Home Buying in 33629>Question Details

Ben, Home Buyer in 33611

I have made four short sale offers, all on the low end of acceptable, but certainly reasonable offers. The

Asked by Ben, 33611 Thu Nov 6, 2008

I have made four short sale offers, all on the low end of acceptable, but certainly reasonable offers.

The banks don’t seem to be truly interested in selling their propos ties, why??

How can I improve my changes without just raising my offering price?

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9
Monia Swaans, MBA’s answer
Hello Ben,
I understand your frustration. I have successfully negotiated short sales since 2005, when no one has even heard of them. I have represented sellers and buyers in different transactions...so I know both sides.

No two transactions are the same, and no two banks are the same either. In each transaction I had to be EXTREMELY tenatious, patient and do alot of digging/research on everyone's motivations...in order to play the cards right...information is power.
I'd be happy to help you win this one if you do not currently have exclusive representation with another Realtor.
Sincerely
(813) 802-8440
0 votes Thank Flag Link Wed Apr 29, 2009
Ben,

I am in same the same boat as yours. I have given an offer for a property for 420K (Listed for 450K) and the bank verbally told me they would accept it but then today they said, the second mortgage lender wants to get the money upfront in the HUD settlements. So all sorts of issues. Not trying to scare you but be prepared for all these surprises along the way.

Banks are generally not accepting offers which are way less than BPOs (I started with 360K and bank will not even respond to it). If you like a house, you should put a good price in my opinion. It will reduce lot of pain and reduce your closing time etc
1 vote Thank Flag Link Tue Apr 21, 2009
Hello Ben,

That's a great question we're all asking ourselves. But there is some logic behind the banks and reasons for not excepting your offers. The first thing you need to know is what the banks are looking for and second you need to work with an agent who really understands short sales. There are many questions that need to be asked of the listing agent to understand where they are in the short sale process. If you are working with an agent she should be able to tell if they are priced correctly for the area. Your agent should be doing a CMA on each property to find out the fair market value and then help you at figuring the right price. But that's just the start.

There is a lot of information about short sales but this is not the forum for a short sale class...lol. But if you need assistance or if you have an agent working with you you can have them call me if they would like to know more.

Hope that helped a little.

Thanks

Gloria Devine
Keller Williams Realty
813-992-5300cell
1 vote Thank Flag Link Thu Nov 6, 2008
Lenders have thresholds on short sales and they differ. Someone mentioned in their answer to go to a title co. and do some research on any mortgages on the property. That is the first step. You need to know what is owed on the property in order to submit an offer that has a hope of being accepted. Generally 85% of market value is a good rule of thumb. Along with the other answers and advice you've been given and if you follow up on that advice, you'll be in a good position to have your offer accepted. It is also very important that your realtor know precisely how the contract and package has to be put together and each lender has different standards. Good luck!
0 votes Thank Flag Link Thu Nov 6, 2008
Another thing that you need to consider...

A short sale is just that....the bank is accepting an offer that is less than what is currently owed on the property. They make their decisions on what they will or will not take based on either an appraisal for fair market value or a BPO for fair market value. They will negotiate down from the fair market value of the house---the percentage they negotiate down depends on a multitude of factors--how many homes in the neighborhood are in foreclosure/short sale process, how many sales are actually occuring in that neighborhood, as well as economic factors for the area in which the house is located in.

You said that you made 4 offers on the low end of acceptable.....acceptable by whose standards? Are they at least 85% of what a fair market value would be on that house? Short sales are not a "steal". They may give you a bit of equity upon purchasing it, but usually you don't see the banks giving the homes away for less than that.
0 votes Thank Flag Link Thu Nov 6, 2008
Hi Ben, I am a realtor in the Washington DC Metropolitan Area. Short Sale transactions can be challenging for buyers. Banks/lenders are interested in selling properties in short sales rather than have the seller default on the mortgage. Some lenders however are more difficult than others during short sale transactions. As you know, lenders try to recoup as much money from the short sale transaction as possible so as to not suffer major loss in the deal.

I might suggest that your realtor does his/her homework PRIOR to you making an offer to purchase a home in short sale status - such as finding out who the seller's lender is. Your realtor can check with their favorite Title Company attorney for information on that lender especially how that lender performs during short sales. If the Title attorney does not provide favorable information about the seller's lender then you must decide to go forward with making an offer to purchase. If the Title attorney give favorable information about the lender, then your chances may be better provided that you make an acceptable offer. Information from the Title attorney will be VALUABLE to you before you make an offer to purchase.

WHAT MAY ALSO HELP YOU AS A BUYER OF A SHORT SALE IS is how well the seller's realtor did his/her work PRIOR to listing the property for sale. THERE'S VOLUMES OF WORK THAT MUST BE DONE BY THE SELLER IN THE PRE-LISTING PROCESS THAT IF NOT DONE CAN MAKE YOUR BUYING PROCESS DIFFICULT. The seller and seller's agent must first get the lender's approval to put the house on the market as a short sale. < ask your realtor and get short sale info on line. MAKE YOURSELF INFORMED.

If the seller's lender is one of those who performs well during short sales including honoring reasonable time lines, and if the seller's lender HAS APPROVED THE SHORT SALE before it is listed for sale then go forward and submit your reasonable offer to purchase. Your contract must be approved by both the seller and seller's lender. DO NOT ORDER A HOME INSPECTION UNTIL AFTER THE LENDER APPROVES YOUR OFFER.

ALSO, I do not know if this caused you to experience difficulties in your buying process but you should know that albeit that you may have a ratified contract to purchase WITH BOTH THE SELLER AND SELLER'S LENDER approval, please know that some lenders in short sale transactions MAY REQUIRE THE SELLER'S AGENT TO KEEP THE HOUSE ON THE MARKET ACTIVE FOR SALE WITH HOPES OF GETTING OFFERS WITH PURCHASE PRICES HIGHER THAN YOURS. IF THE LENDER DIRECTS THAT THE HOUSE REMAINS ON THE MARKET ACTIVE FOR SALE AND iF THE LENDER RECEIVES A HIGHER OFFER FROM ANOTHER BUYER THE LENDER WILL VOID YOUR OFFER AND ACCEPT THE HIGHER OFFER. This can happen all the way to YOUR DATE OF SETTLEMENT AND YOU WILL NOT BE ABLE TO PURCHASE.

HOW CAN YOU IMPROVE YOUR CHANCES: Now, if this is a home that you really want to buy and it is truly the home of your dreams and your low offer is rejected initially, ask your agent to monitor the property status and if it remains on the market for a LARGE NUMBER OF DAYS since your first offer, ask your agent to submit your offer again. If all your subsequent offers are rejected and the property goes from short sale to foreclosure, resubmit your offer again.

Ben, remember a lot of other buyers are competing in the purchase of short sales because they feel that they will get the "better deal" versus buying a home in sound financial condition. In these cases, sometimes you must submit your "best offer" and be financially prepared to compete with other buyers' offers in order to prevail and then expect to wait because some lenders are slow in their responses during each step of the short sale process.

Short Sale Transactions can be challenging to say the least in some cases. I hope that this information was helpful. If you need this information amplified or clarified, call me, my contact information is listed below.

Audrey Winstead
Weichert Realtors
Camp Springs, MD. 20746
301-423-9200 ext. 178
awinstead@verizon.net
0 votes Thank Flag Link Thu Nov 6, 2008
Banks and lenders definately want to move on and eliminate real estate owned. The issues are many; like Bruce mentioned before me- the properties that you are offering on.. may not be approved. The "seller" will sign just about anything asked. The lender has more at risk.

Typically, the mortgage balance(s) are so much in excess of the current market value, lenders will accept about 65% of what the mortgage balances are.

In many cases, lenders prefer to foreclose.
0 votes Thank Flag Link Thu Nov 6, 2008
In a short sale the bank sets a goal of accepting a net of 80% what the home owner owes plus costs of the short sale. If your offer is under that, it is very unlikely they will take it. If it goes to foreclosure, in most cases the private mortgage insurance company will pay the bank 80% towards the foreclsoure so the bank does not have to take less. You need to search the title and find out what the owners owe so you can base your offers on that. good luck with your search for a deal.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Nov 6, 2008
I am sure that banks are interested in selling, but keep in mind, at the Short Sale stage, the bank does not own the property. They are just owed money on a loan they had made so that the homeowner could purchase the property. Banks are in the business of making money by lending money and then getting the money they'd lent back, plus interest. In a short sale, the bank gets back less money than they'd originally loaned out. So, in a short sale, they don't make a profit, they lose the potential for all profits, plus they're losing some of the original asset they'd lent - some of their original loan amount.

A bank will not be very happy to do this until they're at the point where they have to - which is the point when they know, with absolute certainty, that they must foreclose on the home. This is when they'd be most receptive to a low-ball offer, but still, that is not a guarantee that they'll take your offer. Many short sales are not yet at this point in the process, if they're true short sales at all.

Many so called short sales may not be a true short sale. They're just properties marketed as such by agents and brokers who may not really understand a short sale, or who are looking to get a buyers attention during a very difficult selling market. If it's not a real short sale, one in which the bank has issued a letter of authorization, then the chances are, it's not a short sale. It would not be out of line to ask to see that letter before making an offer on a short sale property. You may not be granted the privilege, but it is worth asking. If there is no letter, there is no short sale - at least at that point - and then it is the owner who'll be making the decision on whether to sell their property to you, and they don't like low-ball offers.

To conclude, if you're really looking for a short sale, don't get married to any one property, be ready to wait for long periods to hear back from the bank, and keep making offers - which should have deadline dates, so you won't have to wait too long (assuming you don't have unlimited funds) to make another offer on a different property.

If you have any questions, please give me a call - 813-944-3115.

Bruce Bernstein
Pretty Dog Realty
http://www.prettydogrealty.com
0 votes Thank Flag Link Thu Nov 6, 2008
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