Home Buying in Manalapan>Question Details

Anna, Home Buyer in Manalapan, NJ

any advice on bidding on a house that is a short sale? I like the house but it definetly needs some work.

Asked by Anna, Manalapan, NJ Mon Sep 20, 2010

The realtor I am working with is suggesting a higher number than what I think would contitute a 'good deal'. Is the realtor being motivated by 'closing' the deal or is speaking from a place where she is trying to increase my option of getting the bid approved? Also, do I definetly need to have my own home listed for sale (the money from the sale would be used for this purchase) or do I wait as I know a short sale takes a long time to process.

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16
Anna,

Banks do not accept a "sale contingency" when approving a short sale. But bear in mind that once a short sale is approved, a bank typically gives you 45 days to close. Since your home is not on the market, unless you have a way to prove you can purchase the house now, you have nothing to offer the bank.

If you decide to go ahead and purchase a short sale, if he/she has not done so already, have your Realtor do a comprehensive market analysis of recent "non-short sale homes" comparable to the one you are interested in, to see what the true market value of the home would be if it were not a short sale. Then base your "offer" on the list price vs what it would be worth if it were not a short sale. Most banks are accepting between 80% and 90% of "market value", but amount owed on the mortgage also plays a factor in what they are willing to "lose" in the transaction.

Obviously the more you offer, the better your chances of having the bank approve your offer. Of course, if the short sale has been "approved" the list price is usually the only offer the bank will accept. Have your agent ask if it's already been approved.

Not knowing the specifics of the house you are speaking of, I cannot tell you if the list price is reasonable, nor what a fair offer would be. Work with your Realtor, but first make sure you are qualified to even move ahead with the purchase.
1 vote Thank Flag Link Sat Jan 22, 2011
Anna,

Your cart is before your horse. You shouldn't even be looking at short sales, because you cannot buy one with a home sale contingency. For that matter, you can't really buy ANY home with your existing home not under a contract of sale.

Your agent is not doing a good job. Just the fact that he or she is showing you short sale homes that you have no chance to buy indicates a problem. Any you are not doing a good job either, as you should have your home sold or in contract before making offers.

Forget about this short sale. Get your house ready to market, price it correctly, and get it in contract. Then find your new home and move forward. Everything has to be done in the correct order to have a smooth transaction. The way you are doing it right now, you have an excellent chance of failure in achieving your goals.

Good luck!

-Marc

Marc Paolella
Relocation Director/Appraiser
Century 21 Joe Tekula Realtors
Phone (direct): (973) 584-4235
Coolest map-based home search: http://www.marcpaolella.com
1 vote Thank Flag Link Mon Sep 20, 2010
The chance on the bank agreeing to any offer contingent on the sale of your home is slim. Even if your home is listed, unles you have a contract from a buyer most banks won't even consider your offer.

Laura Giannotta
Keller Williams Realty-Atlantic Shore
1 vote Thank Flag Link Mon Sep 20, 2010
Anna -
After you have done your financial due diligence, you need to due your "caveat emptor" due diligence. Homes that are in a financial distress situation often incur above normal deferred maintenance. These can range from:
1.plumbing and roof leaks that go without prompt addressing
2. mechanical systems that are not properly maintained, leading to accelerated wear and breakdown
3. mold conditions caused by the aforementioned unattended leaks
4. termite activity and damage - again, due to lack of attention
5. Septic systems, oil tanks, wells all need to be checked out - they can cost thousands in repairs or remediation.

The list can go on and on. The ability of the seller to address these issues after and inspection has revealed them may be limited or non-existent. There may be no capital and the property may be 'under water' in terms of what is owed to the bank.

A thorough, unbiased full inspection of the property from an experienced, licensed NJ inspector is the best protection you can get to avoid the proverbial "money pit". There may be great values out there, as, unfortunately, one person's misfortune can be another person's fortune. But, real value is in getting exactly what you are paying for, or more.

I have been a sole proprietor NJ inspector since 1993 and have done well over 7500 of them. I draw on my experience and studies in engineering, biology and graduate level critical thinking. My personal standard is well above the minimum. I hope this is helpful.

Joe Serino
J Serino Inspections
732-213-6260
0 votes Thank Flag Link Fri Jan 21, 2011
Anna,
Good question. First, you must get your property on the market before you make any bids on a home. This way you will be ready when you find your new home. You may want to ask if the short sale has already been approved by the bank and if they have approved the list price. In most cases the bank has a set number and will respond with a "yes" or "no" answer. Most likely, a buyer will be waiting weeks before they get this response. Do as much research as possible and if you do not feel comfortable, keep looking. Good luck and best wishes.
Celia Szieber
Crossroads Realty-Executive Office
732.597.0060
0 votes Thank Flag Link Mon Sep 27, 2010
Hi Anna,
If you are looking at short sales you need to be ready to purchase. I have not heard of any short sales or bank owned properties accepting offers with a home sale contingency.
If you want to be serious about looking for a short sale property. You should be ready to purchase.This means you should get" approved" not qualified for any financing . Or if you have cash make sure you can provide proof of funds.
As for price to offer. At recent seminar hosted by Bank of America( they are now the largest holder of bad mortgages) I was informed that most accepted offers are within 90% of market value. Note: this is market value not list price. This is important as your agent can help any offer put in with support in the form of recent market sales of like properties. This was how Bank of America advised us to present offers.
So the main thing is to be prepared to purchase with no contingency. And be ready to justify your offer with the latest market information.This will give you the best chance to have your offer accepted. Key to this process is your agent. So chose a agent who is experienced and trained in short sales.( a SFR designation is a agent who has had training in short sales). Yes those letters on our business cards actually mean something.
Good luck Anna with your home search.
Web Reference: http://robertsuarez.net
0 votes Thank Flag Link Mon Sep 27, 2010
Good Advice has been given here. So many people looking to buy a home "forget" that they need to sell their current home first, and no one has a crystal ball to know how long that process is going to take. At present, unless you are qualified to buy without selling, there is nothing for you to think about in relation to making a 'good deal' on this short sale home.
The most important thing for you to do now is to find an agent that you not only feel has the knowledge and experience to get you where you want to be, but also someone that you like! For some reason it seems like you either do not believe what this agent is saying or that you do not trust them. It's perfectly OK to interview more than one agent for the job. After all, buying a home for most people is the largest purchase that they will make, and the selling of your current home will determine what you will then be willing to buy.
The very best of luck to you.
0 votes Thank Flag Link Fri Sep 24, 2010
The ultimate decision on sale price will be the bank/mortgagee on the home. Lately, the banks are not letting homes go fir significantly less than market value. Shorts are presenting some good opportunities for discounts like 10% or so, but it is tougher to get as good deal as you can get from a motivated seller that owns their home free and clear. Your Realtor, is probably guiding you based on her experience as a buyers agent's job is to not just to get you as good a deal as possible, but also to make sure you actually get it. I have not yet seen a bank approve a short sale with a home sale contingency, so I would suggest selling your home first as it would put you in a better position to buy a short sale.
0 votes Thank Flag Link Wed Sep 22, 2010
Hello Anna,

First, if your new purchase will not be all cash, you will need to speak to a reputable lender & see what you will qualify for once you sell your current home & due to all the new lender guidelines make sure that you will be able to get a loan (even buyers with good credit sometimes can not get a loan in the current credit climate).

Second, get your home sale worthy (priced correctly for the market, cleaned & staged...) & listed on the MLS.

With a contingency to sell your home, many sellers will not even consider you; but if you are in escrow you may have a chance.

Now to your question. Your agent IS motivated by ''closing' the deal' and the only way she can do that is by increasing you chances of getting 'the bid approved'. If the deal doesn't close she doesn't get paid; so your success is also hers.

Re: a 'good deal'. It's all relative. Is this property likely to get multiple offers? Does it need work beyond a few cosmetics? What are the comparable homes selling for? How much do you like this house- would you kick yourself if it sells for the difference that your agent is suggesting and you didn't listen to her advice? Lien holders want as close to market price as possible and they know what market price is, so if they aren't going to get more than what they would net if they foreclosed they will foreclose just so they don't make it easy for the distressed seller.

Hope that helps & best of luck on your future new home,
Trevolyn
0 votes Thank Flag Link Mon Sep 20, 2010
Hi Anna
I can tell you from experience that lenders on short sales look for the highest & best bid with the least amount of contingencies & a strictly as is sale.Before you submit an offer you should have proof of funds available, a pre-approval for a mortgage & home inspection completed. If you need the proceeds from the sale of your present home in order to close on this home or any other home that is a short sale & your home is not sold yet you are really wasting your time & energy. Most of these sellers are finiancially distressed , need a quick closing & most often are not in a position to wait for you to sell & close on your home 1st. You really need to sell your home 1st before pursuing a short sale. So more than likely you will have to pass on these opportunities for now until you have funds to present a solid non-contingent offer
0 votes Thank Flag Link Mon Sep 20, 2010
Marc is sooo right...there can be no home sale contingency in a short sale...period. Your Realtor should know this. List and get your home under contract first, and have the buyers mortgage commitment firmly in hand, then start looking for a home.
However, keep in mind that a short sale can take months to approve, then the bank typically gives 45 days to close once approved.
As far as offer price on a short sale, you should 1) be looking at recent closed comparative sales as a guideline, making adjustments for the work that needs to be done (short sales usually are as is...no one is making any repairs) 2) know that the BANK will send someone out to do a market analysis of "fair market value" and use that as their guidline for what amount they will accept, and 3) know that the banks will usually not take an offer if the difference between what is owed to them and what the offer is, is more than 80-85%.
0 votes Thank Flag Link Mon Sep 20, 2010
Anna,

It is in your own best interests to listen to the advice given. Sell your home first, so you know how much money you have to buy with. Get prequalified for a mortgage before looking at homes, so you know how much you can spend. Then, you will feel comforatble shopping for a home you know you can afford.

Let your agent do his/her job by helping you select the best homes for the price and negotiating on your behalf, especially now that you are giving the agent the right tools to get you a lower price.
0 votes Thank Flag Link Mon Sep 20, 2010
Marc is 100% correct, I didn't read the rest of what you wrote!!!! At the VERY least your house should be Under Contract!!!!!!!!!!!!!!!!!!!!!!!!
0 votes Thank Flag Link Mon Sep 20, 2010
Your agent is probably right - especially if he/she is a buyer's agent. It is the bank (not the agent or the homeowner) who negotiates. The bank will not accept an offer that is too far under market value. So while you can get a good deal on a short sale, typically you still have to negotiate with market value in mind. The difference in commission to your realtor if the numbers are relatively close together (off by $10 or even $25k) is minimal - your agents responsibility is to you not his or her bottom line.

The other problem you have is with your home - there is no way that a bank will accept a home sale contingency... a short sale - whether it's a good deal or not - may not be the way for you to go given that you have to sell your house first.

Good Luck!
0 votes Thank Flag Link Mon Sep 20, 2010
Hi Anna,
Ask your Realtor to show you on paper, closed sales of comprable properties in the past 3 months.
This way you will know the actual value .If your Agent is a Buyer's Agent , you should expect them to be working soley in your best interest, if the Agent is a disclosed dual Agent, then there's different rules that apply.
Good Luck!
0 votes Thank Flag Link Mon Sep 20, 2010
Your agent sounds like she knows what she is doing. With a short sale, the listing agent sets the price, not the bank, and the bank will have it's own appraisers deciding what the value of the house is. Most agents list home with a lower price than comps to get interest generated, but the bank can counter based on their appraisals. So ask your agent to see the comps she came up with so you will understand her point of view. Also, you really need to get your home in escrow, as it is unlikely that a bank will accept your offer unless you are in escrow on the sale of your house. Best, Terry Bell, CPS Real Estate, Santa Rosa, CA
0 votes Thank Flag Link Mon Sep 20, 2010
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