Home Buying in 19114>Question Details

Nicole, Home Buyer in 19114

Can a bank in a short sale change the price of the house mid negotiations?

Asked by Nicole, 19114 Sat Jul 25, 2009

We drew up an agreement of sale for a Short Sale home back on May 1. We were notified that it could be a lengthy process, and it was. Talks had been stagnant until this week, when the bank decided that they wanted $212,000 for the house instead of the original $184,900 the house was listed for. To make things worse, the seller was willing to give $8,000 towards closing costs and now the bank is saying they only allow 3% which would be about $5,500 toward selling costs. Our realtor said the bank does not disclose their asking price until an offer has been made on the house. Sounds like a bait and switch to us, trying to get the buyer to pay more money than they had actually planned. Are they allowed to do this?

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The bank in a short sale does not set the asking price, it is usually an agent or seller who sets it below market value to attract the most potential buyers, the bank will have at least 1 appraisal and will not let teh house sell for much less than current market value.
0 votes Thank Flag Link Fri Aug 23, 2013

Not only do unexpected changes happen during short sale negotiations, but surprises can await you at the closing. I just finished a deal where the seller fired his agent and attorney and introduced a whole new set of demands at the settlement table. Fortunately, a compromise was reached as my buyer had his moving truck waiting.

Short sales are classic examples of "The Peter Principle" - if it can go wrong, it will go wrong!

Good luck,

Joe White
0 votes Thank Flag Link Tue Jul 28, 2009
Unfortunatly yes they are allowed to do this. When the listing agent and the home seller decide on a number to place the home for sale. They really do not know what the lender would except until an offer is placed and submitted to a lender. See if the numbers work for you and if your still getting a deal. If not then walk away and find something else.
0 votes Thank Flag Link Mon Jul 27, 2009
Hello Nicole

Short sales are extremely tedious and stressful. Nobody can understand until they actually go through it themselves.

I am sorry that you are going through all of this.

This does not sound right to me. I've been doing short sales for many years and never heard of something like this before.

It is not normal for a bank to change the price after they have had the offer for a while. Remember, it is called a short sale which means the bank is agreeing to take much less on the loan. I would need to know all of the facts here.

As for the seller assist, a lot of banks won't even allow it so 3% is a good thing. The seller still has the right to make decisions but as far as seller assist, they do not have that right. The bank has the right to accept offers and seller assist.

It is not true that the bank doesn't disclose their asking price until the offer has been made. I don't know where your Realtor got that from. This all sounds fishy to me.

Renee Porsia
Associate Broker
(215) 669-0589 Direct
(215) 358-1100 Office ask for Renee
0 votes Thank Flag Link Mon Jul 27, 2009
Well, the same thing is happening to use right now. The bank counteroffered their original and agreed upon (signed sealed and delivered) offer WITH A $36,000 INCREASE. The bank and owner set the price then BB&T corporate got involved........poof !
Flag Mon Nov 4, 2013
I think the issues are that people are misinformed about short sales. Unfortunately a lot of real estate agents let buyers and sellers believe that they are going to get a win/win with a short sale property. The truth is the bank is not going to be so willing to sell a house for much less than its market or appraised value regardless of whats owed on it. It someone owes 200,000 on a loan and the house is worth 200,000 the lender isnt going to simply say Ok to 185k offer because thats what the seller is OK with. I have even seen short sale listings where the seller is not even deliquent on the mortgage in which case a short sale is not even an option. Negotiating short sles can become very frustrating and personally if there are other properties I would be looking at those in the meantime.
0 votes Thank Flag Link Sun Jul 26, 2009

The process is confusing and grueling for all parties involved. I sense your frustration and I'd like to answer your question although you may not like my answer. I don't like my answer either. Please read on.

The original mortgage amount that the seller agred to pay is the amount of money the bank ultimately wants. If $300,000 is owed then the bank wants all $300,000. Not that I blame them entirely. It is the bank's choice if they will take less money than what is owed and exactly how much less is again still their choice. The seller of the home and the buyer do not set the price that the bank will take.

In your case the bank countered your offer price. The buyer and seller agreed to $184,900. That is all fine and good but the bank makes the final decision. The bank's counter offer was $212,000. That is what their valuation determined was a fair number for the home. Seller's assist is usually never allowed on a short sale. But, that the bank will allow 3% is a "gift" if you will. It may not feel fair but the bank is in the position to make these decisions.

Saying the bank would not disclose their asking price is not exactly an accurate statement. The bank's asking price is what is owed on the mortgage. The bank would not disclose the short sale price to you until they did their own assessment of their interest in the property. Once they came up with their price (no matter how ridiculous the final number appears to be) they disclosed it. $212,000.

So, to answer your question, is the bank allowed to ask for more money that the buyer was willing to pay, then YES is your answer. It does not matter what the seller thinks is a fair price. It does not matter what the buyer thinks is a fair price. The bank has the final say. What the bank can not do is ask for more than what is owed on the property. if $300,000 is owed they can not ask for $400,000.

We have written a lot about short sales. Please read some of the other articles for another perspective on short sales. Here is a link: http://activerain.com/blogs/thesomersteam/tags/short%20sales

Perhaps a new buyer is willing to pay $212,000. Now that you know the exact number the bank will take, you can target a new purchaser without the waiting and guessing. Much luck to you.
0 votes Thank Flag Link Sun Jul 26, 2009
Nicole .. I am sorry..you are in this situation...Buying and Selling a short sale is a long painful process for everyone involved. The seller can agree to anything but until the bank signs it is not a contract.The bank can sell the house for what ever they want to..they own it...
0 votes Thank Flag Link Sun Jul 26, 2009
Sorry, we didn't draw up the agreement of sale, it was just the bid for the house. I was talking to someone about an agreement of sale and meant to write that we signed a bid for the house at $184K with $8K seller's assist.
0 votes Thank Flag Link Sat Jul 25, 2009
Nicole, thanks for your question.

Actually, the process of "bait and switch" only applies when an item is advertised for a ridiculously low price and when you arrive to get it, you find that the product is gone (or never existed) and the only thing left are higher priced versions of the same thing.

No such situation actually exists in the sale of homes. The listing price is the "suggested price" for the home, but the "market price" (the price the home is sold for) is based solely on an agreement between the buyer and the seller and the market price in any situation can far exceed the listing price. In this case, unfortunately, since the seller is no longer in control of the home due to delinquent payments and the fact that the lender will not be paid full value on the loan, the "other seller" (the bank) has a right to say what price will be acceptable for them.

Had the bank not been involved in the sale, the $212K offer you recently received, would have been the same as if the buyer countered your offer of $185K with a price of $212K. Even here in California, for example, a short sale home can be listed at $500K, have multiple offers above asking price, and the buyer with the highest offer may still get a counter from the bank for a fee even higher than the offering price.

At this time, you have several of choices--1) Choose to purchase the home at $212K with only $5500 going toward closing costs; 2) walk away from the contract; or 3) Counter the bank's offer. Keep in mind, however, that if you counter, you're likely to be back in the same situation as before, with nothing happening and waiting for the bank to review their file again. Hopefully, the response to a counter will be shorter than to the initial offer.

Talk with your Realtor about the best strategy to, if you still wish, buy this home. Good luck!!

Grace Morioka, SRES, e-Pro
Area Pro Realty
0 votes Thank Flag Link Sat Jul 25, 2009
You say that you drew up an agreement for sale back on May 1.

Did the Bank approve this in Writing? Did you receive a Signed copy of the Written Approval?

If the Bank did not approve it, then there was no Contract.

The $184,900 List Price determined by the Seller and/or the Real Estate Agent was obviously "Short" of the amount needed to pay off the loan.

The Bank decided not to accept it.

0 votes Thank Flag Link Sat Jul 25, 2009
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