The banks are getting tougher with short sales and the rules have changed, I have run into all kinds of problems with short sales. If you are prepared to wait 3 to 6 months, then it may be for you. My advice is to look for foreclosures; they seem to be closing a lot smoother and faster.

Hi Vicki,

I just came across your post here and found it interesting enough that I figured I'd write a response to you. In looking through your comments you bring up a very important point... "I guess the owner's 10 price reductions over 360 days was news to the lender?" When you have a situation like this, your offer most likely went in and the Listing Agent was never keeping in touch with the loss mitigation dept. as they should have been. Being news to the bank, they most likely thought the list price was the original that was possibly submitted and never updated, and took your offer as a slap in the face. The other red flag that I see is 360 days on the market as a short sale. Was it really on the market for that long because usually a foreclosure that has had no offers on it for more than 120 days seems out of the ordinary. The normal foreclosure process once default is recorded usually is up at 111. That's usually after 3 months of not paying the bank their monthly payments. Also if the Listing Agent hadn't dropped the price faster to get an offer, that Agent priced above the market and chased it the entire way. The idea for short sales is to help the seller get out in a very fast amount of time. Short sales here usually last no more than 160 days on the market. After 160 days, the homes show up as canceled and about a week later or so, they show up as REO under a different agent.
As for RealtyTrac... I would take that site with a grain of salt. I have found numerous errors in there posts in my area alone. I've seen a 4 month delay in posting SOLD on a bank owned property, which here, can take 2 months to close from initial offer. Not to mention RealtyTrac said it was one price and the MLS showed a completely different price. I've also seen RealtyTrac post that a home here was in foreclosure and when I approached the homeowner about their foreclosure issues, they said they've been up to date the last 8 years and have never missed a payment. No NOD was ever recorded on the property. However, the reason the delay on why you don't see that particular condo on the market could be that the bank is waiting for the ownership of title to catch up to them. A lot of loans were several layers deep and when they foreclose on a home, sometimes the title can take several weeks to catch up to be recorded as their ownership. That had been the case in some homes here in the delay of showing up as an REO listing.
Hopefully this gives you some other information as to what could have been the case most of your responses in this thread. Hopefully you were able to find out from your agent what the case was. One big thing to keep in mind as to why you can never get a clear answer from the bank though... BANKS DON'T CARE. Keep that in mind. They didn't take your offer because THEY DON'T CARE!!!

I would contact the lender's Loss Mitigation department manager and ask the agent to provide me with photos and comps to back up my offer.
Any advice? Realtors, how would you react?
~~~~~~~~~~~~~
I would be surprised if they would talk to you, to be honest.

OK, the condo we offered on is now listed on Realty Trac with a median market value of $146,000. That's nuts! It hasn't shown up on MLS yet, however. Our agent is working today on getting any info he can on it.

Just a note of caution on waiting for the lender to put it on the market. I had a similar situation, however I advised the buyer to wait for the foreclosure as it will be easier than trying to do a short sale. About 10 days after the Trustee sale the property came on the market, $30,000 less than the original price under the short sale and the listing agent never called me even thought I had asked her to. She had said it would be 3 to 4 weeks. Just be on the alert.

It never ceases to amaze me the stupidity of these banks. Foreclosure costs them a ton of money and by the time they are done, they will net less than if they had accepted some of the short sale offers. That being said, I know an investor who knows all the ins and outs of getting a short sale done. Even with all that the additional prep he does to get the bank's attention and consideration, he says that only 1 in 6 happen. In fact, he says that it's not even worth it to do so much work so many times to just get 1 property that he now sticks to foreclosures.

To answer Chris comment, Did you fax over your offer to bank and bank foreclosure lawyer. Have you able to talk to bank foreclosure department. I had a similar cases for my short sale client, I had 2 offers to purchase it. But none of them go through. I faxed over to foreclosure lawyer and foreclosure department, REO department. I had been chasing everyone possible include serviing bank and loan bank. There is no use.

I think it is pretty much because the timing. It is earlier on in the foreclosure time table, bank willing to accept offers.

Wow, such wonderful input. Thanks everyone. We do have an agent who advises us that on that particular unit we can do nothing but wait until that condo is listed with an agent by the lender as REO at which point we can put in an offer and see if it flies. And I guess there's no timetable on that either. We have to wait until the bank has it appraised after the owner/occupant has moved out.

We're still looking around but that community is the one we decided we wanted to be in after looking at umpteen developments throughout the Coachella valley. And as we wait more units go to short sale listings, which we are now avoiding.

In the meantime, lenders are becoming increasingly risk-averse. Whereas we were required to put dpwn 20%, that's now gone to 25% and our mortgage broker says he expects it will hit 30% for Canadians such as ourselves.

I have never had so much trouble trying to give someone our money!

What a mess!

To be honest, I believe banks don't really know what they are doing, They gave huge loans to people to buy houses who couldn't even afford them, now everyone is in foreclosure and offering these short sales. Now everyone else including first time home buyers w/ excellent credit have to pay the consequences w/ the banks and w/ the ridiculous prices that went thru the roof!!!!! NOT FAIR!!!!!!

Hi,

You dont' have to deal w/ the lender's agent.......and I strongly recommend that you retain your own buyer agent.

Once a property is owned by a bank, it is much more straight forward. The listiing price has been established, and it becomes much more similar to a traditional sale (compared to the short sale.)

The decison maker has a benchmark price that is acceptable to them. If mulitple offers are submitted, it can go over list.

Short sales have a small percentage of closing. REO properties have a high percentage of closing.

Good luck
Deborah

Hi Vicki,

I read all the answers to your question and I did not see the answer that I have, so here is one more for you. The Foreclosure department is different from the Loss Mitigation Department of the bank.

It is a little like that math problem we all had in school where the two trains leave the station at different times with varying rates of speed and you have to figure out when they will arrive.

Here in California the timetable for a foreclosure is on a set timetable. Once someone gets a Notice of default on their property 121 days later there will be a foreclosure unless they take actions to cure their default.

A short sale can be negotiated with the loss mitigation department all day long but it is not going to stop a foreclosure once that magical 121st day comes. This is why is it crucial to know if a seller has received their NOD before you start negotiating. Yes, it is a little crazy that the same bank would not have better interdepartmental communication but that is just the way it is and once you know it it makes it easier to deal with.

Good Luck!

Michael Layton, GRI, e-PRO

I've been hearing a lot of horror tales like this both from this site and other sources. What a mess! Those who think the real estate crisis in the US has "hit bottom" are either 1) clueless about the goings on in the marketplace or 2) following the spin method of "If you say it's true long enough and loud enough, people will believe it's true."

We are still hoping to buy in PS but have come to believe that the only way to go is to wait until it is foreclosed on and then deal with the lender's agent.

Thanks though for all your input.

I'm sorry but I didn't read all the anwers: I have to share this with you:

I listed a property as a short sale for 165K, the loan balance was 170K. Got an offer for 160K, the bank rejected it. The owners were perfect candidates for a modification, they came up with a lot of cash to catch up and were lacking $2000. The bank refused to deal and foreclosed.

After being empty for 8 months, finally it came back on the market for sale as a foreclosure for 140K. A friend purchased it for 110K, and rented it out to the same people that were previous owners. They are going to purchase it back when ready.

Is that justice? I can't think of a better exemple where the bank shot itself in the foot!!!

All these responses were very helpful.
I'm an experienced business woman, and I rent out a furnished condo that I own here in Edmonton. But I'm a newbie at short sales. An action plan is formulating in my mind but I'd appreciate info from Mike and the realtors.
Our PS agent has done a great job for us, and I suspect the value of our deal is considerably less than he is used working with, so seeing that he gets the value of his commission on this would be important to us.
Having said that, I'm considering modifying Mike's approach by working in tandem with the agent. I would contact the lender's Loss Mitigation department manager and ask the agent to provide me with photos and comps to back up my offer.
Any advice? Realtors, how would you react?

When I have bought houses at short sale, I've had to keep in front of whomever I was working with in the Loss Mitigation dept. That meant daily phone calls, continually bringing the saledate to the attention of whomever I was working with and that "time is running out", faxes back and forth documenting the information. I've even sent photos of the property so that the Loss Mit people could show management the delapidated condition of the property. (Obviously this won't work if you're trying to buy a "beautiful" property.) I provide "comps" and really document why I think the property is worth what I am offering. They push back for more money or other concessions and I just explain that the property doesn't jusitfy more than what I am offering. Depending on the property, they make a concession or I make the concesion or I walk away. Don't "fall in love" with a short sale. The bank's business is make money and they don't really care how much you love the property. I find that Real Estate Agents are too busy trying to make a living to throw the dice on this type of transaction (and few really understand it anyway) so I work directly with the bank/Loss MIt and reduce my offer by what they would have had to pay a Real Estate Agent. You have to offer a "quick close" and no contingencies. They probably will insist that the owner doesn't profit form the short sale. And yes, there a a dozen reasons it cn and often does fall apart. The Loss/Mit person gets to keep their job if they move files off their desk. And the first way to get it off their desk is the way they are going to go. Bank loss or not. They can always "justify" their decisions to their boss by saying "the offer wasn't strong enough". The boss sure doesn't have time to review the mountain load of files sitting around. Because of this, I often will get the manager involved early on in order to alert them that this is a "real deal". I can tell from the first conversation with the manager if we are headed in the right direction. I've rarely had it go south when the manager gets involved.

Thanks everyone. Our realtor was told our offer "wasn't strong enough." I guess the owner's 10 price reductions over 360 days was news to the lender? Amazing! We are pre-approved for an amount 25% higher than the most recent list price - had agreed to pay the closing costs ourselves - and this happens. We are reluctant to look at anything that isn't REO now and these are in terrible shape.

Have another question about lenders that I am going to post in the Financing category. Perhaps you can help me with that as well?

There are a number of reasons or a combination of them for not accepting a short sale offer. Most of which have to do with getting the bank the most money. The loss mitigation department or appointed trustee may have more properties then they can handle or deal with. The current value of the property may be a lot lower then the foreclosure amount where an auction may get a higher sale price over a short sale offer. There may be equity in the property (value higher than foreclosed amount) that may get a higher auction price or sale price as a bank owned. With the high volume of foreclosures banks, loss mitigation, and trustees are using automated valuations and BPO companies a lot more often than actual appraisals - although less accurate - that have a tendancy to indicate a higher market value and are cheaper in cost.

Vicki, Banks or loss mitigation companies representing banks will often foreclose and allow a property to be offered to the public at a Sheriff's sale. This usually happens when the short sale offers do not meet the percentage the bank has determined they need, based on an appraisal of the property. I beleive the appraisal numbers are often skewed by the amount of money the mortgagor is short. The bank will have a representative attend the Sherrif sale,usually an attorney, to protect their interest. Many times the bank will buy the property back at the Sherrif's sale and offer it to the public through a real estate agency. These bank owned properties (REO's) are again appraised or a Brokers Market Analysis (BMA) is performed to determine the price they will now offer the property at. This new price is often less than the banks original determination of what they needed from the short sale. Doesn't make much sense and this is indicative of why lending institutions are in the fix they are in.

Vicki,

Carolyn could well be right.

However, sometimes banks are so mired in red tape that they shoot themselves in the foot. I had a short sale deal last month where the bank had already agreed to accept the price offered by my client.

Everything was going right, until the next day when the bank sent the home to Sherrif sale. None of us could believe it! We had a done deal with all the particulars agreed to, and some numbskull at the bank forgot to pull it from the Sherrif sale!

There was a lot of finger pointing, but the fact remained: The bank had a bird in hand and they let it fly away.

Hi Vicki: Wish I had the correct answer to that question. Maybe the bank decided they could get more money though a foreclosure sale. What reason did your realtor say the bank gave when your offer was finally rejected?