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Britt Grothe…, Home Buyer in

House was a short sale no opened as a foreclosure

Asked by Britt Grotheet, Sat Feb 9, 2013

4 months ago (Oct 6, 2012)we made an offer on a short sale house. Seller accepted our offer. Offer was presented to the bank. BPO was done at beginning of Jan 2013. We have been waiting and waiting to hear from the bank. 2 weeks ago our agent began to pressure the sellers agent. Sellers agent responds with the statement that the seller has not been responding to the banks request for certain paperwork. This week we get
The news that as of Jan 29th 2013 the house is in foreclosure and the auction date is set for March 7 2013. Our agent states that the sellers agent now had 2 weeks to get the foreclosure postponed or it's done...the house will go to auction on March7th. My question is... What about our offer? Why have we heard nothing from the bank about our offer. Not a rejection. Not a counter. Nothing. Isn't it in the banks beat interest to try to sell it as a short sale vs a foreclosure? Or is the bank stuck because the seller is being uncooperative?

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22
First Time Buyer’s answer
Thought I'd give you my experience with short sales thus far. I made an offer on a short sale that was closer to market value. After not hearing back for some time my real estate agent contacted the seller's agent. The bank would only accept that price if the owners would sign a promisory note for a certain amount of money. I supposed this was to cover some of the losses on the banks end.

The owner was refusing to accept the deal and had their own offer in mind. The owner and bank seemed to be in a battle with each other. I have since walked away from the property. It became obviously that the reality of the market was irrelevent to the owner and the bank; both parties wanted to walk away without major losses.

From what I understand I'm not the only potential buy who has walked and the owners are going to find themselves in foreclosure.

That was just my experience. I thought the same thing as you did with regards to the bank wanting to unload a bad investment, but neither the bank nor the ower was willing to take too big of a hit.
0 votes Thank Flag Link Thu Feb 14, 2013
The bank is weighing the options of selling the property on the secondary market and getting write-off benefits vs taking the proposed contract. Whichever yields the bank more is the avenue they are goingt to take! The biggest problem with short sales is the lack of communication between the parties. This is a result of agents taking listings and not understanding how the process works on the bank end. If you understand the language of the banks then this wouldn't have happened.
From hanging in the secondary market circles, I can tell you it is like listening to a foreign language in the beginning, full of acronyms and figures and very fast paced. If the details of the transaction are not laid out in writing to show the net benefit to the bank of taking your contract over selling the note on the secondary market and also including the option of the bank foreclosing on the property, then your file is pushed to the side for another

Catherine Purcell - Fairway Independent Mortg Co
Flag Thu Feb 14, 2013
Thank you for your input "First Time Buyer" - I have heard from some servicers that in some cases the Bank just simply wants the owner out of the home so they opt for a foreclosure regardless of the loss. I know it sounds crazy but it happens. You have to understand, there are home owners that are several years behind on their mortgage and frankly...investors are frustrated and just want the asset back and try and turn it into a good note.

Second...which is VERY important...as a Short Sale Listing Agent....I push to have the bank waive the promissory note up-front. I generally get this in writing and prior to listing the property.
1 vote Thank Flag Link Thu Feb 14, 2013
The lender is the dealer in this situation, so they control the deck of cards. In other words, the sale will take place on their time frame.

The lender determined a selling price for the home, and the seller will accept whatever price the lender and the buyer agree upon. The lender knows that they may not be able to sell the home for fair market value, so you can get a deal, but at the same time, they are going to try to get as much for the home as possible.

Also once a borrower has completed a short sale, their credit report will say something like, "loan paid off for less than was owed". It's not a good thing to have on one's credit report, but it's better than having a foreclosure listed!
It might be then that the bank is getting back at the seller for not co-operating.
0 votes Thank Flag Link Wed Feb 13, 2013
Hi Britt, please feel free to contact me by phone anytime. I take many calls with questions like yours from many different people so please do not hesitate. With respect to your pricing question. The bank takes into account many factors. One, how much loss are their investors willing to take on the property, two - the current condition of the property which is typically disclosed in an interior BPO (Broker Price Opinion) - Three - the Bank will more than likely do an appraisal on the property if such a loss is determined. Four - Over-all market value. Remember, the bank is not in the business of holding real estate (laughing). They want to get rid of this headache of a property as quickly as possible so they are looking for a 30 day quick sale "as-is" valuation from their BPO Agents and Appraiser. This is why I believe you may be better of waiting for this property to become an REO than bidding at auction or even pushing for a Short Sale. Just my opinion of course without knowing your numbers up-front.
0 votes Thank Flag Link Sat Feb 9, 2013
@Robert B. McArtor- My husband and I will check out your website together this evening.
Now, with regard to Bank Owned Properties...as I stated previously, the seller is extremely upside down on the property. He owes over more than half what the property is currently worth. It was a fixer upper when he purchased it. He attempted to do some work on it himself but it is rough, torn up inside and has been abandoned now for over a year. At this point it is probably not considered "in move in condition". We would need to sink a lot into it. In fact our offer and loan were based on that. Construction loan. We did a lot of market research (tons of comps, had 3 contractors look at it AND put together a comprehensive package with pictures and supporting docs from a contractor as to why our offer was what it was.)
Long question longer....are bank owned properties priced at far market value or based on what the previous seller owed? Although, nobody in their right mind would pay that!
0 votes Thank Flag Link Sat Feb 9, 2013
It is nominally based on fair market value, but they often rely on a Broker Price Opinion (BPO), which is really just a real estate agent's opinion rather than a professional appraisal which I have found to occasionally cause problems...
Flag Sat Feb 9, 2013
The main reason is a lack of attention by the listing agent. They should contact the bank daily, they should assist the seller with getting what they need before even placing the home on the market. If the bank takes it back at foreclsoure your offer dies and then you can make an offer once the bank places it for sale if they do in deed take it back.
0 votes Thank Flag Link Sat Feb 9, 2013
Sorry for all my English mistakes in my recent post. I was typing fast and did not read it until I posted it LOL!!!!!
0 votes Thank Flag Link Sat Feb 9, 2013
Britt, great questions. The note holder will more than likely become the "Seller" of the property. Per our MLS rules, it WILL be advertised as a BANK OWNED property. If the property is occupied, the note holder will take certain steps to offer "Cash for Keys" to the Mortgagee or simply move forward with an eviction. If you live close to the property, you can drive by to check on this. Also, the REO Agent (the person listing the property) will post a notice on the window stating that they have been authorized by the lender to manage the property, etc. They will more than likely be the ones YOUR agent will be in contact with an offer in the future. Don't worry about being the first offer on the desk. Many times the note holder has a waiting period of generally 15 days which I call a "cooling off" period for all offers to be submitted. The bank will then look at all offers (if the property is priced correctly) and accept the best one. THIS is where you need a Buyers Agent with a high success rate in submitting and closing bank offers/contracts on the buyers behalf. They need to be experienced in knowing what the Bank is looking for in an acceptable offer. I can't tell you how many offers get refused because of certain contigencies, etc. I live in a former Bank Owned Home and beat out 6 other offers when it was reduced $100,000 overnight. Your agent just needs to know how to help you structure the deal. If you really WANT to house...you will get it. Hold on to your cash, keep your credit and financing in order. You will get it.
0 votes Thank Flag Link Sat Feb 9, 2013
@Bob Coursey- seller agent has received requests...she claims seller is being uncooperative. This is the sellers 2nd go around with impending foreclosure. 1st time it was postponed because seller filed strategic bankruptcy, chapter 13, back in July 2012. Dec 10th seller requested to have bankruptcy lifted. At that point house re-opened as foreclosure.
0 votes Thank Flag Link Sat Feb 9, 2013
Britt, the best way is to have your agent create an automatic search of the property address so when the REO asset manager puts it back on the market, you will get an email alert.
0 votes Thank Flag Link Sat Feb 9, 2013
The seller agent should had received a request for more information about the property.He might had not answer their request.But he can stop the forclosure and show them the offer or ask them what more information they needed.
0 votes Thank Flag Link Sat Feb 9, 2013
Husband just spoke with our agent who said pretty much what Robert B. McArtfor said regarding the home becoming a bank owned property. Seller is way upside down on this. Probably won't sell on the court house steps...certainly not to us.
Next question...once it becomes an REO property, who exactly are we buying it from? Wells Fargo? Is it advertised as a regular property, just bank owned? Or does it go up on an REO auction block? Also, how to we keep track of it to make sure we are the first to make an offer once it goes back up for sale?
You guys have given such great info!
Thanks so much!
Britt
0 votes Thank Flag Link Sat Feb 9, 2013
Britt,

check out my blog for more information on why the banks were not responding.I have a video link there that will enlighten you to the short sale process.

CatherinePurcell
SeniorMortgageLoanOfficer
Fairway Independent Mortgage Corp
0 votes Thank Flag Link Sat Feb 9, 2013
Hello all,

I.have found that when an asset manager is not responding, file a complaint with the CFPB. YOU WILL BE AMAZED HOW YOUR FILE GETS MOVED TO THE TOP OF THEIR "to do" list!
0 votes Thank Flag Link Sat Feb 9, 2013
Britt,

check out my blog for more information on why the banks were not responding.I have a video link there that will enlighten you to the short sale process.

CatherinePurcell
SeniorMortgageLoanOfficer
Fairway Independent Mortgage Corp
0 votes Thank Flag Link Sat Feb 9, 2013
Hi Britt, as a Foreclosure Auctioneer in Maryland and part of a Team with RE/MAX Components that specializes in Short Sales, I completely understand what you are going through. When one of our team members represents a Buyer in a Short Sale transaction. One of the first things we look at is how many successfull transactions has the Sellers Agent completed. We do not want to waste our time nor the time of our Buyers. There MUST be a separate Short Sale Negotiator working on this file...period. This is a full time job (which we have in our group).

Aside from this, the next step is the Auction. Think very carefully about this. 99% of foreclosure auctions are purchased back by the note holders (the banks, investors). Why? because there is simply too much money owed on the property and other fees, costs and expenses are added to the banks bid price. If you attend the auction, make sure you bring your required deposit in the form of a certified check be do NOT be dissapointed if the lender buys the property. Simply understand that once the property is ratified through the courts, this property will become an REO (Real Estate Owned) home and will eventually hit the market as a Bank Owned Home. Once this happens, you will have your shot again to purchase the property...and more than likely at a discount than the amount it was listed as a Short Sale. Patience is the key here.
0 votes Thank Flag Link Sat Feb 9, 2013
Ugh! The truth hurts! Thanks for the good advice. My agent hasn't said its over yet but with an uncooperative seller and a sellers agent who is "green" with regard to representing a short sale, I guess we need to move on...or get ourselves together to be on the court house steps on March 7th.:)
0 votes Thank Flag Link Sat Feb 9, 2013
Britt, this will not make you feel any better but here goes. Welcome to the club. It is unfortunate but I have clients that are going through the exact same ordeal. There is no rhyme or reason to bank procedures so don't waste your time trying to "understand" the best interest of the bank. This is not a condemnation of all banks. Simply a realization that this seemingly anti-productive mentality exists and there is little you can do about it. The first rule of distressed sales is to sit your clients down and discuss this exact situation and make sure, if they decide to proceed, they understand and are OK with the possibility of being completely ignored. Hopefully your agent prepared you. Move on and better luck next time.
P.S. I believe in Karma. Things happen for a reason. Your patience will be rewarded. Keep trying.
Best of luck to you.
0 votes Thank Flag Link Sat Feb 9, 2013
Hi Britt,

Sometimes despite an agent and sellers best efforts the banks refuse short sales. They can even be working with a foreclosure and a short sale at the same time and always in completely different departments that don't talk to eachother.

That being said, the sellers agent or short sale negotiator should be knowledgeable enough to be checking on the status of the foreclosure at least on a weekly basis.

I had a very similar incident recently in which we could have very likely gotten the short sale approved but the Seller decided to stop sending necessary paperwork and ceased communication with us.

Perhaps you can get an ever better deal at the county courthouse auction! Best of luck.
0 votes Thank Flag Link Sat Feb 9, 2013
Hi Britt,

If the seller is not cooperating with the bank, the bank will not approve the short sale - they will let it go to foreclosure.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Sat Feb 9, 2013
Most banks have a foreclosure department that is separate from the short sale department and unfortunately it is true that the left hand does not always know what the right hand is doing. In this case however, if the seller did not diligently provide the paperwork necessary for the short sale then the bank legitimately went through the foreclosure process in parallel. You are correct that the bank cannot do a short sale without the cooperation of the seller. It is a shame since it would have been better for all parties, including the seller (who would probably gotten a stipend of $3000 dollars out of the short sale and not had his credit as damaged). It would have ben cheaper for the bank to do a short sale rather than a foreclosure.

As I am sure your agent has told you, I would not count on closing on this house.
0 votes Thank Flag Link Sat Feb 9, 2013
Hi again-Just wanted to give a bit more background in case it helps someone answer the question. The owner abandoned the home about a yr ago. The home set to go to auction 1x before on July 5th 2012. The seller filed
a strategic chapter 13 bankruptcy and the home was not auctioned but placed as a short sale for $379,000. The seller owes $550,000. 2 leins both with Wells Fargo. Based on what we know about the sellers lifestyle (small business owner, cars, boat, vacations, renting a waterfront home) there is some question as to the sellers amount of
Hardship. We are specutating that his resistance to communicating with the bank could be due to this.
Now can any of you look into your crystal ball for us please??? We want this house!!!
Thanks britt
0 votes Thank Flag Link Sat Feb 9, 2013
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