Home Buying in 95405>Question Details

Chelle172, Home Buyer in 95405

Can a bank counter for higher than the listing price on a foreclosure, even if there are no other offers made on the property?

Asked by Chelle172, 95405 Thu Jun 24, 2010

My husband and I put an offer on a short sale for the listing price. The bank did a BPO and came back with a counter of $50k more than listing. First, I don't really understand how the house was listed so low when it wasn't even close to what the bank wanted. But, we are definitely not pursuing a short sale again. When a house is listed as a foreclosure, is the asking price already approved by the bank or could we possibly run in to the same problem as before?

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Chelle, CJ was right on with her answer. You've got to get your "terms" correct. Your question is phrased incorrectly. A "foreclosure" normally refers to a home taken back by the bank AFTER they've gone through the Notice of Default (NOD) cycle of roughly 120 days. Many "Short-Sales" are NOT even in this process where they are 90 days late and have had a NOD filed on the property. Some are however. These can be very urgent "intensive care" transactions! You should know where you are in this cycle!
And CJ is absolutely correct--the Bank in this case is NOT the owner. You are making an offer with a contingency of "approval by a third party" to the short-sale which is normally the bank (s). The Seller decides what's going on with the offer. The reality is if they banks do not wish to negotiate then all bets are off. The "Short-Sale" will result in a transaction which goes no where! Currently in Sonoma County the Continue to Show numbers are very high with 946 "in escrow". However 578 of these are Shorts! That's 61% ! Throw in 104 REO's and 72% of the Continue to Show homes are Pre-or Foreclosed homes!
Regarding your question on price--some Realtor/Agents price at "market" (that's a term which you can get a BIG arguement over!) and some price a levels so low they are gauranteed to generate many an offer. I fall on the "market" side as usually the price point "Shorts" are falling is in the very sought after sub $400K range. You're going to sell it! The more realistic price the better recieved by the lender and the less disappointment for YOU the Buyer! Your Realtor/Agent should be giving you sound guidance in this. Short-sales historically sell HIGHER than REO's. It's all there in black and white. They are NOT bargains just fall in that first timer category price point.
Counter-offers? Through the Seller is where the counter will come from. They are NOT negotiating with YOU but with the Seller! Granted, it takes both parties to agree to the price but the Seller has more to lose in this situation. The bank could be demanding a promissory note, threatening further litigation, playing major hardball--it is the SELLER's choice to make. Many a Realtor/Agent,slugging it out for months with the lender, become indifferent to the wishes of the Seller and make it their personal mission to "close this sucker!". It is NOT their call.
Understanding the language of the pre-foreclosure and foreclosure market and the timelines, plus nuances of negotiations will put you in good stead. If your Realtor/Agent can't guide you in this then get one who can.
1 vote Thank Flag Link Thu Jul 8, 2010
your comment about a "bank" asking a higher price is not accurate in a short sale. the bank is not the seller, just the lender deciding what price to accept that is less than what is owed. since the lenders won't tell anybody what they will accept without a written offer and complete escrow package, listing agents are forced to put a "pluck from air" price on the property. that price unfortunately has nothing to do with what the bank will accept, or even if the bank will accept a short payoff. you got caught in what I call the short sale "grind". This type sale "grinds" up the buyers, and is it any wonder the agents keep offering lower and lower prices as more and more buyers ignore short sales.

REOs: this is another difficult process for buyers. Often there will be multiple offers and every buyer has to decide what their "highest and best" price is. About 20% of the time (it seems so far), the buyer that is the highest, drops out of the deal - as long as 1-2 months later, and the bidding starts all over. It's no wonder many buyers trying to buy a home don't want to get involved in these deals either.

The trouble with ignoring these properties, at this time, in the 95405 area, for the last 6 months, 18% of the market were REOs, and 35% were shorts. So ignoring these meant skipping 53% of the market.....a very tough decision.

There are other market hurdles, not covered here, that buyers need to know. I highly recommend you work with an informed representative. These days particularly, who you hire will make a BIG difference in your results.
1 vote Thank Flag Link Thu Jun 24, 2010
They can always counter higher especially if they have multiple offers. Some short sales are listed at below market prices so that they can get an offer in. Once the offer is in they can start working with the bank who owns the property. Some banks will go with the price and some will not. It is all a roll of the dice right now.
Web Reference: http://www.readybell.com
0 votes Thank Flag Link Sun Aug 29, 2010
Well, all the agents have lots of great info, but one thing I would like to add that may be helpful to you is this. If you tell your agent you only want to look at Foreclosures, then you will miss out on one great opportunity, because as you know, searching for real estate online involves searching or limiting what you search for, and sometimes, because short sales are so frustrating, many buyers drop out of a short sale escrow and by the time that the bank has informed the listing agent what they will accept the buyer has dropped out. this can make for a much easier transaction for the next bidder, but if you're not looking for a short sale, you won't find this opportunity! Best, Terry Bell, Realtor, CPS Real Estate, Santa Rosa DRE#01414808
0 votes Thank Flag Link Tue Aug 24, 2010
Wow.. Thats a good question. I'd speak with the agent that did the BPO.. and maybe get an professional appraisal.
0 votes Thank Flag Link Fri Jul 2, 2010

You should reall speak with your real estate professional about the "short sale" process. With a short sale the buyer actually needs approval from both the seller and their bank.

Important to note is the fact that the bank normally has nothing to do with the listing price and therefore would request a higher price, if it were to protect their interests.

Good luck

0 votes Thank Flag Link Thu Jun 24, 2010
Don't give up or pass on a short sale. Hire an agent that has specialized knowledge in short sales. The National Association of Realtors has the "SFR" Shortsale and Foreclosure Resource designation, CDPE has the "Certified Distressed Property Expert" and there are HAFA certifications as well. An agent with this specialized knowledge should be prepared to be your advocate and help you navigate a successful purchase and to avoid properties unlikely to close.
0 votes Thank Flag Link Thu Jun 24, 2010
I think you know the following but I want to clarify. A short sale and a foreclosure are two different animals. The bank does not own a home that is selling “short”, that would be an REO or bank owned. In either case either can counter at a higher price. A bank may have certain internal guidelines with regard to this but it certainly is legal. They may have been trying to get multiple bids by offering a low listing price.

To your second questions "When a house is listed as a foreclosure, is the asking price already approved by the bank or could we possibly run in to the same problem as before?"

There are generally fewer games played with a bank owned sale. That said there are often situations where the BPO the bank had done is too high and when the lender has the home appraised the appraisal comes back lower than the BPO. Even if the BPO is correct if there are multiple offers on a home the bank may counter asking for best and final offers. It is the Asset Managers job to get as much for a home as possible.

I would not immediately give up on short sales. They can be a pain but they also make up a good portion of the available inventory in many areas. This trend will continue to grow as banks are encouraged to allow owners to sell short as apposed to going into foreclosure. Ask your agent about the new HAFA program.

Best Regards,

Eric Soderlund
0 votes Thank Flag Link Thu Jun 24, 2010
The agaents above left excellent answers there is really nothing else I would add as I would not want to confuse what has already been stated.Should you need a lender in the future I would be more then happy to assist .Thank you Jeffrey Martino Young at Essex Mortgage Bank in Santa Rosa,ca.95404. 1-877-870-2676
0 votes Thank Flag Link Thu Jun 24, 2010
Short sales are a unique situation in real estate. Instead of just a buyer and a seller, there is at least one lender who has a say in the transaction since they are being asked to take less than they are owed. A good listing agent will have determined a listing price the bank would accept for the property before posting a price. Clearly that didn't happen in your case. Instead, you got chaos, tons of paperwork, and no sale. Short sales handled by experienced agents can often run smoothly, but your case is not unusual.

A home listed as foreclosed, an REO, or bank-owned returns the transaction to a familiar buyer-seller model. In this case the listing agent works with the bank to set the price. I have seen many foreclosed homes sell for more than the listing price, but that was because of buyer demand and not the bank countering at a higher price. The bank is within their rights, however, to counter your offer. A more likely circumstance is that you can expect to find competition for well priced REO property. There are a lot of buyers looking for bargains and it's very common to be in a multiple bid situation. In the lucky situation that you're the only offer on an REO and your offer is solid, the bank will probably take it.
Web Reference: http://reo.sonoma.net
0 votes Thank Flag Link Thu Jun 24, 2010
Lenders have different policies, but in our experience most still don't reveal what price they might accept that is less than what is owed until an offer is presented. Things are changing, but slowly. Some lenders are more proactive and will begin the process of determining what they will accept as soon as the property is listed.

The low listing price could be due for several reasons, e.g., they want to attract offers to get the lender to tell them what they will accept because they know the lender won't tell them until they get an offer.
0 votes Thank Flag Link Thu Jun 24, 2010
Yes, they can. And they often do.

When a house is listed as a foreclosure, sometimes it's a pre-approved price. More often it's not. Homes being sold under the HAFA (Home Affordable Foreclosure Alternatives) program as short sales do have pre-approved prices.

So, yes, you very possibly will run into the same problem as before. Have your Realtor ask whether the figure being presented is a pre-approved figure, and/or whether it's being offered under HAFA.

Otherwise, you might want to stay away from short sales and foreclosures.

Hope that helps.
0 votes Thank Flag Link Thu Jun 24, 2010
Don Tepper, Real Estate Pro in Burke, VA
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