fiduciary responsibility is to get the best offer for her client (and the bank). Keeping the listing active until a better offer comes along might allow that, even though it is not beneficial to you. At some point, though, if no other or better offers are forthcoming the bank may sign off.

Jeff 

MG - your situation sounds rather complicated to me, and I am not an attorney.  There may be laws in your state that determine how this sort of situation can be handled. I would think that only the person who owns the property has the right to transfer the property to another peron such as yourself. But if it is a short sale, such that what is owed is less than what the home can sell for the bank will need to approve this.

I woulod contact a real estate attorney in your state to ask some of these questions.

Jeff 

Caligirl182:

Well, I am not an attorney here in CA, but as a licensed agent and a member of the National Assoc. of REALTORs, it seems that a situation like this could be interpreted to be a violation of the Code of Ethics (but this does not impact licensees who are not NAR members).

Since you are being represented by your agent that is the person who needs to advise you on what to do and when, or to give you the necessary information so you can decide how to proceed. To the best of my knowledge all offers are to be presented to the seller. But I have also heard of situations where the lender is only reviewing offers one at a time, or the highest, etc.

Anyone can purchase a home that goes to public auction, but you do have to meet the requirements. I am not an auction expert but I believe a substantial amount of money must be put down as a downpayment  and homes are auctioned as is. Seems to me that many homes do NOT get sold this way and end up becoming bank owned properties.

Jeff 

Justin -

These are good questions, and often asked by many buyers.

The lender can pretty much do what they want. They do not need to counter all offers but can jsut counter the one they feel is the best alternative. It would be nice for all parties to have a last and final opportunity but it is not required as far as I know. Banks want to get as much money as they can, so keeping listing active until they have an offer that meets their appraisal gives them the best shot at getting the best offer. The bank has the right, and will want, to see all offers if there is a chance a better one will come along, at least until they sign off on a particular one.

I would think you could submit a counter offer, or rervise your offer in you wish. If you have an agent I would speak to him/her, ot ask the lsiting agent. Keep in mind the bank wants to optimize the offer (minimize their loss) so however they can do that they likely will.  This is, inpart, why these deals are so frustrating to buyers.

Good luck.

Jeff 

Jeff, We're in North California East Bay area and recently found a shortsale home that we really like. The house is located in a new development HOA neighborhood and the builder has two more to sell. They are asking $685k-720k. Besides there is another one listed as resale at $675k. The shortsale property is one of the larger ones and is listed for $465k. Is that even possible? We contacted the listing agent, they are not allowing any showings for another month (not to disturb the people still living in there I believe) but they said they were accepting offers and had already received some without disclosing the amounts. We are comfortable making an offer w/out seing the house since these are all very new but we cannot decide what an acceptable offer would be. Would anyone offer above the listing price? We are not working with an agent, is that a good idea? Thanks, Semiha

Semiha:

Working with an agent will mean you have someone to look out for your interests, which the listing agent cannot. That person can also assist you with determining a reasonable offer price and strategy based on past sales and other factors. 

Some short sale homes are priced low, in order to generate bids and multiple offers, and potentially a higher price, which may be above the asking price but fairly consistent with comparable homes that have sold. Keep in mind that the bank will have to approve an offer and they will be looking for market value or nearly so in most cases. A very low price may end up much higher with bidding.

If you need a referral to someone in your area to help you with your purchase, let me know.

Jeff 

Hi Jeff, We recently made an offer on a short sale that has a first and a second. The first accepted the offer based on the second receiving 1K to pay off the loan (88K owed). The second bank said they would only settle for 5K. The selling agent tried to negotiate with each side but they wouldn't budge, so each of the agents agreed to give up 2K of their commission to cover the remainder the second was requesting. The second has now accepted but the first is saying if there is any additional money it needs to go to them and won't allow the second to receive more than 1K. Which puts us at a standstill. The first accepted our offer and we aren't asking them to pay anymore to the second but they won't allow us to pay that difference. Have you ever run into this type of situation? Is there any chance of resolving it or do you have any advice? I'd hate to lose the house but I don't know what we can do about it at this point. Thanks for all your info...your blog has been been a great resource for us during this process. --Kelly

This is the best info I've been able to find on the internet regarding short sale info -- thank you!

 My question: We have an offer in on a short sale (25K above the listed short sale price). The owner of the home clearly does not want to sell, and has gone to great lengths to misrepresent the home on MLS, make it difficult to view the home, etc. The owner of the home also happens to own the realty office representing him (so his realtor works for him). Finally to my question -- is there any way to verify that the seller's realtor has actually presented our offer to the bank? We have a funny feeling that they are just sitting on it (fax # didn't work, phone number was incorrect, our agent had to go to great lengths to actually get our offer into their office). I'm told by our realtor that there is no way we can even find out who the bank is. Can you either confirm or deny?

 Thanks so much!

 

hi jeff - we just put an offer in on a home in Marlborough, Ma - about 25 minutes west of Boston. The home went on the market in 10/07 for 254,000. Since then there has been no offers and they droppedvthe price every month since its been on the market. The last listing price was for 189,000 - in the beginning of April. We put an offer in for 170,000 - the seller accepted and the listing agent has taken the property off the market. We were told by our agent that the 3rd party - a lawyer firm in Boston that is dealing with the lender Citi Lending Group (I believe Citibank) out of CA will get back to us on our offer within 60 days. Unfortunetly our current lease ends in 60 days - so we are going to have to ask for an extension for at least a month. But my question is how good of a chance we have to get an approval on our offer from the lender. We don't knowhow much they owe on their loan but we know that they bought the home in october of 2005 for 330,000 so I assume they still own a good chunk - they piggy banked on their loan ( thankfully through the same lender- so we aren't dealing withtwo banks) but why would they list it for 70,000 + grand less than what they bought it for?? Our agentvwanted to give us a heads up that there could be a possibility that the bank could reject our offer to forclose - she wanted us to know ever possibilty - we are in hopes b/c we have been the only offer in the 200 days that it has been on the market and since our offer - it has been taken off - so we are not dealing with any other parties coming in to out bid us. How likely is it that the bank will decide to foreclose and if they do why wouldn't they have done it sooner - rather than waiting on an offer?? The home to our knowledhe does not need much at all it is AS IS but we do not see anything major - Can we do anything??? Are we missing something?? Any advice would be great. Thanks

hi jeff - we just put an offer in on a home in Marlborough, Ma - about 25 minutes west of Boston. The home went on the market in 10/07 for 254,000. Since then there has been no offers and they droppedvthe price every month since its been on the market. The last listing price was for 189,000 - in the beginning of April. We put an offer in for 170,000 - the seller accepted and the listing agent has taken the property off the market. We were told by our agent that the 3rd party - a lawyer firm in Boston that is dealing with the lender Citi Lending Group (I believe Citibank) out of CA will get back to us on our offer within 60 days. Unfortunetly our current lease ends in 60 days - so we are going to have to ask for an extension for at least a month. But my question is how good of a chance we have to get an approval on our offer from the lender. We don't knowhow much they owe on their loan but we know that they bought the home in october of 2005 for 330,000 so I assume they still own a good chunk - they piggy banked on their loan ( thankfully through the same lender- so we aren't dealing withtwo banks) but why would they list it for 70,000 + grand less than what they bought it for?? Our agentvwanted to give us a heads up that there could be a possibility that the bank could reject our offer to forclose - she wanted us to know ever possibilty - we are in hopes b/c we have been the only offer in the 200 days that it has been on the market and since our offer - it has been taken off - so we are not dealing with any other parties coming in to out bid us. How likely is it that the bank will decide to foreclose and if they do why wouldn't they have done it sooner - rather than waiting on an offer?? The home to our knowledhe does not need much at all it is AS IS but we do not see anything major - Can we do anything??? Are we missing something?? Any advice would be great. Thanks

Kelly - Thanks for sharing this info, as I have heard of others with similar experiences when there are two loans involved. Sometiem they get resolved, and sometimes they don't. I know of one person who got a real estate attorney involved and that seemed to help move things along to resolution. It's a shame because you are not really talking about all that much money in the overall scheme of things. OF course then you have the expenses of an attorney on top of everything else, unless your agent's brokerage has legal representation.

I hope for the best for you. Perhaps as things just sit they will all agree it is better to settle and move on, since the bank is losing more money anyhow by not getting their mortgage payments. One lost payment would likely make up for the difference.

Jeff 

Katie - sorry to hear about your situation, but thanks for sharing, since the issue of presenting offers, or not, comes up in regular deals too.

Here is CA we can view the public record to see who the lien holders area. Perhaps there is an assessor's office or somewhere else that has that  information - it is normally public record. Of course even if you find out the name of the bank getting in touch with the right person may be a challenge. This may be situation where your agent's broker needs to be involved, since the brokerage itself is ultimately responsible for a transaction, on either side.

Here is CA we also require a signature on the offer to show acceptance. Without a signataure the contract is not binding.

It seems to me that if the seller cannot make his payment and goes into default he does not have a choice about selling, like it or not - the bank will foreclose unless he can work out some sort of arrangement. 

Keep us posted - this sort of information may be helpful to many others. 

Jeff 

Casey - thanks for sharing this (hey, I lived in Bolton, right next to Marlborough, for 10 years!).

You are asking the million dollar question. No one really knows, except the bank, what they will do.  While it would seem to make sense for the bank to accept a reasonable offer so they can avoid the costs of foreclosure, many banks seem to not do so and go through the foreclosure process, even though the seller is pleased about the offer. It is out of their hands, however. I have heard of many cases where it takes weeks and weeks for offers to get approved by the banks, supposedly because they are overloaded with properties. Here they seem to keep properties active on the market to try and generate more offers until the bank actually finally approves something.

Glad to hear you are working with an agent and getting some advice. Knowing ALL the possible consequences is helpful, even if not reassuring. As I said, only the bank knows for sure...and maybe they don't either.

Keep us posted. This is a good lesson for readers.

Jeff 

As Jeff says nobody really knows what the banks are going to do or when.  It's very hard to even trust what they tell you they are going to do unless it's in writing.

Casey - If you can stay month to month on your lease that would be the most ideal.  I would not set a date to leave until everything is certain.

In our case, we have had approval from a first bank for over a month now, and are still waiting on the second bank.  They told us they would do their own BPO.  A week later they had done it "supposedly."  Then we would get an answer in a week.  After the week, the BPO was lost, then a week later found.  Now, we found out the BPO was never done but would be done "ASAP" so we can still settle on April 30th.  By the way, our first attempt to settle was January 31.  We put an offer on this house December 30, and still don't know if and when it would happen.  So my advice is, hope for the best, but prepare for the worst.

 Good luck to all of us trying to buy short sales.  And there seem to be more and more out there.  If this one does not happen for me, there is no way I would attempt another one.  When I got into this, I had no clue what a short sale was.

 JC (still waiting in MD)

Thanks for the comments, JC. Unfortunately too many are finding out what we have been saying for some time, that shorts sales CAN be very complicated, frustrating, and not necessarily the best deal. For someone who has to move, they are a big risk, IMO.

Sorry to hear you are having so much trouble. Hope it will get settled for your soon. Let us know.

Jeff 

So I just found this website and have been reading a lot about short sales and thanks so much because this has been so helpful.  Anyways, my question is this:  my husband and I are purchasing a home that was a short sale.  We put in a full price offer that was the market appraised value and we have agreements (verbal) from both mortgages, and seller of our offer.  However, our Realtor told us that is may still take 60 MORE (already 25 days) to get a written approval.  My husband and I have time, but we need an answer within a month and we have a closing date of May 20th.  We also stipulated a date we needed an answer by.  So is there really anyway to hurry this up?  How realistic is it to get a written approval after a verbal approval?   Is it promising that the selling Realtor took property off market and is going to bat for us?  He got the offer worked out between first and second mortgage companies.  I guess I am just confused and am tired of waiting and watching other houses we liked go out the door while these guys keep promising us quick action and not getting any.  Is there hope or is it just a waste of time and we should move on?  Thank you in advance.

Tired and Confused -

Well your sentiments echo those of so many others. I have been hearing from some folks that these deals can take 4-6 months in some cases...a really LONG time for a buyer (and seller) to sit and wait. Seems that the listing agent is very involved and perhaps can become even more proactive in getting the bank to move along. Knowing the right person to call is key.

The decision to move on or wait it out is a tough one, and a personal choice.  I suppose if you found something better that was not a short sale that the decision would be easier. Someone also told me they had heard that only about 22% of short sales actually close, so the odds are not great. I certainly don't want to encourage you one way or the other. Best of uck in whatever you decide to do.

Jeff

It's tough to decide when to fold.  In our case we have been hanging in there because nothing comparable has come up (as new - only two years and not lived in- and at the price).  However we have kept looking and extending deadlines a bit at a time in case something better came around.  We FINALLY have approval from second lien holder, and are working to settle next week (getting our loan finalized and inspections done).  It has taken us a good four months to get to this point.  Hope it is smooth sailing now.  Will keep you posted.

Thanks,

JC

JC - Congratulations. Sounds like great progress at last. Sometimes hanging in there, either because you like the property so well or if there is nothing better, can work out in your favor. I admire your perseverance!

Best wishes for a closing soon. Let us know.

Jeff 

Jeff,

    A  lot of great reading here, my wife and i currently have a offer in on a house here, listed at 250K there was another full in to the listing agent which we were advised by our agent to offer 260K.  The listing agent has accepted our offer and sent it to the bank to be approved.  Here is where it gets confusing for me.  There are two banks that will need to approve, and the house is slated for auction the end of May.  Is there at all a possibility of us being able to make this happen?  If we have an offer into the bank and the auction date comes, does this void our offer or will the bank still continue evaluating our offer?  I have the suspicion we are in for bad news.

Zach:

Well part of the answer to the question lies in how your state handles foreclosures, I think. If they have already moved into that phase the process may continue until completed with an auction if the home does not sell through normal channels (which is how it happens here in CA once a seller goes into default).  The period for that to happen is typically set by state law. It may be possible for the bank to delay the auction if they choose in order to complete the sale that you are involved in.

Both banks will need to agree on what loss they are willing to take, and that negotiation can take some time, especially if the second lien holder stands to only get a very small amount. Since the bank has apparently not yet approved your offer, anything can happen. Unfortunately it seems that the time for these types of deals to get resolved can take several months, so timing may not be in your favor but you never know. 

Since I don;t know the law in your state I don;t know what will happen if it gets to auction time and approval has not been given. It would seem to me that unless the bank delays the auction it will proceed at that point. 

Perhaps your agent and the listing agent can continue to put pressure on the bank to approve the sale and move things along instead of letting it go to auction. But it is ultimately up to the bankk(s) adn the personnel involved in making the financial decisions (the asset managers).

Best of luck.

Jeff 

My fiance and I are dealing with a short sale through countrywide.  We put our offer in on February 1 and are still waiting.  The most recent activity from Countywide has been that they sent an appraiser to the house one week ago.  My questions is is this appraisal a good sign?  Is it one of the last steps in giving an okay for closing??  Does this mean we should have an answer soon, since we have been waiting this long.

My fiance and I are dealing with a short sale through countrywide.  We put our offer in on February 1 and are still waiting.  The most recent activity from Countywide has been that they sent an appraiser to the house one week ago.  My questions is is this appraisal a good sign?  Is it one of the last steps in giving an okay for closing??  Does this mean we should have an answer soon, since we have been waiting this long.

Amanda;

Well it could be a good sign. The bank will not approve a short sale unless they have an appraisal or a BPO (Broker Price opinion) completed, since they will be looking for market vlaue or nearly so. hard to know if, once done, they will make a quick decision, but at least things are progressing.

Good luck.

jeff 

Well, the hurdles continue for us.  Three days away from deadline to close as agreed by both lenders after nearly 5 months in...but we could only do partial inspection on the house because surprise "No electricity."  Seller will not put it back on because they already owe thousands to the electric company.  I don't want it in my name - after all it is not my house yet, and besides the electric co. needs plenty of notice to get it done.  We are resorting to using a generator tomorrow to power things up and check them.  Still pushing the second holder because their acceptance letter has a different purchase price than the first holder's acceptance letter because surprise - they did not look at the latest HUD-1 we sent them after the first holder asked for an extra 2,550.  Just one thing after another - like this entire process.  So, it "ain't over 'til it's over."  I will only celebrate and rejoice when I have the keys in my hand after settlement.  We shall persevere and hopefuly get it done.  I hope my next post is then.

Thanks and be mindful of all this if you are in this process or thinking about getting in it - there is no rest for the weary.

JC

On an interesting note an attorney told one of our sellers that the lender has a responsibility to respond much faster than what they have been. This could turn into another whole issue of legal mumble jumble if the patterns continue.

The attorney basically stated HOGWASH for 2-3 months for a decision.

Also I did not read thru all of the responses above so this might have been mentioned but what has been coming out recently that many lenders after the loan closed took out their insurance in case the property defaulted. The homeowners were never aware nor charged for it.

Where this comes into play now is the lender can force the hand to either accept a note of x amount of dollars or be foreclosed on.

This indicates to me the lenders have known all along what was going to happen. So the question is why did they approve these loans?

JC - thanks for checking back in, but so sorry to hear the trials and tribulations are not over. I hope we will hear from you soon that closing has occurred and you are a new, and happy, homeowner.

Jeff 

Terry - well you know I rather wondered about the legality of all this. I do know one buyer who got an attorney involved and all of a sudden things started to happen.

The information you shared is news to me. I sure don't have the answer to your question, though. You have to wonder 

Jeff 

Thanks Jeff.  The tribulations are over!  After a few more surprises (of course :-), a lien from the HOA, and other issues, closing was yesterday.  My agent (God bless her heart) had to forgo part of her commission so the bottom line to the first lien holder would be maintained.  We, of course, took care of that difference for her right at the settlement table - only fair after how hard she's been working for five months on this deal.  It sure was worth it though.  Good things come to those who wait as we have a brand new home we would otherwise not have been able to purchase in a regular market.  We sure could not have afforded the 250K extra the former owners paid.  I wish them luck and I'm glad that at least that difference is forgiven by the IRS this year so they don't have to pay taxes on that "income" - as if they ever saw that money.  I hope the banks will not go after them for an unsecured claim on that money (I believe that depends on state deficiency laws - we're in MD).  Loosing such a beautiful home and taking the damage to their credit must be painful enough.

Thanks,

 JC

OUTSTANDING, JC! So pleased to hear it ended well, given all the pain for so many months. And what an honorable thing to do for your agent. I'm sure it was much appreciated. These situations are so difficult and it is the sellers who come out the worst. Fortunately it also mean someone who possibly could not have bought now has a new home! You must be thrilled!!

Again, my congratulations, and thank you for being so willing to share your stories so that others might leanr. best of luck!

Jeff

Placed an offer ($265,000, list price:$261,000) on a short sale home the week of May 12th and just turned in the rest of my earnest deposit ($19,000) to an escrow agent.  We put a deadline of June 1st, but after all this reading, it appears like I won't be hearing by then.  The lender is USAA, anyone have short sale experience with them?

Also, should my agent try and get clearence to speak directly with the loss mitigation department, or should we just sit back and wait. Hopefully the lender sees the large deposit as a sign of how serious we are.

 

Thanks all for the great info.

I have submitted an offer on a Short Sale with Wells Fargo. There are 3 offers on this property, ours is highest that what my dual agent is telling us. WF has ordered inside appraisal on property scheduled on this thursday. My question is will the appraiser be accompanied by the listing agent to gain access to property and can they put pointers ( like old carpet, no upgrades , crappy paint job etc, spider webs etc)  so the property is appraised low to improve chances of sale? Typically how long does it take for WF to answer after appraisal is done. Do they share the appraiser with Listing agent.

I meant "Do they share the APPRAISAL with Listing Agent?"

Carlos - your agent may be able to get permission but you may have to rely on the listing agent. Bottom line the bank is concerned about what they will not, not so much about your deposit. TIming in, unfortunately, not in your favor. many of these deals seem to take 3 - 6 months to get to closing. Best of luck.

Jeff

Jack - the appriaser may have access to the home without the agent. While they will likely consider condition (I am not an appraiser, mind you) but I suspect what is more important will be issues of size, number of bedrooms, amenities, etc. as they compare to other comparable homes that have sold in the area. I don;t know how long WF takes to respond once an appraisal is done. I suspect it has more to do with who the people are who are involved in the transaction at the bank. They may or may not share the appraisal with the LA - he or she can crtainly inquire.

Jeff

Thanks for all your comments. WF is now telling the agent that after you inquire LMO will get in touch with you via mail in 72 hours. Since she first inquired on Thursday so by tonight LMO should mail back to attorney & LA. It seems they dont want to waste their time talking. What an irony, in the situation where communication is most critical for all involved these guys isolate the LMO, who dreams a Yes/No on a deal without giving anyone a fair chance to explain the situation..

Jack:

It's ironic all right. Keep us posted - this is useful to know.

Jeff

72 Hours passed by today and they say its not 72 hrs from Thursday. So now they say negotiator will respond via email/fax by tomorrow( wednesday ). So again on hold for another day. LA and attorney are saying they will get owner/seller to call them as they might hear from them and hopefully seller can get negotiator online. Thats the last try. In the meanwhile I am calling my agent every day so they call WF and stay on top of case. I want a quick Yes or No from Bank and move to work with newer inventory coming into market everyday.

 

 

Jack - it just goes on and on, doesn't it?! It's hard to be sitting in this position and seeing all the other inventory come and go. I truly hope you get this resolved soon. Your patience is admirable.

Jeff

Some updates, WF tells the LA to submit HUD-1 and Short-Sale addendums. They also requested some other paperwork which is already with them AGAIN.. So will wait for the submission and hope to hear back from them.

 

 

Thank you so much for the information and links.  I have a client who is interested in a short sale.  I haven't ever worked with one before.  Thanks again.

The lender's can, sadly, play roulette with the short sale offer. Hence, the time table. Terrific blog post, Jeff, and great comments.

Jack - the saga continues, doesn't it. Makes you wonder...

Good luck Penny. As you can see from all these stories, short sales are a huge challenge for sellers, buyers and their agents.

David - they sure do. Despite having this going on for well over a year now it doesn't seem as if much progress has been made.

Jeff

My agent says "If bank is asking more paperwork that means its towards yes" Dont know why that would be the case, since they havent seen a HUD-1 yet how would they know there bottom line proceeds.

They have asked for proof of buyer down payment, bank statement or bank letter. Is this required? 

I am financing 80% and giving a cash down on 20%, Do I still need to provide the proof of funds to the ShortSale approving lender?

Jack - well here in CA part of the contact requirement on any purchase is some sort of proof of funds, unless the loan is 100%. They want know that the buyer is not taking a huge loan out on a credit card, etc. And if it is in the bank account, in my experience it is common to show proof that you have the cash to close.

Jeff

thanks jeff you advice is precious. I sent in the proof of funds to the agent, they will submit by monday and then wait begins for YES/NO/Counter from the bank. HUD-1 was also sent. I learnt today that seller has FHA loan ( I dont know what price do they normally expect). I have scheduled inspection tentatively for next weekend, however I may not see approval by that time.

I have put in an offer on short sale lender is Wells Fargo about 4 weeks back. Realtor tell me that she has verbal yes from negotiator, and them negotiator sent another list of documents required.

I am confused to really do the inspection or wait for approval from lender in writing, please advice.

At what time should I have attorney review this contract?

Jeff,
My wife and I recently sold our condo and have found a home here in Los Angeles we fell in love with.  Our condo is set to close escrow in 30 days. 

After looking at homes in the area we found one we liked at a reasonable price (509k).  We were informed it was a short sale, and offered the full asking price 509k as to not mess around. 

We have now found out the asking price (509k) was NOT approved for short sale, as it was just reduced 20k (without the bank's permission) and the short sale approved price was actually 529k.

Our offer of 509k was approved by the seller and was supossedly sent to the bank.  I'm assuming this is where the wait begins. . .

Should we be in contact with the bank? the Seller's agent?  What type of turnaround have you seen from Countrywide?  The previous postings mostly complained about Wells Fargo.  

The seller only has the 1 loan, so thats definately a positive.  We're not looking forward to moving 2x (once to rent, once to the home) but we will if we have to. 

I'd hate to go rent for a month or 2 then find out we didnt get the house and we have to look all over again.  Do the banks usually let you know "you will get the home, but it will take 3-4 months" or is it usually a short escrow once they know if you will indeed get it?

Thanks

Great info. In L.A. I have seen both...3 mos and no response...3 days and a counter. It seems it depends on whether or not there is a 2nd TD, if that is with the same as the 1st TD and if they are willing. Many 2nd lenders are digging in their feet because the 1st is taking all of the short, so they're left with trying to foreclose to recoup anything.

While it greases the wheels to remove termite and repairs and such, many lenders are still giving credit to close. Stuff seems to be moving now if the banks can get ahead of the ball.

Update on my journey in short sale, bank asked realtor to get HUD-1 , Short Sale addendum, Proof of Funds( Cash Portion) (signed by all buyer, seller, realtor, attorney) to be submitted to them by wed Jun11. After this realtor said bank will submit this to investor and hope to hear in next 1-2 weeks of approval.

What is the past time frame and chances of approval with a FHA loan with Wells Fargo?

Will Wells Fargo -  Forego the short or will they GOFAR with short ( already 4 weeks and counting) :)

Mike - well the issues you raised are pretty common. Seems some agents just set the price without talking to the bank. Although it seems that some banks will not come out and say what they are willing to accept until the appraisal is done. In terms of waiting, it really seems to vary by bank, by the players who are involved, and if there is more than 1 lender involved. I have heard that Countrywide is trying to get a response to the offer they will accept within 45 days, but not sure that is happening regularly. The REOs definitely seem to get resolved more quickly. Hopefully your agent is staying in touch with the listing agent. Having only one creditor definitely makes the situation easier to resolve.

Ron's answer seems to be very relevant here.

Best of luck - hope it does not take tooo long to get answere. Some buyers make the personal decision to continue looking at other property just in case the short sale offer does not move ahead.

Keep us posted on things - it is helpful for others to know what is going on in these situations.

Jeff

 

 

 

Ron - thanks for your perspective and feedback. I have heard from some folks that there is a little progress in terms of response time, at least on the part of some banks. It will be interesting to see what happen once Coutnrywide and BOA get through the acquisition.

Jeff

Is this common on short sales....

Let me start by saying both my realtor and the listing agent are doing everything they can to push this sale for both me and the seller, and up until now things were going great. Also, since I'm not a realtor, I hope this makes sense... I may have some of the lingo wrong.

We made an offer on a short sale about a month ago (May 4^th).  The home has two mortgages.  May 14th the banks countered our offer (pretty quick for a short sale).  I then countered back on May 16th.  May 21^st both banks gave the listing agent a verbal acceptance of our offer.  We were told that as soon as the title search came back showing the banks there were no other monies/liens owed on the property, they would sign the contract.  Since we were going into a holiday weekend I was told we might not get the contract by the end of the week.  May 29^th both banks spoke with the listing agent again, and again verbally confirmed they had accepted our offer and were just waiting on the title search/hud-statement.  June 2^nd, everything was completed and the hud-statement/contract was faxed to the banks. Ever since then, the 1^st mortgage bank, who is normally very easy to deal with and get a hold of has essentially disappeared.  His voicemail says the mailbox is full and you can't leave a message.  The listing agent faxes him every morning and every evening and to this day we have heard nothing????  Is this common?  I know short sales take a while, but it seemed like the bank was moving on this one and now they have just disappeared.

Here is a breakdown of the dates:

Sunday, May 4^th - we made our offer

Tuesday, May 6^th - seller accepted it

Wednesday, May 14^th - received counter offer from the bank

Friday, May 16^th - I countered back

Wednesday, May 21^st - both banks verbally accepted the offer

Thurday, May 29^th - both banks again verbally accepted and said they were just waiting on the title search/hud-statement

Monday, June 2^nd - All documents were faxed to the banks for signatures and we have not heard from them since

Thanks for any input!

Jack: Well I have heard that these loans may be harder to get through approval on a short sale but perhaps other folks have some experience. But it sounds as if there is a little progress - at least some requests for information...

Jeff

Laura - well, you have actually had more communication than many people seem to get. The issue, it seems, is that the two banks now have to work out what they are each willing to accept on the payout. While one is primary, the second could hold things up if they are not willing to negotiate, or if they cannot agree on an amount with the primary lender. It couldbe part of the hold-up now is this negotiation, based on whatever they now feel is the market value.

There may also be a change in personnel, which happens, or they are overwhelmed with properties they are trying to deal with. Or perhaps someone is now on vacation adn no one is coevering for them.

The agents seem to be doing what they can and should continue to stay in touch regularly, and keep notes on what they are doing.

Keep us posted - this is another good larning experience adn adds to the information we have on how these deals work, or don't.

Jeff

Thanks and I will keep you posted.  I guess it just shocked me how quick they were moving and then 2 working days later they seem to have disappeared.  I feel I have great agents working for me and it is what it is. Hopefully, the will stick to the verbal agreement and come back and sign.

 

We are in escrow on a house since March.  This whole process of a short sale has been very frustrating.  We originally made an offer of $600K in January, knowing full well its a short sale.  We were fully prepared that it would not be a conventional sale and would require some patience.  We did not hear from the listing agent until March that our offer was accepted and that the lender wanted to close in 21 days.  We did everything we could to have all our paperwork in place.  One week before close of escrow, the listing agent informs us the second lender has not approved the sale.  At first the 2nd lender said they verbally approve the loan but would take a couple of weeks to have a written confirmation.  Weeks past, and after many attempts to obtain any answer, we hear that the second lender wants an additional $80K to approve the sale.  We found out the second lender would only recieve about $5K if the sale goes through with our original offer.  We asked the second lender to give this to us in writing so we can at least take it to first lender to give up some of their money.  Both agents have agreed to give up part of their commission, but 2nd lender refused to put anything in writing unless we agreed to their terms.  We find this extremely unethical and unprofessional.  Our agent is suggesting we walk away from this deal, wait for the house to foreclose and then make a run for it.

Any suggestion would help.

We are in escrow on a house since March.  This whole process of a short sale has been very frustrating.  We originally made an offer of $600K in January, knowing full well its a short sale.  We were fully prepared that it would not be a conventional sale and would require some patience.  We did not hear from the listing agent until March that our offer was accepted and that the lender wanted to close in 21 days.  We did everything we could to have all our paperwork in place.  One week before close of escrow, the listing agent informs us the second lender has not approved the sale.  At first the 2nd lender said they verbally approve the loan but would take a couple of weeks to have a written confirmation.  Weeks past, and after many attempts to obtain any answer, we hear that the second lender wants an additional $80K to approve the sale.  We found out the second lender would only recieve about $5K if the sale goes through with our original offer.  We asked the second lender to give this to us in writing so we can at least take it to first lender to give up some of their money.  Both agents have agreed to give up part of their commission, but 2nd lender refused to put anything in writing unless we agreed to their terms.  We find this extremely unethical and unprofessional.  Our agent is suggesting we walk away from this deal, wait for the house to foreclose and then make a run for it.

Any suggestion would help.

Alan:

Well that's a tough one. I have heard of a number of shortr sales getting derailed because the second lender would to agree to terms. It's unfortunate since my guess is they will receive even less if the home is actually foreclosed. Whether you decide to walk away or not is a tough choice. Sometime folks continue to look and if they find something they like better, move on to the new deal. It may still get resolved. You can choose to agree to the propsed terms or simply stick with what was alrady agreed on adn see what happens. It really is up to the two banks to battle it out - the first one couold give up some more of their moeny to get this to work too.

Perhaps someone else out there has has a similar experience and can share what happened.

Best of luck, Alan. This must be very difficult.

Jeff

Alan:

I have a similar situation/update:

When both banks verbally agreed to my offer of 205,699... The 2nd mortgage agreed to take 3k and the rest would go to the 1^st mortgage, realtor commission and back taxes owed.  However, when it came time to put it in writing, the 2nd has now said they won't take less than 10k. 

It's so frustrating when they give you a verbal acceptance and then come back and change their mind.  You get your hopes up, you think you're buying a house and then poof... everything is back up in the air again. 

I understand the banks are losing money on these deals and it's all about their bottom line... but then they shouldn't verbally agree to these deals until they have all their ducks in a row and are sure that is the final amount they are willing to take.  I think that is what frustrates people the most on these short sales, the banks can't make up their mind!  They need to come up with a figure they want for the home and then they'll either get it or they won't... but the way it stands now, they are just playing games with good, strong buyers who can get these homes off the banks hands.

Back to my situation... the 2^nd did put it in writing for us that they would take 10k, so now we have faxed that along with the new HUD to the 1^st mortgage to try to get an approval from them.  The problem is that the 1^st mortgage has still been out of communication with us for two weeks now, so we are in limbo. 

I just wish the banks would stop stringing the buyers along, give us a flat ‘yes' or ‘no' so we can move forward or move on.  The buyers aren't the problems, we're the ones trying to offload these properties for them, yet they treat us like we owe them all the time in the world.  You would think they would have figured out by now that most buyers don't wait around, they move on and then the banks end up having to foreclose and everyone loses.

I hope you get an answer soon, if I don't here back by the end of the month... I'm going to start looking for something else.

Thank you Jeff and Lara for your comments.  It looks like there is a consistent behaviour with these bankers.  A few years ago, they were so willing to lend to anyone to make a quick buck and now with this type of behaviour, its no wonder most people don't have a good opinion of bankers.

We have already starting looking at other places

Alan

Lara - thanks for sharing your story. It's the same tune we keep hearing over and over. It's no wonder so many buyers now do not even want to go after a short sale, given how long it can take and the uncertainty. The irony is that the banks are making it that much more difficult to sell the very homes that are costing them money, and the longer it takes the more it costs them. And then if they foreclose there is even more of an expense. To me it jsut does not seem like a prudent handlling of their assets. And as the number of these distress sales continues to grow in some area, the problem is not goign to get any better.

I wish you the best of luck in getting YOUR home closed soon. Please keep us posted - these stories are helpful to others.

Jeff

I am the buyer in Short sale. We had a verbal approval on this from the negotiator, he was going to use a appraisal & BPO done on the property 4 months ago, asked us some paperwork and said they will submit to investor. Now I learnt that they ordered a BPO and inside appraisal on the property. In this falling market whats the point to doing another BPO/Appraisal which is gauranteed to come lower than previous. This is so crazy. WF cant put thier act together, I think they have lost there marbles. Does this mean starting the process all over again? and keep waiting for another 4-6 weeks?

Jeff- First off, I have learned more from your blog then I could get from my realtor, and sadly I have shared with him to help our situation. I have two questions first:We have an original bid on a short sale condo in Gulf shores,al since Jan., with no response from the bank.In april we upped the bid and again this month so that the bid represents market value on the condo, 190 on asking of 218. The representing realtor has yet to respond or acknowledge the bid(one week). What do you do with unresponsive agents, who will not share information about which bank has the short sale? She is with Keller Williams and is the office's part owner? also we heard that a investment company paid the back taxes. Why would they do that? and if we got the property would we have to pay them to? We are hearing so many rumors, the frustration may win out, especially since the last rumor was the the listing agents cousin has a bid on the place. Thanks for all your great information, it is appreciated by those of us who are lost!!!

Jack:

HArd to know what it means. Do you know that they did the original BPO? If the market has shifted down this could be favorable in terms of price if it differs from the first, if it was actually done. It IS hard to understand how this can all take so long. Perhaps once they get the BPO they willbe able to go ahead an approve the short sale in writing. Keep us posted.

Jeff

Natalie - well I'm glad this has been helpful. I know the news that buyers have been sharing is not very positive, but it is the reality. The ownership of the propertyshould be available in the public record. Here in CA we can submit a formal written request to perform to get a response, although if nothing happen you are no further ahead...but at least you have documentation of lack of response. So much of the frustration come from not knowing the reality, and getting no sense of where things are. It's why so many buyers just say the heck with it and move on. But, sadly, then the bank loses a viable buyer.

It would seem that the current owner (of the bank) needs to pay the taxes as part of the deal, not some other party. You ay be able to find in the public record if the taxes have been paid. A title company can likely research this as well, or perhaps call the assessor's office.

Let us know where things go - this can possibly help others too. Good luck.

Jeff

 

 

While they were waiting for the new appraisal, they reassigned the negotiator. The previous was helpful and leaning to say yes to the deal since he suggested some changes to HUD1 so they can get the 82% bottomline for investor as this is a FHA loan short sale. This reassignment is 3rd in last 5 weeks. WF is a bunch of jokers who play musical chair with there mitigators. No wonder there is no accountability since each file gets 4-5 mitigators assigned to the case, end result is no decision. Property goes for foreclosure.

Hey Jeff,

Noticed in your update that you are seeing the same things we are -- banks being more receptive to handling short sales.

Jack - the story continues, doesn't it? Changes in personnel seems to start things all over in some cases. It's hard to get a handle on what the process really is, if there is one. Perhaps everyone deals with these situatons differently.

Jeff

Paul - well, there seems to be SOME improvement, but more wo with the bank-owned properties. But with the number of these sales ot there, and in talking to other agents, there is not a lot of change.

Jeff

Short sales make me cringe! I still don't understand (I don't think I'm experienced enough) why a short sale won't help on closing costs. I'm told no but they will do it if it goes into foreclosure. I had a buyer that offered $165,000 on a home listed at $155,000 (comps were around the $180,000 range) so it could pay the down payment (FHA) and closing costs. We were told no. I saw that it closed last week at $132,000. What sense does that make?

Jeff, Thanks for the Short Sale information.  I haven't yet been involved with any myself, but have been wanting some additional information to prepare for the future.  Thanks again, Mike.

LaNita - I can understand. But they are a reality in many areas and knowing how they generally work, what to expect, adn so on can help us better help clients. You have to wonder about the scenario you describe. Maybe there are some rules but the banks seem to have their own.

Mike - glad it's helful. HAving all the feedback from consumers who arae living with these deals has been tremendously useful  to everyone I think.

Jeff

My dual agent is asking me to list down my frustration in an email and send it to her. She wants to send this to the bank to increase some pressure on them to make a decision. Is this a good strategy? Frankly I am at a point I need an answer and I am prepared for more Yes than NO. Has anyone tried buyer pressure in a short sale? Please share your thoughts.

May 15 - Offer date

May 16 - Offer Submitted to bank

Jun 4 - Hud-1, addendum requested by bank (verbal Yes), New Appraisal ordered.

Jun 9 - Appraiser visited the property for Inside appraisal.

Jun 10 - Hud1, addendum, proof of funds submitted

Jun 18 - Bank still waiting on Appraisal, Negotiator reassigned ( for the 3rd time )

Jun 23 - Agent requested Frustration email to be sent to bank.

Satar

I ended up sending a mail yesterday evening to realtor with frustration stating

1) 6 weeks of wait dont know how many more.

2) mortgage rates climbing cost 3000/yr

3) inventory pouring, reduced listing price and good houses getting sold while I have to wait. Waiting for newer appraisal is pointless in ever falling market.

4) rental lease termination Jul 30 ( which I did after verbal yes ~$2000 cost)

5) Stressing about being Qualified buyer( substantial down and pre-approved) with no contingencies and ready for early closing.

6) Need answer or will consider reducing/withdrawing the offer.

Hoping to get an answer in a day or two.

Jack:

Thank you for sharing these issue that confront so many buyers who are trying to purchase homes through the short sale process. Folks forget about the costs they might accrue by waiting for many months, potential loss opportunity, etc. I think I may have to wrote a post inspired by the.

I admire your perseverance and patience, but it sounds like it is really wearing thin.

Keep us posted.

Jeff

Jeff

What is strange is the bank seems ignorant of the market news which tells them declining real estate prices everyday.

http://biz.yahoo.com/rb/080624/usa_housing_caseshiller.html

I am a first time buyer so I am thrilled by the sense of owning a home. But this no sense waiting game is really wearing my patience. Me and My wife liked 2 other comparable home and kept them as backup incase this doesnt work( this would give be about 30K break I must admit). But now both the houses are under contract in 6 weeks of wait. I persued this one because Jun 25 was foreclosure date on this house so I thought I can get a quick decision and if it is a no I will persue other 2 houses. Now I am stuck bank is not answering and other 2 houses are gone under contract. Now if bank doesnt approve this, what I have read about ASC/WF it is likely outcome, then I have to start the whole process of seeing 20 houses, pinpointing 2-3 and start making offers and it takes time and energy. It took me 2 months to do this last time.

Jack

 

Jeff

They have countered for 35K more than my price asking about 8% more. God knows how the appraisal came out more than the last time( arent real estate prices falling in entire US). WF is getting to my nerves now. Thinking of countering at 2K more. House needs some repairs and is not in best shape from inside. They did both BPO and inside appraisal. This is FHA short, does Seller/Authorized have right to ask for the BPO/Appraisal?

Based on that we can offer something that will get them there bottomline 82% of appraised value.

Suggestions welcome. What else can I do?

Jack

Update, well I'll recap a little first... 

If you may recall we got a verbal acceptance by both the 1^st and 2^nd mortgage on our offer of 205k.  The 2^nd mortgage was supposed to take 3k, and the rest would go to the 1^st mortgage, less realtor commissions, back taxes, etc. 

When it came time for them to put it in writing, the 2^nd mortgage changed their mind and said they wouldn't take less than 10k, but they did put that in writing for us.  The 1^st mortgage company disappeared for two weeks, however, they are back. 

The listing agent worked very hard to convince the negotiator at the 1^st mortgage that he should still accept our offer, even with the additional 7k loss.  The negotiator did NOT ask us for more money (that was shocking), and he's submitted everything to the "final approval committee"... so now we wait.  (This was last week)

I just wonder how often these "committees" accept the offers, or if I should be prepared for a NO or a COUNTER.  Also, how long it usually takes to get an answer once it gets to this point?

Jack - well it just keeps going on, doesn't it?  Prices are falling in some areas but not all. Some are more stable and in some they are even rising a bit. Are there 2 lenders? Perhaps the second one requested another RPO. you can certainly request to see it but I don't believe they are required to give it to you. You are forunate that you are a situation where you do not HAVE to give up and find something else. But that is always an option, as you know.

Throwing more money at the situation as requested is an option. Does this affect your mortgage signficantly? Has an appraisal been done by your bank? I assume not since you do not have a signed contract. If the property does not appraise your bank will not loan the money. Something to keep in mind.

Anyone have other thoughts?

Jeff

Jeff

They had ordered both BPO and FHA certified appraisal. The negotiator is using some number to arrive at a counter of 445K against mu offer of 410K. I dont know the number she is using is from appraisal alone, BPO alone or mix of the two. In this process I have learnt and am already well-versed in "how to create a HUD1". So if she just tells me appraisal number( since it is FHA loan) I can do the other calculation and alter my offer(10-15K) so everyone is happy. My agent is double dipping and right now getting 6% of the proceeds so I can persuade her to give me a 1-2% break and lets get this done. Bank is not receiving any payments on this house since last 8-9 months so this is a good deal for everyone. Sadly there is no focus.

Seller has a first FHA loan and then a home equity loan on this property with same lender "Wells Fargo"

 

Well, on Thursday they gave us another verbal ok, and asked for an addendum with a new closing date (since Thursday was the original date we were supposed to close - that wasn't going to happen).  We got the addendum to them on Friday and got the written, that's right, I said written approval from them yesterday.  They didn't counter me as I thought they would have, to cover the additional 7k loss that the 2^nd mortgage caused when they changed their minds from 3k to 10k.  We said we needed until July 15^th to close but they told us we had to close by July 9^th!!!  That is next Wednesday, and with a holiday thrown in the middle of this... we are a little nervous!  My lender says we'll be okay, we're strong borrowers (excellent credit and 20% down) but I'm just a little worried he won't be able to get the appraisal done in time.  He assures me we'll be okay, but I'll be holding my breath until next Wednesday.

If it all works out... we got an awesome deal!  It was listed for 349k, then dropped to 275K... we offered 200k, but when they countered us with 250K we came up to 205,699K and that is what they signed off on.  We're so excited and can't wait until next Wednesday so that we can hopefully be done with this! This will be one of the longest weeks of our lives, and just hope and pray it all works out.

Jack - From what I hear a bank may reduce the commission as part of the negotiations to make things work. I have found that VA and FHA appraisals can differ from BPOs, and they tend to be stricter in terms of overall guidelines, etc. Two separate appraisers can come up with different market values.

Sounds like you are getting close. It has clearly been a frustrating experience, but you have also learned a lot. Hoping for the best to resolve this soon for you. Thanks for sharing all the things that have happened - this helps others appreicate the difficutlies of what these deals are like and to help set expectations.

Jeff

Laura - well it sounds like you are very close. I have found that appraisals can be done very quickly when needed (even in 24 hours). If the bank's underwriter has everything else they should be able to give the final approval on the loan quickly. Funding the loan can be done the day the loan docs are signed in many cases since the bank may accept a fax of the docs and can wire the funds as needed.

Good luck - we are keeping our fingers crossed for you. Stay in touch with your lender to make sure things are moving along as needed.

Jeff

Learning from Laura's experience and sending in an up offer by 5K. Lets see how it rolls.

Jack - good luck. It's hard to keep throwing money at a deal sometimes. Hope this works for you and you can celebrate soon!

Jeff

Great post  Jeff. The higher the success rate also depends on the listing agents communication with the bank and letting all parties know it can take a while for an approval.

Question.  We have submitted a full asking price offer on a short sale.  WAMU holds the first and second.  There were three other offers on the home.  I don't know if we are the highest or not. 

I'm wondering if it is the bank who decides to sell the home to, if they approve the short sale.  Or is the seller involved at all.  If I'm not the highest offer, will they ask if I want to increase my offer?

I don't want to wait around 2-3 months if I'm not the highest offer.  I would be willing to increase my offer, but don't know if I'll be given that opportunity.

Any advice?  By the way, the asking price was based on two REO's that just sold in the same tract. So the price should be right on target with the comps.

I have a question on this one: Make sure you make the offer contingent on the short sale being approved by the lender and set a time frame for approval.

Isn't that a given? Isn't the offer contingent anyway on the bank takng the offer? I was told once to write "contingent on approval of bank" but I felt like "duh" so can you tell me? Thanks!

LaNita:

Well, you raise a good point. But putting it in writing makes it part of the contract and protects the buyers' interess in the event thngs change. Yes, it IS dependent on the approval but IMO that needs to be spelled out so it is part of the binding contract, should you reach that point. And our attorney says so too!

Will putting in a date matter? Well, not likely, since the banks seem to do what they want and when. But if the date is there it becomes clear that once passed the buyer can move along if they so choose. Make sense?

Please feel free to share any thoughts on this, or other experiences with these sort of deals that may help others learn.

Thanks for stopping by to ead and comment.

Jeff

Jeff

After almost a calender week and minimum of 3 working days I dont have any answer on my counter offer of 415K against bank 445K. I am hoping to hear something today.
Jack

 

So the loss mitigation officer is either out of office or reassigned. So we are now dealing with a new one for this week or forever. Obviously I am not expecting to see any progress... WF SUCKS

Satar/Fellow bloggers

Need help, new negotiator is assigned to the case. Now he is willing to work with my new offer and is suggesting that in HUD-1 include seller concessions to make up for the difference. Have you had experience with this? I read in FHA short you cannot give seller concessions. Any thoughts?

Seems the short loan is conventional, after all the while I was told it is FHA. So we worked on net of 82% and now since this is conventional WF/ASC wants 85%. So deal is now stuck with 3% of 509,900 = ~15K

Here is my situation

BPO ( six months ago) 480K

BPO( 3 weeks ago) is 509,900 SURPRISING, I have already raised my offer to 443K from original 430K.

realtor comm, taxes, transfer tax, attorney fee comes out 25K. This includes squeezing 2% from RE Comm. Now we give a net of 418K to bank which is 82% of new BPO. In the evening WF changed its mind said guidelines are to have payoff 85%. Now my offer ~15K short. Granted I can get some more out(2-3K) of RE but I was wondering if I up the offer by 15K and ask for seller concession 15K ( for buyer closing cost, down payment assistance although I would be putting 20% anyway). Will this work? since the net to bank is still remains same?

Jack

I have heard that threshold on the conventional is flexible. Normally they would take 85-92% of FMV but market conditions, repairs and crime etc can make them flexible. With Wells Fargo by experience what threshold do they work with. My case they are very adamant on the 85% is there a wriggle room?

Jack

Laura: How is your deal going?

Has anyone been successful with short sale at all?

We are considering buying a short sale house, but are hesitating after hearing so many toubled stories...

 

Jeff and All,

Thanks a lot for sharing so much knowledge and stories on short sale. My learning in the last 30 min is more than last 3 months.

Here is the situation I have for inputs:

We put an offer ($630k) for a $650k listing one month ago (east bay area). The seller has two mortages. Our buyer agent was told that the first lender has approved the offer while the second one is pending on Tuesday. Since it is a falling market, the house price fell about $15k (according to Zillow) in the last month. Is that reasonable to make a new offer at $610k at this time? We have put an expiration date in our offer which has well passed. I am wondering how can we convince both buyer and selling agents to submit the new offer. Will it be taken well by agent and lenders?

Our offer is the currently the best offer (far better than the first one as I was told). Will appreciate your inputs.

Resubmit Offer - glad you found this useful. It is work in progress, for sure, as more folks weigh in with their inut and experiences.

First, I would not worry too much about Zillow since their values CAN be off (high or low). The fact that the value HAS shifted does suggest that they may have been a real shift in the market as more distress sales sell and pull down the values. The real deciding factor will likely be the appraisal that the bank does to determine what value THEY will accept. The challenge, with two lenders, is getting both to accept the terms. So often the first one, the largest, gets most or all the money and the second one must negotiate to get as much as they can. The first, of course, must be willing to do this, and these issues can really hold up the process.

One approach I have seen a few timens is for the buyer, when submitting an offer where there are two lenders, is to offer to put more money into the deal specifically for the second lender. This would not be something to do withtout some knowledge of the financial situation but a negotiator I worked with recently suggested this as a way to get money for both lenders to make the deal work, since the 1st was not willing to give the second lender as much as they wanted.

Does it make sense to revise the offer? Not sure. If there is supporting data with comps to show that the value of the home really is less, it is worth talking with your agent about this, who can then talk with the listing agent. The risk, though, is that your revised offer may then be less than another offer.

Good luck - keep us posted.

Jeff

 

 

 

 

Newbie - our concerns echo waht I am hearing more and more, and that is the fear that the short sale will not be concluded. I have heard that only about 25% of these actually close, and in some area the number is even lower, but that is anecdotal not fact. REO's seem to be more successful and easier to trasnact.

The other number I hear regularly is 3 - 6 months for closing. So hoping for a quick conclusion is not reasonable. So it depends on how badly you want a particular house, your price range, what is available,  and how long you are willing, and able, to wait.

Working with a local agent who knows the market well, and who has some experience with short sales is important, IMO.

Jeff

Jeff,

Thanks for sharing the thoughts. Our offer has money for both lenders. A new development though:

I browsed through the newspaper over the weekend and found a public notice to auction sale the VERY property we made the offer! Our agent assured us that it is just a procedure thing that the lender must send. The deal would procedure once the second lender approved.

The question is that even we get writting approval letters from both lenders, can the property still be saled to others during our offer contingency peroid (loan and inspection)? Our concern is that we will in an aweful position once we lock the loan while the property is sold to others.

I will provide update next week on our short sale experience.

Resubmit:

Yes, it is my understanding that the public notification is a required part of the process. And if the lenders do not approve the sale it can still go to auction. But they can also delay it if things are getting close to being completed. Unfortunately there seem to be no guarantees.

Good luck. I hope it works out well for you. Glad you are open to sharing your experiences as this is good information for others who may be considering short sales.

Jeff

Lately the banks are being more aggresive accepting short sales. . . at least that is what I'm experiencing right now.

Fernando - that is good news. Not sure that is happening herebut it is possible and it may just not be my experience. Any progress in that direction is a good sign, IMO.

Anyone else noticing changes in this way?

Jeff

You always have great topics and news; keep it up

One thing about a Short Sale is there is nothing short about them except the amount the lender will recieve. It is a great way for a seller to sell the home instead of having a Foreclosure

Ken - I appreciate the positive feedback. This post in particular has been a terrific learning experience.

Roland - how true. The problem is it seems that so few are actually able to sell during the short sale process.

Jeff

The problem as I see it is, there is a time window that you have to do it to succeed and not a 2-3 months process. BPO should account for the trends in the neighborhood while giving it out.

Right now in a falling market comps are coming like 550, 525, 500, 475, 450. Now as buyer you know this process takes longer so you put in 425 as the next progression minus any defects discount (AS-IS sale) . BPO comes out at 500,000 taking the 5 sales previously mentioned, now investor want to 85% of BPO. Also property has tax, commission and other liens( 30-40K) which are a increasing number for buyer, before they net the real number. Now with 425K offer they would net (42k- 40k) 385K which is far below the number they expect 410,000. This is a case where home is maintained and sell as comparable which is rarely the case. Most bank dont do BPO again unless it is 3-4 months old. They stick to it and deal doesnt go thru....

Now in this whole process no one is wrong, other than the person who did BPO since he/she didnt take into effect of downward trend.they should discount the earlier sale with fall percentage. So in this case the BPO should come out as around 460K - 40K (taxes commission, liens) = 420 K and deal will go thru with everyone feeling like a winner.

Correction, so if BPO is 460 and investor is looking for 82% net is 377K. For buyer 425-40K = 385K is over what investor expects and deal is done.

 

Questions:

 

We are about to sign a purchase agreement for a short sale property and we are the buyers.  There is a 1st and 2nd loan against the property and they are both different banks.  Our biggest hangup with the sellers is they want to set a closing 2 and 1/2 months from now.  We want to close ASAP especially since it seems a lot of these fall thru and we don't want to wait 2.5 months to find out.

My first question is, won't the bank dictate the closing date to us?  Seems like they want if off the books so wouldn't the come back on that with something sooner?  The listing agent already has a verbal agreement with the 1st that they will take our price.  He also believes the 2nd will give a release for $3000.  

My second question is, suppose we go with a closing 2.5 months from now and the bank goes along.  Do we need the purchase agreement signed by BOTH banks or just the 1st mortgage bank?  If we get a signed agreement back, then it seems like we would have a good chance to get the property and they wouldn't be able to back out or take a higher offer, correct??  Thanks.

 

 

WANTED TO KNOW I FOUND A PROPERTY FOR 390000 I MADE AN OFFER FOR 285OOO 20,000 DEPOST PRE APPROVED LETTER THE HOUSE FORECLOSURE THE AGENT IN CHARGE ONLY WENT DOWN TO 370000 FOR SEVERAL COUNTER OFFERS MY FINAL WAS 310,000 MIND YOU THE COMPS ARE FROM 320000 TO 350000 THEY JUST LISTED 2 MORE FOR 297000 AND 3250O0 WHAT CAN  I DO TO TRY TO GET THE ORIGINAL HOUSE AT THAT PRICE BETWEEN 305000 TO 310000 DOES THE AGENT KNOW HOMES HAVE LISTED BELOW THE MARKET VALUE AND WILL THE BANK SEE THIS....COULD THE BANK ACCEPT MY  OFFER IF I PROVIDE THE MLS NUMBERS TO THEM TO SEE THE PRICING OF THE HOMES SINCE THERES IS ABOVE MARKET VALUE...PLEASE HELP....

Inxperienced:

Good questions. While you can agree on a closing date with the sellers, the bank will ultimately decide when that is on the basis of how quickly they respond, approve the short sale, etc. Most short sales I have heard about take several months or more to get resolve - closing in 2.5 months is fairly ambitious in my experience, but there are exceptions.

Seems to me that both bank will need to approve the short sale and,thus, sign the contract, but that may depend on how things work in your state and what contract law requires, but I am not an attorney.

Whether they can accept another higher offer is not clear (again that is a legal question). I would think that once you have a binding contract (that has been signed by all parties) then you may be safe but banks seem to be able to do what they want.

Jeff

 

Nick:

Well the market value will only be obvious once a home sells. The listing price has little to do with it since some homes, especailly distress sales, are listed low to encourgae bidding wars. The bank will determine what they are willing to accept based on an appraisal or a BPO (Broker price opinion). Any information you can provide may help but ultimately it is up to the bank to decide what is accetable based on market value. The comps are a good measure of this value unless the market is declning, then only themost recent comps (say within 3 months or less0 will be reasonable.

Jeff

I am in process of putting an offer on short sale from Saxon Mortgage. I will be buyer in the transaction. I just wanted to know

1) Although there is no payment from Seller for 3-4 months, the house has no foreclosure date. Is this normal?

2) What net payoff do saxon accept as % of BPO ( usually it is 85%). I read they counter at BPO are they kidding, why would anyone take that when closing happen after 6 months in SS? Why wouldnt the buyer just buy from normal market and close in 30 days.

3) My Buyer Agent and Seller Agent wants me to go thru Atty Review before lender approving the sale. Is this how Saxon operates? In previous one I cud just put offer and wait for approval. Once approved you could start the Atty Revu and inspection & mortgage contingencies. Does Saxon operates differently?

4) Will this new bill approved by president in anyway impact short-sales. Since lenders may do loan mod over foreclosure proceedings? Will this delay decision? or will this lessen the chances of shortsale approval?

We don't know that the short sale can take forever. Last week we put an offer on a short sale property. On our offer we put a clause that say if the closing does not happen within 8 days starting the day we sumitted our offer our offer will be considered expire. Property is listing for 170K offer full listing price and in cash. Our deposit is 25K. We also let them know we are willing to match any offer. How strong do you think our offer is? Do we need to put a new offer after 8 days because of the clause? Are we risking losing any of our earnest money? Does our time limit put pressure on the lender to move faster? Please help.

This house has been foreclose and in the redemtion period.

Jeff, Thanks for the helpful insight on how to buy short sales... Will put in into practice next time..

- Canada Mortgage Rates

Jack - somehow I missed the notification that you had left another comment. Sorry to be so late in responding.

The dates and process seem to vary by state adn the foreclosure date is based on the process for that state AND the date at which the Notice of Default (when the buyer has stopped making payments) is filed.

I don't know about Saxon but have seen other banks counter at appraisal/BPO/full price level. You raise a good question and some buyer go the standard route becuase they CAN neogtiate adn move things along more quickly. Depends on the property that you want and you willingness to wait. I'm afraid I am not familiar with the process Saxon follows - perhaps someone here has some sense of hoe they operate and if attry review IS reviewed first.

Another thing to keep in mind, I hacve learned, is that if the homeowner has PMI then the PMI company is another interested party and will be party to the negotiations. This can also hold things up.

The hope for the new bill is that more mortgage lenders WILL try to work out compromises with their borrowers, but there will still be folks who cannot pay no matter how much is negotiated. I suspect we will still see a good number of short sales. I have been hearing from other agents that banks are starting to move things along and to try to get more transactions cleaned up by the end of the year. Time will tell.

Jeff

 

Cutepup - are you working with a buyer agent? If so I would talk to them as states have different contracts and stipulations about offer expirations. I would not think anew one would be needed but that depended on the requirements. Here in CA offers can remain on teh table if the uyuer wants even after the expiration date since banks never seem to respond in a reasonable period of time.

I have heard of short sales taking 3 - 6 months to get resolved, and some don't.

As long as you follow the  agreed-upon terms in teh conteract (dates, etc) there whould not be an issue about your deposit, but again I am not your agent nor do I know what your state's contract requirements area. Your agent should stay in touch with the listing agent, who hopefully is staying in touch with the bank to understand where things are in the process. Unfortuantely time limits don't seem to have much if nay impact on the banks and getting them to move faster. The time line seems to be basd more on who is working on the negotiations, how many lenders are involved, and when the BPO or appraisal is done so the lender knows that fair market value that they might be willing to accept.

Good luck.

Jeff

Hi All, sorry it has taken so long for me to give an update.  We did close July 9th!!! We didn't know if it would go through until 2 hours before closing, but it all worked out.  Just to give you a recap:

Sunday, May 4^th - we made our offer 200k

(original asking price was 349k then it dropped to 279k)

Tuesday, May 6^th - seller accepted it

Wednesday, May 14^th - received counter offer from the bank (250k)

Friday, May 16^th - I countered back (205,699k)

Wednesday, May 21^st - both banks verbally accepted the offer

Thursday, May 29^th - both banks again verbally accepted and said they were just waiting on the title search/hud-statement

Monday, June 2^nd - All documents were faxed to the banks for signatures and we didn't hear from them for two weeks. 

The 2^nd mortgage was supposed to take 3k, and the rest would go to the 1^st mortgage, less realtor commissions, back taxes, etc. 

When it came time for them to put it in writing, the 2^nd mortgage changed their mind and said they wouldn't take less than 10k, but they did put that in writing for us. 

The 1^st mortgage holder finally got back in touch with us and the listing realtor worked very hard to convince them to eat the additional 7k loss.

She succeeded!  They only gave us a week-and-a-half to close but we got it done and closed July 9th!!!  So, from start to finish it was a little over 2 months. 

It can be done, but it takes a lot of time, great realtors on both sides, persistence and a bank willing to take a loss.  I will say the listing realtor called and faxed the banks every day, she was always cordial and never too pushy, but let them no she wasn't going away =)

Good luck to you all

Laura - most importantly, CONGRATULATIONS on your new home. What a monumental effort. I am so pleased it worked out for you, and despite the trials this will be encouraging to others. It sounds like there was a good team assembled and people did what they were supposed to do. I know it was very difficult for you to go through the process.

Thanks for coming back to share your success and help educate others about the process.

Jeff

Laura - A deal in 2 months with 2 banks involved is exceptional performance.

Jeff- We just went to being under-contract from Atty Review with the seller and now the toil with Saxon begins.

 

Jack - it IS impressive. Laura's transaction is the shortest short sale I have heard about. Just getting anormal done in 30 days can be a trial sometimes.

Best of luck in your own situation. Sounds like things are moving along - hope the momentum keeps up.

Jeff

I am an agent with many many years experience with buyers and short sales. This guy is leaving out a lot and you should seek out a true buyers agent before you dabble and lose your shirt. Ask about doc stamps and if you get charged for the sales price or the whole amount owed. Just one example.

I am sure he will remove this remark. Check back.

Sunny Day:

Thanks for the comment. From what I have read, knowing about doc stamps in Florida IS a very important becuase of recent changes in how they are being charged in short sales, and should be looked into, so thanks for sharing that. It sounds like you have lots of experience with short sales - perhaps there are other thoughts you might want to share on this subject that are not Florida-specific?

Of course, this article, as you can see from reading it, is NOT designed to be the TELL ALL expert guide to short sales in every state. As you know, the practices that govern real estate transactions vary from state to state. Since I don't know where Jack is even located there is no way that I can advise him on all the particulars of a short sale in his state, and doc stamps may be handled differently. And if he is working with another agent it would not be appropriate to interefer with that relationship. If he is not in a contractual relationship with an agent then yes, having an agent would seem to be a prudent thing to do.

I'm not clear why you think I would remove your comment, especially if it adds value to the conversation we are having about short sales. I do find it interesting that you are unwilling to share any information about yourself in your profile, and that you are responding anonymously as if you have something to hide. If you are, indeed, as experienced a buyer agent as you say, then one would think that sharing that experience on-line would be an important thing to do and would add credibility to your comment. Plus folks might want to know more about you. I suppose that's your personal decision, however.

Jack - what do you think? You clearly have become very informed on short sales. Do you have an agent that is advising you? Does that person seem knowledgeable to you?

Jeff

First, thank you Jeff for this great blog! What a great way for us all, buyer/seller/agents to learn from one anothers experiences.

After much a-do, we opened escrow on a short sale (Orange County, CA) today! Waiting on Hud and bank written approvals. Word is we won't know for 2+ weeks if things will go w/out a hitch from the bank. We are sure on our side; pre-approved, excellent credit 40% down, so it's all a waiting game. I'm still nervouse as h.e. double hockey sticks that things will fall apart. As stated before, buyer's take the risk of lost opportunity, but then again, things always work out one way or another. My Mantra: IT IS WHAT IT IS.

I'll keep you posted.

Hillbilly - you are welcome. I am glad that you are finding the conversation here to be useful. There are so many things to know about, and each situation differs, especially with how the bannks are responding. It sounds like you are well qualified - hopefully the bank will recognize that, and the offer will be viewed as one they are comfortable with based on their BPO or appraisal.

I have been hearing that banks, in general, are getting more responsive with regard to short sales. PLease feel free to share your experiences here so others may learn.

Best of luck.

Jeff

Well I have worked with couple of agents in different counties in NJ. This is my second attempt at Short-Sale and I am also looking at a REO as my backup should the deal fall thru. Its been a long journey for finding home as both me and my wifey somehow are "Value for money" people and hence see better deal in short sale. There has been one regular house on which we bid earlier on the shorter side of listing( we didnt get it).

As a buyer and forums like these there is lot of information available. But for short-sale one needs to be patient to come thru. I am in market since April and its been almost 5 months in search with 3 offers so for and 1 more lined up in event this fails.

As many have mentioned here, I am hoping as we enter last quarter the lenders/bank will be more flexible in accepting offers to get them off there books in this year instead of sitting inventory.

Some agents have been knowledgeable and some have been apprehensive about getting to either side of ss/f/reo.

Jack - well I wish you the best of luck. There are many buyers who not be willing to take on these deals as you have.

Your experience shows that buyers need tio be especially patient, and becomne knowledgeable about the process in their particular area. There are many agents, unfortunately, who do not have much experience with short sales. This could potentially be an issue for a buyer.

Keep us posted. Your comments have been helpful for many here on this post. Best wishes for your success,

Jeff

Is the listing agent allowed to reveal what offer amounts  have already been submitted to the bank on short sales?

Chris

Fiduciary responsibility of a listing agent is not to divulage the other current offers. However at thier descretion they can give you a ball park number at which the bank can entertain an offer. More likely if you choose them as dual agent i.e. respresenting your side as well. Again I am not a lawyer or realtor just another buyer looking for deals

when does a short sale listing go to Contingent?  When the bank agrees to an offer ??  Is it usually a done deal for any future buyers?

thanks-Bonnie

Chris - I believe the regulations may vary from state to state in terms of what a listing agent may do, adn with permission from the seller. The Disclosure and Consent for Representation of More than one Buyer or Selelr here in CA states that "seller or listing agent may disclosre the existence, terms or conditions of Buyer's offer unless all parties and their agent have signed a written confidentality agreement." Whether they do or not can depend on all sort of things. In my experience with short sales, it is pretty common to be able to get a ball park figure of where a new offer has to be in order to be competive, e.g., to be in #1 position the offer must exceed...etc.

Jeff

Bonnie - the practice with these transactions seems to be when the bank has accepted the offer and approved the short sale in writing. Even if they verbally state they will accept they can continue to accept other offers if they wish until something is in writing. It does vary from bank to bank, as well as with how the listiing agent handles it. And different MLSs have different requirements regarding when a property is to be listed as Pending.

It is always wise to check with the listing agent before submitting a new offer to see what the status is, even if it still says active.

Jeff

Great site.  I am an attorney who has conducted short sales for personal investment.  It seems like the banks are even more willing to negotiate today than ever.  I have additional information on my site - including copies of the forms that are required with your short sale offer and tips for negotiating with the bank and dealing with the loss mitigation department. http://nutsandboltsrealestate.com

Short sales are creating great oppotunities for home buyers and sellers alike.  The real estate market has shifted and investors and agents have to shift with it.  It is the newest old technique that is very misunderstood but highly effective if done correctly.

Is it possible to have, as a buyer, more than 1 offer out at a time?  We put in an offer mid-July on a property and gave 1 week for an answer.  It's a short sale with IndyMac.  We just found out today the negotiator has been assigned.  We are the only offer they have for this property.  We have now found another property that's an REO that we really like also.  Do we need to pull the other offer and then offer on the next place?

You provide some great information on this blog.  I wish I would have come across it earlier...

One thing I have learned about through the short sale of my house is the difference between purchase money mortgage and non-purchase money.  this is important because if you have a non-purchase money mortgage, often times the servicer can pursue you for the deficient amount of money.  At the same time, from what I understand, the banks are not pursuing these anyways.  But, I do think its an importnat point to bring up. 

I had a lot of help on my short sale.  I had a great realtor that was recommended to me by shortsalecenter.com - check them out, and good luck with the short sale!

Is it legal for the sellers agent to raise price of short sale after it has been on market for a month and I have offered full cash price and now they raise the price by 15,000 ? Legal ??

thanks Bonnie

Lisa - I am not an attorney but as far as I know there is nothing illegal. But is is more a question of what is a sensible approach to buying property in this amrket. While in my experiece buyers do not normally do this, in part becuase it suggests a lack of seriousness, the manner in which short sales and foreclosures are handled by the banks seems to go against normal protocol, expectations and deadlines.

Are you working with an agent? It really is something I would discuss with that person to get thier thoughts - some agents do not want to work with buyers who put in multiple offers. But again, the REO, short sale and foreclosure market is NOT normal by any stretch. Since buyers are waiting for answers for weeks on conotracts it is not unusual for them to put in offers on other properties while waiting.I think it is more of a personal choice than anything. Again, I am not aware of a rule that says you cannot, but obviously you want to follow the terms and conditions of any contracts.

Good luck in your decision making,

Jeff

 

Mr. G. - you raise a good point about the different kinds of loans (refinance vs. purchase). There are also some requirements in the new laws about how the IRS will tax, or not, the monies that are forgiven in a short sale. I always advise folks to consult an accountant to they understadn the implications of these situations on their personal finance.

Thanks for sharing this information. Glad you were able to get through the process.

Jeff

Bonnie - unless there is a contract signed by both parties, I don't believe there is anything illegal about this. While it seems unfair, may not make sense in light of your offer, etc., the seller has the right to make changes in their listing as long as it follows the requirements of state law and the MLS. It sounds like the seller is trying to encourage higher offers, or perhaps has done an appraisal that suggests the property is worth more. Did you have a signed contract on your offer or are you still waiting for a response from the bank? What does the listing agent have to say to your agent about the status of your offer? No reason why your agent cannot ask about the change.

Jeff

thanks Jeff

seller agent says she got higher offer over weekend (yeah, right) and she said per bank instructions she raised the price..not sure I believe her after being on realtor.com for 34 days .. she had told my agent and myself that she submits all offers to bank and I made my offer 2 wks ago of cash so I would think the seller had signed as did I..banks aren't even open on weekends and it appeared early this morning on realtor.com at higher price..

thanks so much for your response..Bonnie

Why are people taking multiple offers on short sales?  This is not an auction, this is not a free for all.  You must conduct a short sale offer scenario just the same as if it was any other offer situation. 

Joseph - thanks for the comment (BTW there were 6 comments so I deleted all except one since they ere identical).

I guess I do not understand your comment. Seems to me that a seller (and the lender) in a SS situation can entertain multiple offers just like can happen in a normal sale, and the seller gets to choose the one they want and formally accept it in writing. How is this different? What does seem to be different is that the banks do not adhere to any reasonable deadlines, make verbal commitments then back out, don't respond for weeks at a time in many cases, and so on.  Can you elaborate on your thoughts?

Thanks, Jeff

Jeff,

My comment was based on the notion of accepting multiple offers after an offer has already been accepted by the seller.  I have seen this time and time again.  Why do it?  The banks won't look at more than one offer at a time.  Once the seller has accepted an offer, and it is submitted to the lender, you may entertain other offers as backup.  By properly disclosing to all offers that they are subject to bank approvals and timeframes, you can do your part in making things go smoother.  Accepting multiple offers just complicates things.  Remember, the bank is not the seller.

http://short_sale_expert.activerain.com/

Hi Jeff,

 

I made an offer on Sun. on a short sale that had been listed for one day at $50K over the listing price. The contract was signed by the sellers and the sellers' agent that day and a copy provided to me. The sellers' agent told us he had no other offers and was submitting our ratified contract to the bank the next morning for consideration. On Monday, my agent contacted the sellers' agent about scheduling the home inspection b/c we needed a combo lock box on the property and the sellers' agent emailed my agent back and said he actually had 4 offers on the property ALL of which were ratified and sent to the bank. According to the sellers' realtor, one of the offers was higher than mine. My question is, how can the sellers ratify 4 different offers on the same property? I am REALLY upset because there was a bank owned property I also liked and would have made an offer on instead had I know there were multiple offers on the one I did bid on. However, I have now missed that deadline for offers. I'll never make another offer on a short sale again if I don't get this property, and I do have a 30 day response contingency, which will let me walk away, but this just seems both unethical and illegal to do this to 4 buyers. I'd love your insight and I'd love to take any legal action I can.

Thanks!
Jeannie

 

Good info, thanks.  Short sales here in GA are taking forever to close.  I had one last year where the bank took 5 months to respond. Of course, by then the Buyer was done.

Forgive me for the length of my post but I desparately need some advice...

 I've been trying to buy a home as a short sale for 5.5 months. I put my offer of $255k in on April 1, 2008 and the sellers accepted it. The sellers owe about $395k (ASC owns both 1st and 2d mortgage). When I fist found the property it was listed at $250k (short sale price set by agent that was not yet approved by the bank.) In May the BPO came back at $273,000. The title person I work with said that this was good news because I was within 10-15% of the BPO. We were told we would hear back shortly and they requested more documentation, which the sellers provided. We were told everything was looking good.

Then, we did not hear anything until August 2008 at which point ASC said the BPO is too old and they had to do a new one but would tell us within 10 days of the BPO whether we get the house. The BPO was done on August 12th and they have not given an answer. Nor will they tell us how much the BPO came back at this time. Sale prices have dropped around here but since the last BPO there have been some home sales in the area with much higher prices per square foot than what I am offering.

Then, two days ago, my title person hears from ASC. ASC says that there is a NEW negotiater on the file and they have 90 days to decide. However, they also informed us that the property is going to auction on October 1st!! We can't seem to get any answers. Why would the bank not just make me a counter for what they are hoping to get at auction? Does anyone have any idea what I should do? I dont' have the cash up front to go buy the house at an auction. It doesn't seem fair to the sellers or myself when we have been trying to get this done for almost 6 months and now it will go to auction without us even getting an answer.

THANK YOU!

Jeannie

I certanly understand your postiion, and disappointment. The problem seems to be that short sales are not handled in the same way as typical sales, where once the seller has signed an offer all other offers are treated as back-ups. In many cases I have not seen ANY of the offers get signed by tghe seller but they simpl get forwarded to the lender. While the lender is not the actual seller, they DO have th approve the short sale. It is up to them what they accept or not, and the way they go about this seems to vary from lender to lender, and even who the negotiator at the bank is.  The bank wants to get as much money as possible so they seem to go about this in any way they feel will yield the best offer, which means allowing as many offers as they feel is needed to get to the number they want.

Can this be challenged? Good question. I don't if anyone has...at least I have not heard so. Since the sale is subject to approval, the bank could simply say your offer is not acceptable, even though signed by the seller, and they could then go on to the next back up anyway. If you feel strongly about this a discussion with a real estate attorney would be advised.

You may have the option of revising your offer - I would ask, iy you are really interested.

THis sort of situation is why these deals are so frustrating to qualified buyers who really want to acquire the property. Are the banks behaving responsibly? IMO it does not seem so in mnay cases.

Jeff

Jen - yep. I know someone who closesd a short sale after more than 9 months. On the other hand at my office meeting yesterder there were two agents who were able to close their respective short sales in about 2 months (there was only 1 lender involved).

Jeff

Nicole - well that is certainly a huge disappointment. I can understand how frustrating this is for you, and it does not make sense. But I have heard of a number of sitautions where a new negotiator is assigned and that always seems to start the clock ticking all over again. One would think that a good offer, based on current prices, would yield a sale rather than letting it go to auction, since in so many cases the auction price either is less anyway, OR it does not sell, and the bank then owns it. THis all costs the bank more money that simply selling through the short sale.

There is much talk of the banks being overwhelmed, staff who do not really know what they are doing, lack of coommitment to getting these properties sold, and lots of bureaucracy. Are these valid explanations for why things are not moving forward? Possibly. But one has to wonder why action is not taken to correct the problems.

Selling at auction is the end rsult of the foreclosre process, at least in the states I am familiar with. Just because a date is set does not necessaily mean it will happen, adn they can delay the acution date if they wish. They still may move ahead with the offer. But I have also heard of cases where offers were submitted, one was accepted and yet the bank still went to auction. I do not have an explanation nor can I understand myself why this would happen.

Ultimately, the choice is to simply continue on, trying to get information and put pressure on them to make a decision and hope they do, or walk away. IS the listing agent being helpful? ARe they in touch with the bank regularly?

Jeff

Here's an update. Yesterday, my title person got a call from the bank which said they wanted $305k minimum for the house. The first BPO came in at $273k so I guess the second one came in way higher.  I tried to get them to do $295k but they won't budge. I have no bargaining power, which is very annoying.

I signed the paperwork today and it looks like it's going to go through. I'm frustrated because we've been working on this for 5.5 months, planning everything meticulously, and then the bank calls and in one day wants an offer for $50k more than my original offer. I'm keeping my fingers crossed that I don't end up broke from this. It's still a good "deal" it's just not the "steal" I was hoping for. Thanks for the advice.

I would have pushed them harder, maybe threatened to walk.  They will absolutely come down another 10-20% from their bpo numbers-which is usually a fantasy number anyways.

http://short_sale_expert.activerain.com/

How do I push without losing the deal? When we told them I was going to offer $295k they said if the offer is not for at least $305k then don't bother sending it.  They said the BPO came in a lot higher than $305k. Realistically, I think the home is worth $370k, based on similar home sales in the area in the past 3 months. Zillow.com has a zestimate of $404,000. I find that Zillow is usually pretty close to true market value. I made the $305k offer but made a condition of closing by Sept. 30th due to an increase in FHA fees on Oct. 1st. Bank hasn't even responded to us yet as to whether it accepts the offer and the condition. Hope I made the right decision. This short sale business is nuts!

Great information, Jeff. Short sales are touchy transactions and can turn sour on a whim. Have a great week ahead.

Stay away from Short-Sales unless the Bank has agreed to accept one before you put an offer in. It could be foreclosed on while you are waiting . . .

My short sale I just closed on took six months. Trust me when I tell you...my buyers were ready to quit every month. A fellow agent I work with waited four months, they were getting ready to close and a cash buyer out bidded them and bought the property cash.  Just like that. The bank accepted the cash offer over the first offer that had waited so long for the paperwork! Unbelievable.

Thanks again Jeff and I will pass this info on today to a few Realtors.

With what all is going on with Mortgage Bailout etc, do you think it will slow down the accpetance of these deals. These normally take 3-4 months so now will they never happen or will they take 12 months?

 

Share your thoughts..

Great post. Very informative for someone who does not know a lot about short sells. Thanks.

CMS - I have deleted your two comments.

They were completely inappropriate and pure spam. I do not appreciate you using MY blog to advertise YOUR services, especially without asking, and for doing so on this network. Good luck in your business, but please don't do that here again. If that is how you how to get business you might want to rethink your marketing plan. People do not appreicate getting spammed and they see right through it.

Jeff

Jack - I was at an REO class today and learned about a new product that will be coming out that will chaneg the way that short sales are being handled as a result of the crisis we are in. Now that the "bailout" has been approved I think we will see other changes as well, and certainly some of the major players have now been acquired by other major players so the playng field is shifting. It is hard to know what will happen but I have heard, through contacts at Bank of America, that major efforts are underway to significantly change how things are being done.

Some good news at this end - we have an offer in on a short sale adn now, after 4 weeks, have gotten an approval with the intent to close by end of the month. Of course that remains tp be seen but I seen this as an encouraging trend.

Dave E - thanks for the support. I think many have a lot to learn - agents on both sides, sellers, and buyers.

Terri - congratulations. Another success story, albeit a very lenghty one.

Richard - well that is good advice for many but in some markets and prices ranges buyers have no choice.  The more we know the better we can prepare ourselves and our clients to deal with these transaction.s But folks need to know how difficult and frustratring they can be and how they might now be right for everyone.

Jeff

Jon:

Thanks for your thoughts, and I wholeheartedly agree. But I deleted your comment.

Spamming my site with advertising to your website is just not cool and is not appropriate here on ActiveRain. I don't spam you so why are you spamming me?

Why don't you just sign up and advertise your services by blogging here? Or consider running an ad here - there are inexpensive.

Hope you understand.

Jeff

Just wanted to share a success story for those of you mid-short sale. On April 2nd I put an offer in on a house. The owners owed $405,000. Finally, on September 26th, we closed for a purchase price of $290,000. The house was appraised at $340k so I think we got a great deal. The process was very long and time consuming. Two BPOs, tons of time sending documents (to my mortgage company and the title agent doing the communication with the seller's bank) and A LOT of stress. Everyday it was up or down. Many times we thought we had lost the house. If you are stuck in the process and think that you are getting jerked around, I have a suggestion. If you (or your agent) is in contact with the seller's bank,  tell them that you are going to contact their investors and tell them that income is being lost on the property and that there is a viable sale being ignored. The investors are who they are afraid of. Continue brining that up and you may get some where. Good luck everyone!

Nicole - first of all Congratulations. That is great news and encouraging for us to hear. You must be thrilled. Thaks for sharing your thoughts - I have heard that this IS a big issue. Of course one has to wonder why the investors are not looking out for their investments, or don't seem to be.

Jeff

Thanks for the congats. I am very happy:) Of course now we are spending a month fixing everything but it is all cosmetic so it is totally worth it.

The thing is that the "investors" are millions of people who don't even know what they are invested in. The mortgages are bundled up into mortgage backed securities. The "investors" really don't know what loans are in the mortgage backed security they are invested in because there are thousands of loans in them and actually, as far as I know, there is no way to find that out. There's really no one following mortgage performance on a lower level, not even the investors themselves. However, if the bank thinks that they will get a bad reputation among investors for losing money that does not need to be lost, then the banks will have no one to sell their loans to. Banks sell them off to get rid of the risk (but they still service the loans). Some of you may know all this but hopefully it helps those that did not.

By the way, the company I dealt with for almsot 6 months on my shortsale was Wellsfargo. We needed their approval to buy the house.The servicer was ASC but my title agent dealt with Wellsfargo, which owns ASC. Wellsfargo was a nightmare but it worked out in the end. You can try what I suggested above. Good luck.

Hi Jeff,

Thanks for all the info you posted here. I just put in an offer for a short sale, and based on the contract I signed, the seller should have gotten back to me yesterday with an 'accept/reject' on my offer. Is that a decision the seller has to make or is it the lender's?

Also, while I'm in this whole process, will the house be listed as "sale pending' or will the house be open for other buyers to see? As of the today, there have been no other offers made on this property, and the the house has been on the market for 90 days now. I am determined to get this house and would like to know whether or not my putting in an offer gets the house off the market for other potential buyers???

Nicole - thanks for the information share.

Carla - I have had short sales where the actual seller (the homeowner, not the bank) responded and in other cases did not. It ultimately boils down to acceptance of the offer and approval of the shrot sale by the bank. I would think that until the short sale is actually approved in writing and the bank has signed off, the deal will still be active so other potential offers can come in. Unfortunate, but the reality is the bank wants the best deal. Of course if youhave a very strong offer it may be fine.

Are you working with an agent? I would see what you can find out from the listing agent about the status, next steps, etc. The other thing that needs to happen is the bank will do a BPO (broker price opinion) to determine market value, or multiple BPOs). Once they know this they can decide what offer is acceptable. That can take some time in some cases.

Good luck! Keep us posted on your progress.

Jeff

Thanks for the reply, Jeff. The seller is actually 7 months behind on his payments, and as explained by my agent, is near foreclosure. Would this motivate the lender to act faster since from what I've read, they'd rather deal with a short sale than a foreclosure?

Also, I believe the short sale has been approved by the lender, since there was a previous offer that was rejected. The property is listed at $330k, my offer is $320k, and the only other offer since it listed 3 months ago was $200k.

Thanks again!

My wife and I were home shopping and found one we liked with a few acres. Called the agent to setup a look see, got pre-approved (Wellsfargo) and submitted a fair offer in writing. Had no idea it was a short sale or what one was. The loan was with WAMU 9 weeks and counting. JP Morgan called 2 weeks ago and asked the realitor if he still had his buyer (Us) he told them yes and the wait goes on........

Mike and Mindy

We are recently dealing with AMERICAN HOME MORTGAGE SERVICING,INC. The offer went through, but came back with a 10-page addendum including terms such as pay over $600 per diem penalty after 35 days (no matter who causes the delay), and limit loan type (otherwise breach the contract).

Since Short Sales are becoming extensive only this year, not many agents have experience with banks, including my agent. I hope to know from this board on your experience dealing with banks, an in particular if you have any experience with AMHSI.

Since the addendum protects lender exclusively, I don't know whether or not they are flexible in the execution in the end. Haven't seen any examples of lender rip off the buyer? Although in this case, it is not the best interest of the lender. Thanks a lot.

AHMSI has been very difficult to deal with lately. I just had one close where we netted them 10K MORE THAN THEIR APPROVED NET, and THEY SENT THE FUNDS BACK AND CANCELLED THE CLOSE!!!!!  All because they did not want to pay a third party negotiation fee.

You must deal with them on a hardline stance. They did not require our buyer to sign any addendums, so I would refuse.

LRC - well no specific experience but certainly banks vary tremendsouly in terms of how well they operate. And if I did have a bad experience it would not be appropriate for me to talk about that company publicly. I can understand your concerm The issue of per diem coss is becoming mor prevalent adn banks are being very diligent about it from what I am hearing.

Joseph - appreciate the feedback. In terms of addendums, I would think that if the buyer refuses the deal will not proceed. May be a legal matter.

Jeff

i'm in California and hoping to buy here -- Do understand, reading between the lines, that an offer does not hold back other offers until it is either accepted, rejected or expires? Are offers submitted with no expiration date? This sounds like an auction bid rather than an offer and it also sounds like the auction has no exact ending gavel until the bank suddenly decides to end it. Are banks allowed to conduct themselves outside the legal and ethical boundaries that restrict real estate agents and typical sellers? If all this is true, what's to keep the bank from waiting for ten offers and starting their negotiations with the highest one? Sure,the bank wants their money ASAP, but to glean an extra $10K, they might be willing to wait a few months longer. What a mess!

Lance - I know exactly what you mean. I've made an offer on a short sale a month ago, and have been biting my nails everyday hoping there won't be any other offers until the lender approves the shortsale. The listing agent told us that they are open to other offers. I do believe this is unethical...but I guess that's how shortsales go. It does state that in the Short Sale Addendum. If you have the time and patience, go for a shortsale, otherwise, don't. It has been a nightmare for us....

Best of luck.

Lance - Yes, you are correct. As with any offer, until you have a signature from the seller, any other offer can come in an be acceptable. What makes short sales so difficult is that the period for offers goes on for an extended period and the bank can pretty much do what they want - a huge frustration for buyers and sellers alike. It tries everyone's patience, and many folks can simply not wait that long to find out if the home is theirs.

Carla - well said. Thanks for sharing your thoughts. Sorry you have been another one of the many who have had nightmare transactions. Your advice about patience is excellent - that is probably the key.

I'm not sure the bank's behavior is unethical, at least as defined under the REALTOR Code of Ethics, but that does not make it right, nor fair, nor easier for buyers to deal with. The lack of responsiveness (not typical in a normal sale) and the length of the transaction are especially hard to understand, particularly given someone needs to sell, they have good offers, and yet no action is taken.

Best of luck to you in your current transaction - I hope it works out for you.

Jeff

Lots of helpful information here.

This is my unfortunate situation.  I wanted to put in a bid on a short sale, but recently lenders seem to be cracking down big time on bridge loans.  I'm looking at a 520K house, they want 20% down up front plus earnest money.  Half of my 20% down is locked in my 150K of equity in my current home.  I qualify for a 630K mortgage loan if I sell my house or offer a contract contingent on selling my house and I have a 820 credit score, but the lender still wants nothing to do with me on attempting to buy a short sale.

Here's my real problem.  Me and my wife went to look at houses in our price range in a large seach area.  Out of 11 houses we looked at, 9 of them were short sales or foreclosures and only 2 were being sold by the owners. 

Basically, we are trapped in our current house from what I can tell.  There's hardly any choices on the market that will accept a contingent contract and even with our exceptional credit and equity in our current home the lender won't go anywhere near us. Without selling our current home first, we'd have to buy a house that is priced 80K below our current home.

We could sell and put all our stuff in storage and live with family while we looked, but as you all mention, this process can take months.  It's no wonder these things sit so long and either go into foreclosure or just deteriorate because no one is taking care of it for so long.

Seems banks are making this worse on both sides of the ball... financing and being terrible about accepting offers.

Anyone get around this issue btw?

 

Thanks,

Cory

Of course they want 20% down-it will be a very long time before we see 100% financing again.

I am working with some fellow investors who are using a program to get access to private funds to close short sale and foreclosure deals. They have been using this for pretty effecively to close deals. Here's the weblink.

http://privatefundsfordeals.com

 

 

My husband and I are first time buyers, and are looking at short sales (can't really find anything else).  The house we want is listed at 195, and it's only been on the market since November (original listing price was 219).  We are working with an agent but I wanted to get some other people's advice here - what should we offer in order to get the bank's attention?  Will things be better in 2009?   Should we wait until prices drop even more?  This market is frustrating!

Sarah - since you are working with an agent it is inappropriate for me, or any other agent, to offer specific advice on your offer since that would be interefering with your relationship. I would work closely with your agent to gather as much intelligence as possible about the market  so you can make a competitive offer. Good luck.

Jeff

Thanks Jeff!

We went and looked at a house that had a listing price of $65,000.  When we showed up to look at the house we were told it was a short sale.  Houses in the neighborhood are listed between $130,000 and $140,000.  What they are actually selling for, I don't know.  We fell in love with the house and put a cash offer in for $65,000 and put an EMD of $5,000.  We provided proof of funds to Wells Fargo because they are the mortgage servicer.  The agent also submitted the seller's documentation for the short sale as well.  This was on December 9th.  On Monday, December 15th I was told by our Dual Agent that they confirmed receipt of the package and would be doing the appraisal.  My concern is that with a low purchase price that they wont approve our offer but we did a full offer of the listing price.  I've been told that the sellers owe $130,000 on the home.  What do you think our chances are?

listing price means nothing, because it is subject to approval from lender/investor.  If package was submitted on december 12, you probably won't get a decision for at least aother 45 days.  You also must be flexible not only on time, but price.  The lender may counter offer.  If you cannot be flexible, you should not consider a short sale.  If you can be, it may turn out to be a good deal for you.

Katrina - it is difficult to say. The list price for short sales is not necessarily what the bank will accept - that number will depend on a Broker Price Opinion (BPO), or several of them. It is not unusual for a short sale to be listed at a lower price in an attempt to get multiple offers that will go above asking, and often there are multiple offers, at least in my area here in CA. The current list price is 50% of other properties (although without knowing the SOLD prices we don't know what the differential is). Since the sellers owe $130K the bank must be willing to forego $65K. That may be more than they are willing to do.

Good luck

Jeff

It says on the HUD-1 that the payoff is $60,590 so is that what they know the bank will accept for the payoff (a negotiated lower payoff) or is that what they HOPE they will accept?  Apparently, the seller is being forced to sell 6 of his properties on a short sale and they wouldn't let him pick which 6 (he owns 10) so my hope is that Wells is already aware and has approved this situation. 

I will say this; if you are planning to buy a short sale property from COUNTRYWIDE....Good luck! My wife and I offered the full listing price and they rejected it. Supposedly the listing agent and sellers never had authorization to have it at that price which was market price. Our letter from the listing agent/countrywide said we could submit another offer and since the file is active, the CW negotiator would have a quick response....yeah right! We offered a very close offer to the bank's appraised value and weeks later we are still waiting for a response. The listing agent cannot even talk to the CW negotiator. The whole process is a waste of time if you are a serious buyer looking for a home. I also feel sorry for the sellers who have to deal with this B.S

Allan - you are right, it can be a really ugly situation. We continue to hear such stories which certainly does not help us move through the difficult housing situation any faster. Unfortunately this sort of situtation is found with many of the banks. Any buyer considering a short sale abolutely must have the patience of a saint. Thanks for sharing YOUR story so that others can better understand the possible implications of trying to secure a short sale.

Jeff

Too many comments to read them all but thanks for the info to buyers on short sales. You should post another one for 2009.

Jeff-I'm in the lovely state of MI and as with the rest of the country short sales and bank owned are common place. We have our buyer clients sign a disclosure re: SS and bank owned that spells out the delays and time involved.

My son purchased a home 5 years ago with a down payment of $65,000.00.  Today his home is worth $200,000.00 less then w3hat he owes on it.  The mortgage co will not work with him they just have whoever is on the line tell him to short sale it.  This makes no sense as they could redo his mortgae to the appraised value and if and when he sold it they could split the equity.  This home was bought in good faith and with the asdvice from the real estate world if you don't buy now you won't be able to later most likely.  Please comment.  Thanks Sharon

Sharon,

 

If he can afford to stay in the home, he should persue a loan modification.  If he has tried and found the lender non responsive, please contact me.

Joe

 

 

Jeff:  He had tried for a loan modification to no avail.  At this time my realtor is working with him but short sale is what she has said.  He did quit making his payments in Sept. because the loan co. was not willing to work with him.  He owes $285,000.00 on the home and short sale is about 85,000.00  He figures he would be nuts to continue paying.  Thanks Sharon

Sharon - this sort of hting has happened to so many people. Some banks seem to be willing to work with their loans and others will not. However the bank will have to approve a short sale and it must be based on a demonstrated hardship. Simply deciding to not pay will not likely cut it. There are credit implications for folks who go through short sales, or foreclosures. BUt of course if one cannot make the payment, there is no other option. I wish him the best of luck.

Jeff

I don't know where the myth that you need to demonstrate some tale of woe to get a short sale  It is simply not true.  A short sale can be done for anyone.  All you have to do is demonstrate that your market value is less than what you owe.  That's it. 

Wife and I just pust in an offer on a short sale home...my question is has anyone had good experience with a short sale and actually closed on it?

Paul - well that is a good question. I have heard estimates of about 25% of short sales close but that canvary quite a bit. Also hearing that more are closing now than in teh past, but many still do not adn end up forclosed. Best of luck.

Jeff

I get approvals on 97% of my short sales.  getting buyers who can actually close?  That's another thing, but the ones that can't don't have anything to do with the fact that it's a short sale. Also, ALL lenders will modify or sell short if you can present it right.  The question is at what price.

Thanks for your help guys...

We presented an offer above asking price and asked for closing cost and so far ours is the only one on the table...or so we're told...however the offer is still 10k below market value...I'm pretty optimistic, but im sure they'll counter back from stories i've read(I need to stay off google...lol).  In the end will the bank want market value for the home u think? or are they willing to loose 10k?  Its only been about 2 weeks(sent offer 2/19/09) so far and we've been told a negotiater will be sent out this week..we're not really in a rush to move out of the place we're at now so we do have a little more time then some...patients might be a different story...=)..anyways I'll post updates...Has anyone else experienced short sales?

 

Every situation is different when it comes to buying a short sale home.  The two most important things are 1.) What lender(s) they have, and 2.) Has the lender agreed to a price already.  These to things can mean the difference between six days for an approval letter or six months.  It is also very important what negotiator you get assigned to, and if the selling agent or person mitigating it knows what they are doing.  It is very important to have a short sale realtor who is experienced in getting deals approved.

We just put in an offer on a preshort sale. The owner is in the hospital and his parents have power of an attonery. The bank is trying to take the house. We offered $100 over asking and did not ask for closing cost. How long does this process take. The bank is Wells Fargo in the Dallas area. We are first time home buyers and are so confused by everything.

Christie - well you are not alone, as the process can be very confusing, and sometimes makes no sense at all in terms of how the banks behave. Hope you are working with an agent.

I have heard of short sales closing in less than 60 days, although that seems to be very rare and only when there is just one lender. I have heard of others that take 4 - 6 months, and some don't close at all and get foreclosed. The process varies from state to state depending on the reasons for the hardship, the foreclosure process, whether then owner is in default on the loan, among other issues. There is also the frustation of competing with other buyers.

Jeff

Jeff

Jack is back

After waiting for 8 months on an offer with SAXON short sale, I have the approval letter. Now my offer was contingent to MOrtgage & inspection which starts after lender approves SS. So now I want to do inspection, but house is winterized, gas and water is off. In order to pass successful inspection I need those running so I am asking my buyer agent and attorney to get it done. They are giving me no hope and saying bank is "as-is" sale..... Let me know your experiences. Do bank de-winterize and start utilities on Short where owner left the property deserted for last 6 months. I want to make sure all pipes plumbing are functional.

Jack

Hey Jack - well that is good news, on one level.

One the one hand it IS "as is" so the bank could argue that. ON the other hand, without being able to verify the condition, you cannot make a reasonable assessment and decide how to proceed. I would check to see what the contract says about due diligence, ascertaining condition, and that sort of thing - seems to me you have the right to verify the operation of these systems, even if they are as is. It is a pretty minimal cost to turn to on power for a day. But if things have been winterized that may be more complicated. We obviously don't have that issue out here.

Jeff

My husband and I made an offer on a short sale on January 26.  We had never even heard the term before, but it was the house we liked best (and we had looked at 38 homes).  Although our agent cautioned us that this process can be time-consuming, he also indicated our situation should be less difficult because the sellers had hired a short sale attorney who had already completed and submitted all required paperwork to the lender.  There was talk of a settlement date of February 19.

Although our agent claims he has handled previous short sales, he has been a realtor for less than five years and we quickly became concerned that he was "in over his head."  When we had not received any response from the lender by mid-March, we hired a real estate attorney to represent us in this matter.  We learned that one of the documents (HUD-1) had to be redone by the seller's attorney; this was completed on March 25.

Again, weeks passed and no response.  Today, we were informed that the lender has "lost" some of the paperwork and there is little likelihood settlement could occur before the end of April.

We have received no acceptance of our offer, nor do we have a settlement date.  The house is still being shown and other offers have been made (ours is still the highest).  Our contract expires on April 26 and we plan to abandon our offer (and reclaim our $3,500 good faith deposit) if we do not have a firm settlement date by that time. 

This is still the house we would like to purchase.   We have a 2/3 cash down-payment and approved mortgage for the balance.  Is there anything else we can do to expedite this purchase? 

Jane - sorry to hear of your problems, but they are not uncommon. NOt sure there is anything that you can do to expedite. It does appear that those deals that have a negotiator do tend to move more quickly. If there is more than one lender that can hold things up quite a bit if the lenders do not agree, I know that many banks have changed personnel, reassigned staff to different deals, and have also declined in staff so you have those issues as well.

I am surprised there is a deposit if there is not actual signed contract. But perhaps things work differently in your state in terms of requirements. Generally people here in CA, in my experience, submit the actual deposits only after the bank has approved the short sale and there is an actual signed contract. I am not an attorney so cannot comment on the legality of how this is being handled, etc.

BEsts of luock - keep us posted, for experiences like yours can help others learn about what they can expect.

Jeff

Nice blog and the comments also have much knowledge. Thanx.        

Hi Jeff,

There is finally light at the end of the tunnel!

My first post was October 30, 2009, a day or two after I made an offer on a shortsale. Just 2 weeks ago, the seller's lenders (Aurora & Homecomings) finally came to terms with an agreement to shortsell the property! So, in all, the 7 month wait was well worth it. It was an emotional roller coaster for me because I fell in love with the house right from day 1 and it was such a bargain.

We are scheduled to close escrow on May 22, for a total of 7 months wait! My advice to all, if you don't have the patience to wait on a shortsale, don't go for it. The whole process can really drive a person insane!

Thanks for all the advice, Jeff.

Carla

 

Carla - Thank YOU for taking time to keep us posted, and for stsopping in for the update, That is very good news. I'm so pleased you were able to stay with it, especially since you like the home so much. Better yet is that it is closing - so many do not.  Let us know when all is said and done...and congratulations.

Jeff

Hello,

I can't believe how frustrating short sales can be and it has only been 2 1/2 weeks since we put in our offer. The home we're trying to buy is going for 345K "as is". We loved it so much that we offered 5K over the list price and gave 5K as our earnest, good faith payment. We knew for this size home and at that price plus the area, we're not going to come close so the waiting isn't too bad BUT the listing agent told my Realtor that there were 6 offers total and ours was the highest and best. What gives? 

If there are two lenders involved, is it the responsbility of my Realtor to know that information? I'm not sure whether this short sale is approved or not, is this something my Realtor should know as well? My Realtor has been keeping me updated via email. I also got a faxed copy of the paperwork the Seller signed (our offer) but now we're waiting for a short sale addendum? How does that work?

My Realtor thinks the listing agent has no clue about short sales and that I should keep looking but I have found nothing of interest in this area so I have no problem waiting. I just hate being in the dark. Is it wise to find out who the Lender is and contact them directly? Can I call the listing agent myself?

What are your thoughts?

 

FYI- I live in Monterey County, CA 

Hi so I have spent the last two hours reading your blog....

I love it...

so here goes:  My husband and I recently put in offer a month ago on a house we love love love... there was one other offer on the house, but ours is higher. My realtor has practically stalked the listing realtor... "we" finally got a phone call from him... He told my agent that he has received our offer, but the sellers have not signed it as a back up offer, but has signed the first, lessor offer... He told our agent that if we got the bank to approve our offer then he would put our offer first... 

I can't help but feel that the sellers have not seen our offer, and obviously he has not submitted our offer to the bank either.

My agent has suggested that I contact the bank and fax our offer and contact the sellers and submit our offer to them by mail... I feel like I am doing all the work... we are first time home buyers any feed back would be great.  Also, our offer expires on the 15th of June.  Once it expires should we go with a different agent.  I feel ours is just not working for us.... but she is very nice.

Hi so I have spent the last two hours reading your blog....

I love it...

so here goes:  My husband and I recently put in offer a month ago on a house we love love love... there was one other offer on the house, but ours is higher. My realtor has practically stalked the listing realtor... "we" finally got a phone call from him... He told my agent that he has received our offer, but the sellers have not signed it as a back up offer, but has signed the first, lessor offer... He told our agent that if we got the bank to approve our offer then he would put our offer first... 

I can't help but feel that the sellers have not seen our offer, and obviously he has not submitted our offer to the bank either.

My agent has suggested that I contact the bank and fax our offer and contact the sellers and submit our offer to them by mail... I feel like I am doing all the work... we are first time home buyers any feed back would be great.  Also, our offer expires on the 15th of June.  Once it expires should we go with a different agent.  I feel ours is just not working for us.... but she is very nice.

Great blog!  It's been very informative to me, as I'm in the middle of my house hunt.  I haven't picked a house yet, but I've been trying to do a little research on short sales since there's so many out there right now.  I have a couple questions:  When do I get an inspection?  Is it before or after the approval by the bank?  Also, is it necessary to get a lawyer before the bank approves the offer?  If I do make an offer on a short sale, I'd like to minimize my costs, since so many short sales do get rejected.  It seems like a waste to get an inspection and hire a lawyer for a house I might not get.

Nikki:

As with the normal sale, generally buyers have their inspections, etc. after they have a signed/accepted offer for exactly the reasons you mention. Until then there is no contact. States vary in terms of using attorneys or not, as a general rule, but you can certainly use one if you feel it is needed. I would consult your agent for more thoughts on this as it applies to your particular area and the normal protocol.  Good luck!

Jeff

My husband and I found a beautiful house in Tampa, FL.  It is a short sale.  We made an offer 4 wks ago for the asking price with an earnest amount of $1000.  The lender has cashed the check (is this normal?) and we have not heard anything.  After reading some of the stories on your blog, I'm afraid of how long this process may really take.  We were told by our realtor that the listing agent is eager to work the case and there have not been any other offers.  We do not know the name of the seller's lender.  The asking price of the house dropped $55K prior to our offer.  MLS shows pending now.  My #1 question is...if the listing price is $250K and we offer that in a contract, how can the bank not accept?  This hasn't happened yet but after reading your blog, it may/can.  Who sets this price?  Who agrees this price is sufficient?  I don't understand the negotiation process when we offer the price that is listed.  Confused!

Christina - I am so sorry I missed your comment and have not been back to respond. THings work differently in different parts of the country in terms of deposit checks - in some area they are cashed up front, and in others not until the offer is approved by the lender.

Short sales can take weeks to many months, and it tends to take longer when there are two lenders.

The banks can do what they want to do - if they get one appraisal that says the property is worth X but you offer Y (even if it is the asking price), it will not get approved. It is not uncommon for offers to exceed the asking price and for the final sales price to exceed asking, but there are certainly exceptions to that. It all depends on the market and what the bank is willing to accept.

I have seen cases where the bank recieved one offer but there were back-ups, adn they went back to everyonje adn asked for a best and final offer. In other cases they first just either accpet or decline the first offer and go on to the next.

I'm glad to hear you are working with an agent who can look out for your interests!

Best of luck - keep us posted - we learn from every consumer who goes through this process, and things keep changing.

Jeff

 

Hello, my wife and I have been going through the very frustration ordeal of buying a short sale, Our offer was accepted bu the seller over 2months ago and finally last week we heard that the sellers bank verbally accepted the offer, a week later we receive information from our realtor stating that the written approval came back from the bank, but the seller decided he wanted his lawyer to go over the contract. In a previous attempt to purchase a short sale this also happened, and the lawyer advised the seller to hold onto the property and allow the bank to foreclose. Is this normal? I don't see how it could be a better decision to let the bank foreclose rather than do a short sale. We are looking to buy in central Oregon if this makes a difference.

Alex

Well, I am not familiar with the market in Oregon but I have heard of this happening on more than one occasion. The downside, as I understand, is that a foreclosure may hurt a seller's credit more so than a short sale, but I am not an accountant. There could be some good legal reasons to do go the foreclosure route, but I am not sure what those might be - it may depend on the seller's personal situation.

Sometimes banks will require the seller to sign a promissory note to pay back the difference in the loan and the sale prices, or issue a deficiency judgement (again this depends on the bank, the type of loan, the state and federal laws, etc.). It may be that sellers can avoid that possiblity if they simply go through the foreclosure. I have heard of sellers declaring bankruptcy at the 11th hour as well. It makes for a very frustrating process for buyers.

If you need a good agent in your area to help you, please let me know. I have some good connections up in Oregon, depending on where you are.

Jeff

I recently put an offer (350k) on a short sale home in san diego. The house had been on the market for a few months with no other offers and an upcoming auction date set. We placed our bid in early July and the seller accepted our offer but still needs both lenders (yes, there are two) to approve it. Our realtor informed us that they were going to postpone the auction date to August 25, 2009. Early August we got a call from our realtor that the listing agent wanted to make sure we could stick it out (8 week minimum=October+). He said they need to find the other "benificiaries" on the second loan and that could take a while. We really love this house and are willing to wait, but I am noticing things moving faster and homes in SD selling for more than the asking price. We offered 50k less than the listed price, but homes in this area are appraising around what we offered--and we only can go up about 10k more. Our realtor feels we shouldn't look at anything else since we made a verbal agreement to wait on a house that we really like. He says now is the "test of endurance" I am finding the house on some mls listings (but no longer on Realtor.com) and the mandatory remarks post that is is in contingency stage "offer submitted awaiting approval of short sale by lender" Is it likely for other realtors to show houses that are in contingency stages? Is there anything else we should do or request during this waiting period? Is it more common for lenders to say "no" or to counteroffer with a higher purchase price? I am willing to wait it out, but it would be nice to have an estimate of the likeliness that I would get this house . . .60/40 70/30 . . . I know you don't have a crystal ball :) but really appreciate this blog and all of the great advice! I will keep you posted if anything happens! Penelope

Penelope - I understand your frustrations, adn you are asking good questions. Bu t since you are working with an agent it would be inapprorpaiet forme to provide any specific guidance around what to do or not do.

The Contingent Status is used by the MLS to indicate to agents and buyers that homes have offers in place that are being considered by the lenders. Normally, once an offer HAS been accepted the agent will change the status to pending. Thus a home in Contingent Status IS an active listing and normally available for others to see unless stated otherwise in the listing.

There are, of course, NO guarantees of any deal closing...some are jus tmore likely than others. The VP of the REO Dept. at BofA recently stated that about 20% of the short sales actually close. The number of REOs is, of course, much higher, since those homes are already owned by the banks.

Good luck - keep us posted, as we can all learn from others' experiences.

Jeff

I used www.beverlyshortsale.com they were very friendly and got the job done imediatly if anyone is loosing there home contact them asap they will save your hose. Thanks Beverly Shortsale

I have question.  I have made an offer on a short sale with two loans.  The offer was within 95% of asking price and is most likely very close to market value (let's make that assumption), the BPO has been done but don't yet know what it came in at.  If our offer is accepted the 1st bank will be paid off completely and the second bank will be paid off on about 1/2 of the outstanding loan amount on the second loan (approximately 150k of the outstanding 300k balance).  The BPO has been done and the negotiater has already been assigned from the second bank, all within 3 weeks of making our offer.  My question is this - is the second bank motivated to do a short sale or will they be better off letting it go thru foreclosure in this situation?

To Tallyho, I have been waiting to close my short sale (with a 1st and 2nd loan) for over 3 months. One thing I learned in the process is that the 2nd line of equity gets nothing if they end up foreclosing (going to auction/foreclosure) rather than short selling.  The 2nd was owed about 10k but settled for 1k since they thought they might end up with nothing.  The first beneficiary was owed almost 500k but ended up taking a much smaller amount (under350) because there were no other offers and they were pressed for a deadline. 

The biggest thing I have learned is to make sure you know what you qualify for. I had been preapproved by two different banks and ended up qualifying with a smaller loan because of government regulations with back-end ratio changes.  I also ended up having to put 20% down and have seen lenders want a history of your bank account for more than 4 months. 

I am now in escrow and hope to close by the end of the month.  Thiis short sale has been a major pain but mostly because of the lending process for me.  Good luck with everything :)

Penelope, thanks for the tips and advice.  Good to hear you are moving along on yours and hope closing goes well.

Tally Ho - from what I have learned, foreclosing is generally far more costly to a lender than agreeing to a short sale, although that may depend on how much they are forgiving. The problkem with two lenders is that both must agree, since the second can hold things up even if the larger loan is getting paid off. It all become part of the negotiation, and a skilled negotiator can often make things happen and work out a deal that is amenable to both lenders.

Best of luck. This is a tough, but not uncommon situation.

Jeff

Thanks for the advice and tips. Update today was that they deal was assigned to the closer and that the listing agent should be hearing from the closer.  What does this mean, does the written approval typically come soon after being assigned to a "closer".  First loan will be paid off completely so I believe it only needs approval from the one bank.  Is it still quite a drawn out process after being assigned to a closer?

 

thanks in advance..

Tallyho - with what I know that sounds like progress, but no telling how much time since that depends on the closer and the bank's general procedures (as well as whoever else might need to had a say). If there is only one loan that can make it much easier, unless they stand to get very little. It's a crap shoot all the way around.

Do keep us posted since I feel that people's personal experiences speak louder than words about what is going on i think this can help others realize the reality of how tough and lengthy these short sales can be.

Best of luck. I am rooting for you!!

Jeff

Thanks Jeff, appreciate the kind words..  Penelope, how is your's moving along?

 

So after getting an acceptance for our 350k offer, we had to drop it 15k because of new loan regulations.  Surprisingly they accepted it (after a week of bitterness).  We are now official owners of our 3 acre dream home and our new stresses include the cleanup and painting dilemas.  It has been almost 4 months from start to finish, but now it is all worth it.  One downside, there was a fire lien (now a fee) on the property that will be added to our property taxes in April (2k) we justified this slam by the lower price we got for the house.

This blog had some of the most helpful bits of information out there for me (and it wasn't too full of sales pitches).

Good luck to you, Tallyho, and all the others on this wonderfully frustrating (yet, hopefully, rewarding) journey!

Hello Jeff,

I have recently made an offer for a pre-approved short sale home.  The seller has accepted my offer and my agent told me that now we just need to wait for the leader to approve. I was wondering if you can give me a few pointers on what to look out for in terms of what needs to be done to avoid paying extra cost and/ or loosing my desposite etc.  Thank you.

Penelope - CONGRATULATIONS! Glad you stuck it out and it has worked out for you, despite the additional work and the surprise. I appreciate your sharing this as it will inspire others to stay in there if they are really interested since some of these deals DO work.

BUT you also make a good point that surprises can show up after the fact. We can all learn from these experiences and I appreciate your openess in sharing. Good luck getting settled.

Jeff

Vanessa:

I appreciate your questions but since you have an agent he or she is the one that needs to provide you with the answers. The Code of Ethics for the National Association of REALTORS precludes me from providing specific advice to you since you are working with another agent. I also do not know where you are and cannot provide any advice outside my area of California.

However, you are wise to ask these questions and should understand your written contract so you do not breach it and risk your deposit. That may or may not depend on getting an actual approval since you may not have a ratified contract (depending on your state laws and the contract terms) until the short sale is approved by the lender. Thus you may not incur any other costs (unless you choose to do so) until there IS an approved contract, at which point an inspection and other things might office. Please talk with your agent to ask all your questions.

Good luck.

Jeff

First off - hats off and congrats to penelope!  Hope you enjoy the new home and have great memories in it!

the short sale we're involved in is moving along.  Offer submiited and accepted by sellers in late Sept and moved up thru to the 2nd negotiator a couple of weeks ago.  Today we were asked thru our realtor when would be the closing timeframe that we wanted.   Sounds a bit too good to be true so we'll see what happens with that and we'll be sure to test the tenacity of the bank in any counter offers.  Overall from my experience so far is make darn sure the listing agent of the short sale has experience with short sales.  It's evident the one we are involved with does and he's pushed these thru before and knows what the banks want and when they want it.

 

Side note - I have a hunch that banks might be speeding up the short sale process being that it's near the end of the year so they can take as much paper loss as possible in 2009 to make their 2010 books look better.  If that's the case it should bode well for shortsale closes between now and EOY..

 

I will keep the group updated on how things progress....

 

tallyho

Tally Ho - well congratulations on continued progress. Sounds like good news from what I know.

I agree about things speeding up a little in some cases. Not sure that's true for all, but in talking with a number of agents today I have heard more good news.

I also hear in the biz ALL THE TIME that the experience of the listing agent is key. Of course your buyer agents should have experiece too but they have much less influence on the process. An experienced listing agent can really help move things along, and get the complete SS package in, or it can be a total disaster if they do not know what they are doing.

Thanks for keeping us all posted. This is a great place for learning for everyone, agents AND buyers.

Jeff

Update for us is the listing agent of the SS property we have an offer in on received an approval letter from the bank today.  However, they wanted the sellers of the property to sign the agreement by 11/20 (2 days from now) and also to receive their agreed upon payment for the sale proceeds the same day.  Now, as buyers how the heck to we swing that - 2 days to get a loan thru all the paper work and to close?  Wow, now I can clearly see why these banks were in so much trouble, from everything I've read on short sales this doesn't surprise me at all. 

Another question - do we as buyers have to sign an approval letter (chase is the bank)?  Or do we only sign papers at time of close?

I will keep the group updated - my agent and the listing agent think this is a typo in the approval letter and say they'll get it re-dated tomorrow (the negotiator was out of the office today).  Stay tuned...

I'm glad to see they are allowing comments on this post again. It has been such a good source of actual experiences, concerns and frsutrations from many buyers. Perhaps that is the best lesson of all. And how things have changed since this was first written.

Jeff

This is a great post on short sale.  Thank you very much for all the great comments.  I am in a middle of a short sale transaction.  The seller has accepted the offer. The listing agent has sent the package to a 'short sales negotiator'.  Now, the listing agent said the 'short sale negotiator' left a message to the listing agent stating the BPO came in higher than offer price.  The listing agent wants me to put in a 'counter offer'.  I am puzzled, how can I put in my own counter offer? How can the seller counter the offer after the sellers signed the RPA.

 

I have asked the listing to provide me a counter offer letter or a rejection letter from the bank.  However, the listing agent said there is no letter; just a voicemail from the 'short sale negotiator'. 

 

I appreciate all the advises.  Thank you.

Jeff,

Thank-you for putting this paper (all these is not easy to keep "in mind").

Clarifying to buyers what they should expect from a short sale deal is easily the toughest part in being part of a short sale deal.  Many of them will say "yes" only to regret because of the LOOONG wait..I can't blame them.  Too bad many was about to close (agent told me) but buyers simple could not wait..

Short sales in Sparks (my city) have been sky rocketing with MSI down to 3.5 months! Because more buyers are educated now than ever before..

 

Thanks again for the wonderful post.

 

                                             -Joe http://RenoHomeBlog.com

Luxury home short sales have been affected (as many of you already know) greatly. 

"homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S." Even in Lake Tahoe, a higher end market in Northern NV (similar to ASPEN, CO) we have seen an increase in defaults and short sales--http://LakeTahoeShortSaleExpert.com.  Forbes report that it may take a while before the luxury market finds a market bottom.  Not hard to see where they're coming from.

On top of everything else, it also depends on who is working with the bank.  A skilled real estate agent can work with the bank to take less and/or effect the appraisal.  I'm not say they need to be shady, but it is easy to influence the outcome of a BPO and help the bank to understand how in this scenario its better for them to take the current offer.

Very nice article Jeff. I missed this one way back when:) I have put together an article about great short sale questions to ask a listing agent as a buyer.

We have a Buyer pre-offer checklist we ALWAYS suggest be used to avoid some of the NIGHTMARES you may otherwise face.....

I run a short sale and loan modificaion negotiations company and cna not stres senough the importance of using a professional when dealing with short sales.....

ALWAYS ALWAYS ALWAYS pre-screen and go with someone that knows what they are doing!!!

 

Sincerely,

Ben Benita, Short Sale Negotiations Expert

Radio Show, "Ask The Experts", AM 1580, Every Saturday, 2PM - 3PM

 

Best Selling Author - "Are You More Likely To See Bigfoot Or A Short Sale Approval Letter?"

......Get your copy NOW on Amazon under "Books, and "Short Sale Bigfoot", and GET YOUR SHORT SALES CLOSED!!!

 

BBenita@Comcast.net

Office -- 703-754-7551