Foreclosure in 22066>Question Details

Bahareh, Home Buyer in Virginia

I want to buy a house which is for short sale. what is your advise?

Asked by Bahareh, Virginia Thu Sep 20, 2007

I am trying to buy a house without realtor so I can get some break on the price. I found a house which I like it a lot. I talked to seller's agent. He said the house is for short sale. I did some research and found out short sale is when bank takes over the sale of a house because owner can't pay the mortgage. Here are my questions
Can I ask for %3 credits for not having agent and I go without agent?
How much banks can be negotiable? Are their price almost fixed?
Who decided for the bank if the price that I offer is good or not? And can I find out who is the bank representative for this house?
Does the bank either accept or reject? Or they negotiate?
How long they keep in for sale before it goes foreclosure?
thank you for your help and advise in advance.

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12 Buyer Rebate’s answer
Banks want to deal with professionals, and so do other professionals. However, the pro's in our network reward the buyer with up to half of the commisison for knowing what they want while the pro does the work. Let us know how we can help...
1 vote Thank Flag Link Mon Jan 10, 2011
You certainly can try to put the deal together yourself, I believe you would not get the outcome that you desire. A buyers agent will be able to help you determine what the property is worth and will help you structure the deal to meet your needs. Many people seem to believe that the seller will pass along the savings if they don't have an agent. In reality it will probably end up costing you much more because of the mistakes you will make in putting together the deal. Many banks will not negotiate they will only accept or reject offers. You may have to submit several offers before you reach a level that the bank will accept. Since the seller pays the commissions you have nothing to loose by hiring an agent. I suggest visiting the following website to find a buyers agent. The Real Estate Buyers Agent Council (REBAC) has an on-line directory that will help you find a Buyers Agent that has earned the ABR (Accredited Buyers Representative) designation. An ABR has experience and speciality training to help you with the purchase of a home. Good Luck!
1 vote Thank Flag Link Thu Sep 20, 2007
Break on price purchasing w/o a Realtor - GREAT MYTH

Bank does not negotiate short sales

Yes prices are usually fixed

Who determines your offer - you do up to bank accept it or not

Banks don't release the rep. name WHY they have a listing agent

Banks don't have time for back and forth of paperwork for short sales or foreclosures if they don't like you offer you may never receive a response

Length of time prior foreclosure - each property stand alone

RECOMMEND locate a buyers agent UNLESS you understand terms of sales offer WHICH you must present to the property owner on State regulated form which only a Realtor can submit you most likely will be exhausting your time. NO listing agent is going to work on both sides of transactions due to liability issues and e & o insurance

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Wed Dec 29, 2010
One thing to keep in mind is that short sales equals a long closing time. In my market it can take many months to close a short sale even in the best of cases. If you need the 3% then you probably don't have the luxury of waiting months and months for the closing. Is your lender willing to keep extending your loan while the seller's lender takes their sweet time in coming to the closing table?

Bad news for the real estate market is good news for buyers; short sales do impact the market. They do force down prices of surrounding homes. You might not get quite the same deal as in a short sale but you will be able to do the most important reason that we all have in buying a home, having a place of your own to care for your family. That is the best payback any property can provide.
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0 votes Thank Flag Link Wed Dec 29, 2010
You need to educate yourself on buying short sales. Please read the following article:
What Every Buyer Should Know About Short Sales…
I can also tell you that you will not save the 3% by not having an agent. The bank is losing money on the sale and they will take the opportunity of not having a realtor on the buying side to pressure the listing broker to give them the funds if they can. Otherwise the listing broker will keep the buying side commission as per their listing agreement. Don't be foolish you need to find a buyer's agent expereinced in short sales to represent you in this deal and it won't cost you a cent as it is paid for by the bank.
0 votes Thank Flag Link Wed Dec 29, 2010
You won't save money by not using an agent. Banks usually allow for commissions in their pricing so if you go in alone, the listing agent will probably get the entire amount. Short sales are a nightmare and you'd be saving yourself a lot of pain by using an agent!!
0 votes Thank Flag Link Wed Dec 29, 2010
The bank/lender/servicer is going to send a Realtor out to the property to do a what is called a Broker Price Opinion or a BPO. It is like a mini appraisal. The BPO agent is a Realtor from office different than the listing agent. They run a market analyzes and determine the "fair market value" for the property. The servicer bases their price on the BPO. The lender/servicer will probably do at least two BPO's during the course of the short sale. Some times the BPO guidelines make it difficult to get a correct value for the servicer. That is when the negotiating begins. If the listing agent feels like the BPO is way off, they can request another BPO and provide comps. to argue for a better value. However, in the end, the price the servicers go with is determined by an opinion from a local Realtor.

Most loans are sold to a third party shorty after they are funded. The third party is the investor who now owns the loan and every Investor has guidelines that must be followed. The bank who originally gave the loan to the seller becomes the servicer for the loan. The servicer's collect payments, process short sales and foreclosures, and makes sure the investor guidelines are followed. The allowable net is determined by the investor guidelines. Most investors will accept between 6 and 10 percent below fair market value, which was determined by the BPO. Some investors will go lower than that.

Once a short sale offer is received, the opener, for the servicer, looks at the investor guidelines for that loan. If the offer is within the investor's acceptable range of "fair market value." a short sale file will be opened and a negotiator will be assigned. If the offer is too low, it will be rejected right away.

Once the file is opened, they do some more number crunching. They compare the net the investor will receive from the short sale to the net they believe the investor will get in foreclosure. If the net is greater with a short sale (which it usually is ) they will move forward with the file.

Once those two "tests" are passed the seller's hardship is evaluated, the buyer's, apparent , ability to get a loan is evaluated, and if all goes well. the short sale is approved.

Purchasing a home without a Realtor is never a good idea, especially in a short sale. You need a buyer's agent who understands short sales. They will know what questions to ask the listing agent and what red flags to look for.

Your Realtor can ask the listing agent who services the loan. That may give you an idea as to how long it may take to process the short sale, but it will not give you the investor guidelines for the acceptable net. A lot of times listing agents are not able to find out who owns the loan, or what the investor guidelines are for that loan, so it is unlikely that you will be able to find out what the bottom line is. When an investor gives a servicer delegated authority, they are giving them the authority to make the decision on the short sale with out investor approval. If the loan is "delegated" then the servicer has a little wiggle room in making a decision. Your Realtor should ask the listing agent if the loan is delegated.

If the offer is close to being within range, and if they have delegated authority, the servicer will probably counter. They are called negotiators for a reason. It is the listing agents job to convince the bank that the offer is reasonable and that it is their best interest to accept.

As to how long they will wait for foreclosure, some investor's have the servicer begin the process as soon as 2 payments are missed and some wait up to a year and a half to start the process. If they have already started the process, my experience has been that as long as they think they have an short sale offer they can work with, they won't foreclose. If the offer is not within the investors acceptable range, or it is received to late to stop the foreclosure, or the packet sent in by the listing agent is not complete, they will go ahead with the foreclosure.

The bottom line is, if you really want the house, hire a Realtor and make a fair market value offer. Good Luck
0 votes Thank Flag Link Mon Dec 27, 2010
1. Can I ask for %3 credits for not having agent and I go without agent? Bank is looking for NET price, when you have a good buyer agent on your side, you can probably save more than 3%. when you talk to one, they can explain how.
2. How much banks can be negotiable? Are their price almost fixed? It is negotiable, your agent can guide you based on any particular case
3. Who decided for the bank if the price that I offer is good or not? And can I find out who is the bank representative for this house? Banks determines what they can accept, and sellers agent will work with his team of negotiators to talk to everyone involved. You(buyer) wil not be able to influence directly. Your agent can.
4. Does the bank either accept or reject? Or they negotiate? They negotiate, again it all depends on agents and everyone involved, how professionally they handle.
5. How long they keep in for sale before it goes foreclosure? case by case, my team has been able to postpone a foreclosure atleast 3 times on one home

Good Luck with your purchase !!
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0 votes Thank Flag Link Mon Dec 27, 2010
What you save on the 3% or so commission could be lost in seconds after the sale and you find out you - shoudacouldawoulda - done some more research into the home you are buying....

The RE Professional dealing with a short sale has a great deal of work to do for you in protecting your asset - and your bottom line. Most agents that work short sales do this almost exclusively right now - it's so complex and time consuming that they can't really do much else.

If you are still planning on doing this yourself - don't look to the banks to want to spend too much time with or for you. Their main goal is to sell this property and get it off their books. They don't have time to walk you through the process or go back and forth to corporate to see if your "new" terms are acceptable. It's generally an "as-is" sale.
0 votes Thank Flag Link Fri Sep 21, 2007
Hi Bahareh,

If I could make a suggestion to you, seek legal counsel. Short sales do not always come out with happy endings. As a buyer without representation you would be relying on the seller's agent to process the deal with the bank unless you had a representative of your own and even then it really is best to seek legal counsel. There are many components to making the transaction work and trying to negotiate with a bank is never an easy thing to do. The banks will not be very helpful to you even though you may be aiding them in the end. Banks require a great amount of documentation that comes from the seller and the seller's real estate representative and again being that you would be the buyer you are on the outside looking in. My best advice for you would be to seek legal counsel and an agent to represent your interest.
0 votes Thank Flag Link Thu Sep 20, 2007
I just realized that I did not answer all your questions. Price is typically not fixed. There's always room for negotiation how much the bank will accept is impossible to predict. You may also want to ask how many lenders there are. If there is a first and second loan, negotiations become a bit more challenging as the second is many times not very motivated to cooperate.

Lenders usually have committees that review the short sale packages. The committees only meet once or twice a months and that's one of the reasons why getting an answer from the lender(s) can take a long time. While you can contact the loss mitigation department for the lender (a title company can help you with finding out who the lender(s) are), the loss mitigation department cannot discuss the account with you because of privacy laws and they'll refer you to the listing agent.
There's no all or nothing when it comes to negotiating a contract with the banks. You'll have to expect that the bank will counter high at first and you'll go back an forth more often than you'd with a private seller.

How much time passes before a property goes into foreclosure depends on state law and what kind of foreclosure procedures have to be followed. Theoretically, a bank can consider a loan in default when the borrow is 1 day late. In reality, banks will not initiate foreclosure procedures until the borrower is at least 30 days late. Due to the flood of foreclosures these days, it can take several months before the bank will record a notice of default. I hope this information helps.
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0 votes Thank Flag Link Thu Sep 20, 2007
Ute Ferdig -…, Real Estate Pro in New Castle, DE
Hi Bahareh. Welcome to the land of short sales. Technically, your definition of a short sale is not quite accurate. A short sale occurs when the owner owes more money on the house than what the owner can sell the house for. Since this property that you found is listed with an agent, buying it without being represented by an agent is really not an option. Many potential home buyers have asked the same question before on Trulia and there are lots of threads filled with great opinions on the subject.

The bottom line is, when a property is listed with an agent, the owner has already sign a contract that specifies the total amount of compensation, which includes the compensation for the buyer's agent. While I always lean towards recommending that a buyer be represented by an agent, I would never even think of recommending that a buyer attempt to go through a short sale negotiation on his/her own. Dealing with banks and all the challenges of short selling requires experience and lots of patience. You also want to make sure that you have someone by your side to make sure that all the necessary inspections are done. Believe me, buying a house is not easy. My question to you is, why would you make one of the biggest investments without having an expert by your side? Would you have your hair cut by someone who did not have training? Probably not. Hair grows back faster than recovering from a bad investment.
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0 votes Thank Flag Link Thu Sep 20, 2007
Ute Ferdig -…, Real Estate Pro in New Castle, DE
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