Home Buying in Scottsdale>Question Details

Genemachine_…, Home Buyer in Scottsdale, AZ

is it ethical or legal to ask balance a seller owes I am considering the property on a short sale.can realtor discuss this? helpful info on my bid.

Asked by Genemachine_2000, Scottsdale, AZ Sat Jun 11, 2011

Help the community by answering this question:


Gene, in 'most' cases the balance owed is completely irrelevant to the offer you should make.

It's the MARKET VALUE of the home that you want to look at VERY closely.

A short sale is a short sale so long as the seller owes more on their mortgage than the home is worth, so why would their mortgage balance matter in determining market value and what you should offer?

For that matter, the balance of someone's mortgage has NO bearing on the VALUE of their home, whether it's a positive equity situation or a negative equity (short-sale) position.

The ONLY time I can see it being an issue is this: the listing agent has set the list price WAY UNDER 'market value', thus 'creating' a short-sale when there is actually some equity in the home.

This is rare, but I have seen it happen a time or two over the last few years.

Example: seller's mortgage balance is $200,000 - actual market value is $220,000 - listing agent believes that the market value should be $190,000 and sets the list price at $190,000.

How could this happen? An inexperienced (or unethical) listing agent has mis-interpreted the market data to believe that the seller is in a negative-equity position (short-sale) when in actuality the home's value is much higher and the seller DOES have some equity left and does NOT have to short-sale.

The absolute best thing to do is to have your agent run a CMA (comparative market analysis) of the property you want to purchase and make your offer based on that.

Give yourself some room to negotiate; you might find that the listing agent has OVER priced the property and your offer should be lower. This does happen occasionally.

One very important item as well....the seller's lender has NO idea what the value of that home is until they order their own appraisal and/or BPO (broker price opinion). Once they have that in hand, they'll compare YOUR offer to the appraised (market) value and determine IF your offer is sufficient to meet their minimum required NET, which usually is set in place by the investor that owns the loan (Fannie Mae, Freddie Mac, etc).

Keep In Mind...the 'list price' is set by the listing agent, & is sometimes NOT a good representation of the 'market value'.

*In a short-sale, the only time the list price is set by the bank is either an FHA pre-approved short-sale OR a Fed Gov't HAFA short-sale.

Based on the condition of the home, a general rule of thumb is that the seller's lender will settle for a percentage of the market value on the NET side (after Realtor commissions and seller closing costs). Sometimes it's as low as 80-82%, and sometimes it's over 90%.
NOTE: This would be a home in 'average' condition, NOT a damaged or distressed property.

The bank might be willing to negotiate more agressively IF they know that the home is damaged in some way (ie: A/C unit has been stolen) and if they foreclose, they'll really have to take a serious 'hit' on the sales price.

Example: Your agent performs a CMA of the desired property and he/she decides that the market value is $100,000.

You and your agent believe that the seller's lender will settle for 88% of that price, NET after fees ($88,000).

The title company will help you determine what the 'seller' costs are based on your type of offer (cash or financing), property taxes, the closing date, and any outstanding liens that the seller may have, and they'll come up with a NET to the seller.

On an offer of $96,000, a 6% commission would be $5760, and let's say the remaining seller closing costs would be another $3000 for a total of $8760.

$96,000 - $8760 = $87,240

That is just slightly below 88% of the market value, which tells me that an offer of $96,000 is just about right.

Obviously, the neighborhood can also play a major role in the market value of a home and the amount you should offer as well.

If there are multiple offers that the seller is mulling over, AND the home is in good condition, & the buyer wants THAT home and ONLY that home, then I recommend that they be aggressive on their offer.

Unless I'm in a very competitive 'multiple-offer' situation, I always believe in NOT leaving my buyer's cash on the table, so I typically have my client offer in the 82-84% range which gives us some room to increase our offer should the bank issue us a counter. This works best if the listing agent only submits ONE 'seller-signed' offer to the bank, NOT multiple-offers at a time.

You should also have your agent ask the listing agent how they process their short-sales and the offers.

IF the agent is sending the bank every single offer that comes in, you have an uphill battle ahead of you....good luck. This practice seems to have waned over the past couple of years, but from time to time I still run into an agent who does this, & I recommend to my client to pass on that particular property and to keep looking.

Hope that helps!

Jim Mitchell
Century 21 All Star, REALTORS
4 votes Thank Flag Link Sat Jun 11, 2011
You can surely ask this question, but in my opinion, this information may not make any difference in your offer price. On short sales the lender is dealing with the market value. If they are losing $50K or $500K and need to approve a short sale, the market value is the determining factor.

I would consider focusing more on the comparable sales figures in determining your offer price, not the mortgage balance.

Best of luck!
Web Reference: http://www.jameswehner.com
3 votes Thank Flag Link Sat Jul 2, 2011
Yes, but do yourself a favor and go buy a property that already went through foreclosure.
2 votes Thank Flag Link Thu Jul 21, 2011
Genemachine: Asking questions of the seller is legal and ethical. I always ask how they determined the asking price. Most of the time, the agent explains what comps they used and what has sold and is on the market. The banks will do BPOs and this info gives me a good idea what the bank will see as a legitimate offer.

DAVID COOPER Las Vegas Foreclosure Speiclaist with 35 years experience buying below market. For a free list see website or Call +1-7024997037
2 votes Thank Flag Link Sat Jul 2, 2011
Is it ethical? Yes.

Is it legal? Yes.

Will it help you construct an offer more likely to be accepted by the seller and the lender? Probably not.

The lender will take a variety of factors into consideration in consider whether to approve the short sale. The primary one is: How does this offer compare to the value of the property? Usually, the lender starts out with what's called a BPO--kind of like a quick appraisal. They're sometimes pretty accurate, but they do have a reputation, often, of being somewhat inaccurate . . . either high or low. Still, that's often what the lender starts off with. Then, if the house doesn't sell at that price, the listing agent is likely to reduce the price. The bank will recognize that the property's been on the market for awhile, and likely will accept less than the original listing price. All of this has nothing to do with what the seller owes.

Now, some lenders will place some weight on what was owed. But the main factor will be the BPO, as adjusted by days on market and by other recent sales.

Your question about what's owed would be more useful in a conventional sale. Even then, though, the "traditional" agent will argue that what's owed doesn't matter--that what matters is what the house is worth. Well . . . not so much. Tim (in his June 11 answer) mentioned some of the factors influencing seller motivation. And those are all relevant. Real estate investors really, really want to know what the balance on a mortgage is . . . so that they know how little the seller can accept.

The more information you have, the better. And there's nothing ethically or legally wrong with asking what a seller owes. Just understand that, in a short sale, that information isn't going to be very helpful.

Hope that helps.
2 votes Thank Flag Link Sun Jun 19, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
Your only concern should be what the asking price is on the short sale, you wont be able to make any other type of negotiation with the bank than what asking price is, and even this price might be too low for the bank to accept!
2 votes Thank Flag Link Tue Jun 14, 2011
okay I had to jump in.... This is for everyone (including Gene, Gene, the dancing Machine)

As far as lowballing offers goes, it doesn't matter on bank owned. On Short Sales, the important thing is not to insult the seller so it's important for a buyer to express to an owner (if the owner is present during showings) how nice and beautiful their home is... you see the seller on a short sale is under no obligation to sign a contract with the highest offer. If the agent representing the buyer is seen as being abusive or insensitive to the short seller then his chances of getting the seller to attempt a "steal" is probably slim and none and slim just left town. On a bank owned, the asset manager will never see any abusive comments and the only ones that get upset with lowball offers are the buyer's agent and listing agent because all offers have to be uploaded to the asset manager. Lowballs are usually a waste of everyone's time--unless the REO has been sitting on the market over 90 days.

On regular sales, a lowball offer may actually result in the buyer paying more than he could have gotten the house. Regular sellers can be highly emotional and insulted when an absurdly low offer is received. They may become less negotiable.

Why an Executor/Personal Representative for an estate would accept a sale at half of the appraisal value is very foolish on her part because she has liability to the heirs and they may ultimately go after her for her lack of prudence. In some states the judge will not allow an executor to complete a sale that far below a licensed appraiser's determination of value.
2 votes Thank Flag Link Sun Jun 12, 2011
Wow, didn't know you take general statements personal? Case of, pot calling the kettle, maybe? What motive would I have, I'm in Delaware? Where is your office in relation to the seller? Hmmm...
Calling an individual out is berating. Did I need to just answer, "yes or no" to his question or were you unable to decipher my answer in my first response? I inferred, without spelling it out for you, it's not ethical, nor illegal. Wasn't that the question?
In addition, do you understand, I didn't specify that what anyone said was wrong specifically, I was speaking to what I see in this and other posts, where agents are trying to say that how much they owe is not a factor. If you didn't see that in the posts below, I recommend you read them again. Did you read, "Your question shows a basic lack of understanding for the 'short Sale' process, one that can be long, complicated, and frustrating." ??? Did you read the posts where respondents said, "what they owe does not matter"? Did either response answer his question? In addition, did you see where agents said that it does not have any weight in a sellers decision? Is that definitively true, Mark? And, where did you answer the question? It appears that you threw around fancy terminology, assuming a guy asking a simple question will be impressed and then go on to say he needs an agent that can speak knowledgeably to these issues with examples, HELOC... 15-18%? Huh, that was speaking to his question? That wasn't a plug for you, a "short sale" specialist? Come on, I thought this was a forum to help the individual asking the question, not to sell your superior abilities? I am merely coming from an angle to provide insight, this isn't my first rodeo and I'll do anything I can to represent the best interest of my clients, barring unethical practices. That's all I was saying, without anterior motive.
In the future, I would prefer that you don't call out your battles, just like in a transaction, it isn't personal, it's business. I truly hope that any buyer is not discouraged by their agent from offering what they are comfortable with or that a Realtor does not pose the question for them for the sake of "value", because of the seller's personal feelings about it. That said, I have never asked what they have remaining, the buyer has been satisfied with seeing what they paid and how long ago and estimating the remaining balance.
2 votes Thank Flag Link Sat Jun 11, 2011
Directed to Tim Carper,

Wow Tim, it seems you may not have read the majority of the replies here. I don't recall reading anywhere that anyone referred to the question or the questioner as stupid. Predominantly the replies were educational in nature. The replies I read did not invalidate the question, just put it into perspective relative to the type of transaction.

As I read your reply nowhere did you address the question posed, however you did manage to berate others and toot your own horn quite loudly. Perhaps a review of the Community Guidelines are in order.

Mark Sumstine
Sunbelt Realty - The Williams Group
Web Reference: http://www.AzProTeam.com
2 votes Thank Flag Link Sat Jun 11, 2011
Yes, you most assuredly can. In fact, many investors are calling people on the 90 day late list and doing just that. I would caution you however. The bank wants fair market value for the property. Just because the seller accepts the offer, does not mean the property is yours. The bank is going to order a BPO as soon as the seller accepts, and if that BPO differs from your offer, you will have a problem. Of course there are other factors involved. Make sure you do your homework and find out who the investor is, and well as the bank. Everyone has their own guidelines and below market value offers will be handled differently by each institution. Be sure the agent handling the sale is a good negotiator, and is able to properly consul you on such matters.. You would be very surprised what a good agent can do with short sales if they just do not take no for an answer. I worked on a top short selling team in the southwest, and you would not believe some of the deals we got done.. If you have any other questions, please feel free to contact me, or visit my website for more information. Have a great day!

1 vote Thank Flag Link Thu Jul 21, 2011
SAure it is, but if you want to do yourself a huge favor you won't consider buying a short sale for any reason at any price.

You need to understand that there's nothing short about a short sale. In fact they should be called Long waste of time sales that typically do not end well for anyone.

To simply get a response is going to take between 90 - 180 days. more than 80% of the time the answer will be no. More than 80% of the time the property will end up for sale as a foreclosure.

While I am certifed as a short-sale and foreclosures specialist, and specialize in buyer side brokering I will never get involved in one as I value my time.

Forget this proeprty and focus on either properties already owned by the bank or by motivated Sellers of which there are plenty in Arizona.

Good luck.
1 vote Thank Flag Link Sun Jul 10, 2011
You can ask the agent and the seller how they came about with the asking price. That should give you enough information to make a creditable offer.

DAVID COOPER Las Vegas Foreclosure Speiclaist with 35 years experience buying below market. For a free list see website or Call +1-7024997037
1 vote Thank Flag Link Fri Jun 17, 2011
If it is really about value, why would we need Realtors??? We could just have appraisers go into the property and determine the price, first come first served? No need for a Realtors. If I can't help my buyer get a home for less then it's so-called "value" in a down or buyers market, then I need to find a 9-5 day job, seriously. My job as a Realtor, is to represent my client and due to my expertise, help them achieve their goals.

Do any of us plan to pay full price or more for a car? Moreover, if you were looking for an investment property, would you pay full price for it? I haven't met an investor or Realtor that doesn't try to capitalize on a seller's situation.
Seriously, I love how Gene, a potential client, asked a question in these forums and was treated as if his question is not valid. There are many factors that can help a buyer get a property at a good price and it is our job to help them reach or come close to their goals.

There are so many factors to consider to help a buyer get what they want. Besides, a buyer doesn't need us to find out what the seller paid for the property. They merely need to check the local tax records. They can see what was paid, if the seller refinanced and obviously did not utilize the money in their pocket to renovate their home, assuming that the value will just magically increase.

There are many factors such as seller motivation, job transfer, lost job, seller's independent appraisers, inflated appraisals, depressed neighborhoods, etc.

What ever happened to, "A HOME IS WORTH WHAT BUYERS ARE WILLING TO PAY FOR IT?" Of course, if a client expresses love for a home and I can show them that it's listed at or below value, I encourage them to offer their highest and best and in some scenarios my buyers realized that they needed to come in at full price.

Why don't we share success stories of steals we got our clients???
Example... I had a buyer that just happened to be interested in a home that the owner left to her niece upon entering a nursing home. The niece got an appraisal for 230K, listed it for 230 and within a week, reduced to 214K. Hmmm, maybe that shows motivation??? Unfortunately, for the seller the Realtor shared the niece's situation with me and said that she needed money quickly for some other interests, so we offered 90K conventional financing without seller's assistance. Can you believe they accepted and we got the home below appraised "value"?" Doesn't that serve the buyer's and ultimately the seller's purpose?
I am not trying to be rude, but many contributors to this post basically told the buyer that he doesn't know anything and/or that any Realtor saying that it's important is wrong. When is the last time you purchased a car from someone that said you must not understand the process or you just asked a stupid question?
1 vote Thank Flag Link Sat Jun 11, 2011
So Gene, what happened? Did you get the house? Tell us your tale of home buying.
0 votes Thank Flag Link Thu Jul 21, 2011
Don't try to out think the bank......it is not a person, but a cold, uncaring entity. Decide on how much the house
is worth to you and see if they will accept that offer. Go low, you can't offend them. Foreclosures are easier to
purchase than a short sale. Plan on a response of 2 weeks to 30 days and another response in the same time frame. You will be lucky to get it under contract and closed within 90-120 days.....even with CASH! Good luck.
0 votes Thank Flag Link Mon Jul 11, 2011
Not so sure having that information will make any difference. Once you make an offer and seller accepts the lender comes on board and makes their changes. Comps are useful in a regular sale but in a short sale the bank/lender holds all the cards. If you really like the property just get ready for a long ride.

Good luck to you.

Agnes Tabor, REALTOR
0 votes Thank Flag Link Fri Jul 8, 2011
Hi Gene,

Focus first and foremost on the current market value--that should be your only point of reference when making an offer on short sale. The balance owed really won't have any bearing on what the lender will accept. Once the lender receives an offer on a short sale, they will have a Broker Price Opinion (BPO) done on the home in order to ascertain market value. That is the guidepost they use when evaluating an offer.
0 votes Thank Flag Link Fri Jul 8, 2011
Gene what the seller owes or will owe after a short sale should have no bearing on your offer. You need to assess what the house is worth in todays market and base your offer on that. The sellers agent will do the same and should base the asking price on that figure adjusted for any damages or repairs needed. The sellers bank will hore an appraiser to do the same and base whether they approve on if the seller has a financial hardship and if the sale sprice is within a ratio of current market value. The seller can then be asked to be responsible for the shorted amounty or it could be forgiven.

Your offer should simply be base don what it is worth in the market and what it is worth to you, a bank will not approve a short sale price that is substantially lower than market value.


Please see my blog for a list of tips and advice on short sales
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Jul 7, 2011
Great answers here, with no further info. Of course the public record for a mortgage will not tell you the balance owed, unless AZ somehow keeps track of that. It is not unethical to ask the balance owed on seller's mortgage but do not make your offer based on that. Actually the agents should share that anyway, assuming the property is listed as a "short sale" or " lender approval required." Trouble is, often the seller has not yet submitted the hardship papers for short sale approval and has no idea if the lender will entertain it. Assuming it is in the works, the lender may not yet have approved a figure they will accept. All in all, lenders usually do not approve much below the market value. which they determine at the last minute before responding to any offer. That is why so many answers here say to go by the market vlaue not what is owed. But by now, one month later, you must have discovered enough to make your offer. If it is a good deal, others will compete for it. Keep us posted. Please.
0 votes Thank Flag Link Wed Jul 6, 2011
All loans or liens on property are matters of public record.
I make it a point to always check the notes recorded on a property in the tax rolls before submitting an offer.

You are thinking ahead and thinking smartly to wonder these things so you don't end up with a bigger problem / wait than you wanted to sign up to undergo.
Web Reference: http://www.maricopa.gov/
0 votes Thank Flag Link Wed Jul 6, 2011
All loans on a property would be a matter of public record. Yes, it's true that in some extraordinary cases an owner may pay above his mortgage payment but it will give you a ballpark idea of what mortgages are attached to a property. Also on a Short Sale the payoff is likely above the original loan amount if there are late fees, attorney fees, etc, etc.

Good luck!
0 votes Thank Flag Link Sun Jul 3, 2011
James Wehner gives an excellent answer. While you are able to go to public records for the amount paid in the transaction, this may not reflect what is actually owed. You have no way of knowing if someone has been paying over and above their required payment or for how long and you have no way of knowing if the seller has taken out another loan against the property.

As James has stated, the banks are interested in the current market value and very often this is much different from the fair market value as stated on some tax bills. You would be wise to hire a buyer agent that is familiar with short sales and ask them to do a market analysis before making an offer. As I stated earlier the amount that the bank will accept will vary depending on the type of loan the seller has and the type of loan the buyer is getting. There are different criteria, but most often it falls within 80% of market value. Hope that helps.
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Sat Jul 2, 2011
The mortgages are on public records so it's easy to find out what any owner owes on any property. If your agent doesn't know how to look up the mortgage(s) on public records, you may want to suggest he contact his broker his favorite title company and they can walk him through the steps.

Again as Realtor James wrote, the amount of mortgages are irrelevant on a Short Sale because the underlying lender(s) and Private Mortgage Insurance company that may need to approve the sale price will do their due diligence and get an appraisal to determine current "market value". If the lender were to foreclose, the "market" price is what they'll get and it has no relation to the amount of the underlying mortgages.

Your first hurdle on a Short Sale is to get the Seller to sign a contract with you as the buyer. If you make any demands or insult the Seller in any way, they will sign the contract with another buyer they may like better and for a lower price. The Seller is not obligated to sign a contract with any buyer and may just wait until someone they like makes an offer!

Good luck!

All the best,
0 votes Thank Flag Link Sat Jul 2, 2011
This is in response to Gerard Carney's answer. The banks often take offers less than the asking price on a Short Sale. This might be different if the bank has a pre-approved price on the short sale, but even then if the property has not sold for quite awhile, then they may still take less. The problem comes in when an agent lists the home for below what they should, and then you run into the problem of the bank not accepting less or even accepting an offer at the asking price as it is not reasonably priced. The banks have BPOs done and they will know the value it should sell at.


Ron & Brenda Cunningham
West USA Realty

*Recognized by the Phoenix Business Journal as "One of the Top Realtors in the Valley"
0 votes Thank Flag Link Tue Jun 14, 2011
Your comments were not taken personally Tim I saw your post arrive moments after I posted mine so I felt sure I was not the target of your ire. I admit I neglected to specify referencing to your second post. I did read your first one and all the others.

While it is true I may have said some things differently than others here, nowhere did anyone call the questioner stupid, the only time that was used was in your second post. Speaking to a lack of understanding is a reference to ignorance. That can be cured by asking questions and getting replies from those in the industry.

As to where my office is in relation to a seller...not sure what your talking about...this was a buyer question.

The information I referenced was specific to information given to me by a local attorney and my own experience with second loans on short sales. Since the question was about loan balances it spoke directly to the question.

I appreciate your advise about not calling out my battles, my offered advice in return is to take more careful consideration of your words in future posts.

Regards, Mark
0 votes Thank Flag Link Sun Jun 12, 2011
You have a variety of answers here. But I agree with Jim Mitchel. His answer is thorough and accurate. The loan balance in not relevant to you in a short sale. Work with an experienced agent and they will help you with the short sale. Just know that some go smoothly and some don't. You could have a very good offer on the home and the bank might still foreclose. Knowing the pitfalls will help you be less frustrated.

Keep in mind, most short sales involve the bank releasing the lein on the loan because the seller owes more than they can sell it for. Some sellers make arrangements with the bank to pay some (or all) of that back. This is one reason that the seller may not approve an offer than is below market value. The other reason is that if the offer is too low, then there is a higher probability that the bank won't approve the offer anyway. A seller is working against time if they have an upcoming foreclosure. They can get the foreclosure postponed, but not always. So, working with experienced agents (both the listing side and selling side) is important.

Here is a blog I wrote about the short sale process for a buyer going through the process that may help you:


Best Regards,


Ron & Brenda Cunningham
West USA Realty
**Recognized in the Phoenix Business Journal as “One of the Top Realtors in the Valley”
0 votes Thank Flag Link Sat Jun 11, 2011
I don't see a problem asking for how much the seller owes on the property. Most sellers will not have a problem sharing this information.

However this information is not as relevant as one might thing. The key information you will need before making an offer is the fair market value of the property.

Having said that, I do understand that most buyers feel more comfortable knowing the amount owed on the property before submitting an offer. And that is fine. Just ask your REALTOR to obtain the information.

Good luck!

Jose Dias, REALTOR
(623) 418-5700
0 votes Thank Flag Link Sat Jun 11, 2011
First, Props to Jim Mitchell for a great response.

The only thing I would add to his reply...know what type of loans are in place. If a second mortgage was used to purchase the property then mortgage insurance comes into play and this complicates the transaction. There have been unreasonable demands from MI companies that have blown apart deals.

More complex is when a HELOC (home equity line of credit) was placed on the property after the purchase and the funds were used for: Cars, Vacations, Credit Card Debt Consolidation or anything else that was not an improvement to the home. In these cases the second lender is much less flexible about accepting a "token" payment from the first lender to settle the debt. Often the home seller will have to come out of pocket to to allow the transaction to close.

My experience is the second lender in a HELOC will want 15-18% to release the lien and 30-35% to release the lien and the debt. If a seller took out a $100,000 line of credit we can be talking some large numbers at the closing table.

Make sure the agent you retain to help you can speak knowledgeably to these issues and give you examples. Its also important that your agent questions the listing agent on these topics prior to your making an offer.

Mark Sumstine
Sunbelt Realty - The Williams Group
Web Reference: http://www.AzProTeam.com
0 votes Thank Flag Link Sat Jun 11, 2011
Oh boy. I'm thinking, by some of the answers given, that your question was misunderstood. You are a home buyer, not a listing agent. You have no right to know what the seller owes on his mortgage. That is between him/her, their agent and their bank.

You need to get an agent to represent you and do a market analysis of the immediate area and submit your offer based on that information. As a buyer's agent, I do need and have the right to know the bank, the type of loan etc. that we're dealing with, but I do not have the right to ask what is owed on the home.

I think the few answers here that said it was legal and ethical misunderstood the question. This would be like asking a seller what their bottom line is. What???
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Sat Jun 11, 2011
Absolutely, this is a must by the agent representing you. As a potential buyer, your agent should be asking as much information about the seller's situation as possible; why are they selling, is it a true hardship, is there 1 or 2 loans, who is the bank, is ther PMI, mortgage insurance. You need to be an informed buyer as possible and this will assist you in learning more about the short sale process, the possible length of time it will take, etc.

Gloria MacKay
keller Williams Arizona Realty
0 votes Thank Flag Link Sat Jun 11, 2011
Everyone else have already discussed the short sale scenario. But as far as your question is concerned, it is both legal, and ethical, and imperative for you to ask and know the balance owed on any purchase.
Best luck.
Torah baktiari
Relax excalibur realty
0 votes Thank Flag Link Sat Jun 11, 2011
I get this question a lot. Sometimes buyers think that they can get a better deal if the homeowner owes less on their mortgage which of course is not the case. A Realtor should ideally list the home at the market value and the buyer should do a comparative market analysis to determine the value of the home and make an offer based on what they realistically might get for the home. The thing buyers have to remember is that even if the home owner accepts their offer, the bank will send out for an appraisal and the bank will try to get as much as they can get for the home regardless of the amount that the seller owes.
Web Reference: http://FeliciaJordan.com
0 votes Thank Flag Link Sat Jun 11, 2011
If they have knowledge of it you can talk about it, it does not mean the bank will tell you, they have allowed a short sale and all they want is an offer from you, whether or not the accept it is still another matter. But if we look at the bank as having two hands, then one would be the hand that gave the loan, the other would be the hand that allowed the Short Sale, neither hand really has anything to do with the other, they no longer equate the loan amount with the new possible sale amount! It is more of a favor to the owner of the house thaat they allow the sale, and they now focus only on how the paper work was done, what will be an acceptable amount, and selling the property!
0 votes Thank Flag Link Sat Jun 11, 2011

Your question shows a basic lack of understanding for the "Short sale" process, one that can be long, complicated, and frustrating.

Are you working with an agent? A real estate professional will be able to clarify the process for you. Not being familiar with this process is very common but an accurate appreciation is very important.

Essentially you will be negotiating with two sellers...the present owner and their lender. Thus, you will be required to have agreement on the sale price and contract terms from both the owner and their bank.

It's very common for the owner to accept a sale price and the bank to not. This brings the process to additional negotiations. There are normally additional factors beyond the balance of the mortgage that enter into the bank's financial expectations. Second mortgages, liens, back taxes, HOA fees, damages, legal expenses etc. are few possible contributors to a higher than expected bank price.

We strongly recommend working in conjunction with a short sale specialist (an attorney) that specializes in distressed sales as well as a RE agent that truly understands the process.

Good luck,

0 votes Thank Flag Link Sat Jun 11, 2011
To answer your question directly, it's both ethical and legal to ask those question and more. The more knowlegible the REATOR(R) is about the transaction, the better their position to market your home and get your bank or banks to agree to a short sale. If your REALTOR(R) is not asking these questions and more, they probably will not be successful with your short sale. The current market price is the ruling factor in getting the home sold but the other information is critical in being able to work with the bank or perhaps banks.

In your interview process find a REALTOR(R) that has successfully closed on multiple short sales. Find out their ratio of successful closed properties. Certifications for short sales/distressed sales are a plus but if the experience isn't evident the certification really does not matter. Look for someone with a minimum of 10 successful short sales with a minimum of a 90% close ratio. Help your agent so they can help you.

Jeff Daley - Luxury Valley Homes Scottsdale
0 votes Thank Flag Link Sat Jun 11, 2011
To be brief, what's owed does not matter. What's it worth matters.
Web Reference: http://www.321property.com
0 votes Thank Flag Link Sat Jun 11, 2011
Great answer by Realtor, Jim Mitchell.

The only thing I would add is if you haven't already written your offer, you may want to ask your Realtor to write in a clause that would allow her to discuss the Seller's account with his lenders. That way you can have another set of eyes on what the lender needs from the seller to expedite the short sale.

Also so you know, if the owner purchased the property with less than 20% down (or a combo loan with a first and a second) the property probably has Private Mortgage Insurance on it. The PMI company must also approve the short sale. I've seen unreasonable demands for the seller to sign a promissory note for a large portion of the PMI company's loss.

You absolutely need to keep looking for a home while you wait for the short sale to get approved. Also do not put up any escrow deposit until/if you actually get an approval. It may be a month or could be as long as year before you will get an approval. It also may just simply foreclose. You don't want to miss out on a property that may be better while you're waiting for what seems like forever.

Good luck!
0 votes Thank Flag Link Sat Jun 11, 2011
As long as it doesn't violate fair housing practices, you can ask the seller virtually anything. If the seller has an ethical Realtor, with strong negotiation skills, the seller's Realtor will advise what he/she should or shouldn't disclose and get the seller's permission, prior to answering any and all questions.
I would recommend that you access the public records to get an idea of what the seller paid for the home and when, to give you a better idea of how much money they have into the home. You could bare the risk of showing the seller that you are trying to get the home for as little as possible. Just like poker, you don't want to show your hand... a good Realtor, will also work with the mortgage company to ensure your pre-approval letter is close to the amount you offer. If the seller and bank are desperate to sell, they may be worried about countering, with risk you cannot finance a higher amount.
All of this sounds good; however, there are many factors that you should consider. If you love the home and it beats out all other properties you have seen in that price range, there is a strong chance that other buyers in your area feel the same way. I've seen too many buyers, worry about how much they skimmed off the price, rather than property value, and lose the home they wanted most over 50 or 100 dollars a month. Unless a seller has to sell immediately, they generally won't accept less then 10% off asking price, without lowering the price first, to see if it brings more buyers their way.
There are many other important factors to consider. A good Realtor who functions as a consultant, rather then a salesperson, will go over those scenarios with you to advise how to get the best value meeting your needs.
The banks have really made short sales a ridiculous process. Some banks are known for expediting short sales and others sit on the offers for 6 months or better, only to find out the offer was denied quite some time ago. Short sales have virtually zero guidelines and nothing can make the bank answer in a timely fashion, so if you are definitely placing an offer on one, I would ask the Real Estate attorney's office for their success rate, average time from offer to settlement, if they have dealt with the bank in question, and if they have a specific process they follow to expedite short sale offers. With a short sale, the bank can continue to receive offers, even after you place yours and many times you are not informed??? The process is akin to the lottery, if you ask me. Well, at least with the lottery, you know when they will draw the numbers...
I explain the ins and outs to my buyers about short sales and they typically decide to go for standard listings or bank owned homes. In both scenarios, they received answers quickly and walk away with amazing deals, knowing what they are getting into.
There are many other factors to consider, especially how the contract will be written to ensure that you are protected in all facets, i.e. home inspection issues, financing issues, questions you would like answered prior to settlement with the ability to back out w/deposit, if the outcome isn't pleasing to you. I personally believe that the bank knows whether or not they will take a short sale from the start and have an equation they look at, considering factors like mortgage insurance terms or whether or not the owner had a guarantee, like a VA loan. Therefore, they may not be too concerned about whether it sells short sale or not. I recommend that you find an experienced agent (not all experienced agents are good), intelligent and savvy, who asks these types of questions, advises you of all scenarios, and will put you in touch with experts (lawyers, attorneys, accounts, etc.) when appropriate. You'll know if they have your best interests in mind to build long-term agent/client relationships or are just in it for a quick buck. Good luck, hope this helps.
0 votes Thank Flag Link Sat Jun 11, 2011
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