Home Buying in Red Bank>Question Details

Carol, Home Buyer in Red Bank, NJ

In a short sale, what exactly is the relationship between seller and bank? We are looking at a short sale

Asked by Carol, Red Bank, NJ Sun Aug 17, 2008

property, and were told by our agent that the seller was doing the negotiating. Does this mean that they are doing it but being advised by the bank from the sidelines? Who really holds the negotiating power -- the seller or the bank?

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simple answer...the bank is king. Sellers do not negotiate with a bank. The bank will either be amenable to the short sale or it will not. Please don't let any one tell you differently.....

jimmy V
0 votes Thank Flag Link Wed Dec 3, 2008
The Bank is the final say so in a short sale. They are not obligated to accept any offer submitted. They're really not even obligated to accept a short sale, period. The bank's goal, while trying to "help" still is to try and recoup as much of the original funds as possible. Is is "ethical" for the bank to set the minimum amount acceptable for short sale? Why not? Remember, the seller is the defaulting party - the bank held up their end of the contract. This differs from the Realtor telling the client what to accept or not accept in that the Bank has a contract with the seller already in place where the parties have already made the agreement on what money will be paid out and paid back. Therefore, the bank does have a right to set the price with the seller. The price they set for an acceptable short sale contract tends to be less than owed. The Bank then determines whether to collect the remaing funds directly from the seller under a separate Note, or not. That would all be part of the negotiation process between the agent and the loss mitigation advisor. Now, having said that, hopefully the seller has a professional realtor that understands the short sale process and is an extremely pursuasive negotiator! Great questions,,,keep 'em coming!

Tina Evans, Principal Broker
Web Reference: http://www.tinaevans.net
0 votes Thank Flag Link Tue Aug 19, 2008
Thank you all who responded! As a spin off question (as I myself learn more about short sales), if the seller is not receiving money from the sale, what is her incentive in holding out for a higher purchase price? I am thinking that the bank has told her that she must sell for a minimum price to meet her financial obligations to them - but I am also thinking that it is not ethical for a bank to tell a seller what to accept (even in a short sale), just as an agent can't actually teller a buyer what to bid.

Thanks again; first time home buyer here with (obviously!) a lot of questions! :)
0 votes Thank Flag Link Mon Aug 18, 2008
Donna's answer is probably the most succinct. However, none of the previous answers have made you aware that with a short sale, there isn't the normal "x" number of days to accept/deny/counter. When the bank receives the offer and paperwork for short sale, it WILL take 45-90 days for the bank to make their determination. You need to make sure that you are willing to wait a length of time before the contract is accepted and closed upon. Most short sale offers die quickly when the potential buyer(s) realize that they a) their offer may not be acceptable to the bank and they won't know for a minimum of at least 45 days or
b) it'll take that 45-90 (sometimes longer) time frame before they actual get to closing.
A few things to think over. Hope this helped. Great question.
Tina Evans, Principal Broker
Web Reference: http://www.tinaevans.net
0 votes Thank Flag Link Mon Aug 18, 2008
Good Morning Carol,

I agree with the other answers. The bank has the final say so on whether or not they want to accept the offer, but the Seller must approve also. Usually in an short sale, the offer is given to the seller first. The seller can counter, reject, or accept. After an offer is accepted with the seller, then the offer is sent to the bank for its approval. At which point the bank my counter, refuse, or accept. Until you have both to accept it can't happen.
0 votes Thank Flag Link Mon Aug 18, 2008
Carol: The responses from Mike and Lynn are correct. But here are some added thoughts.

Think about this for a moment. A SHORT SALE occurs in a majority of instances where the seller (1) is SHORT concerning past payments, (2) sees they will be SHORT — medical reason or lost a job (3) or is forced to move and the home JUST WON’T SELL. In that regard, their short (or will be). Now talking about a SHORT SALE and a SALE actually being a SHORT SALE “may” be different. Be sure you know — for sure.
As Mike so eloquently stated, the correct use of the term is best defined as he noted: The bank has agreed to take less than the outstanding balance of the mortgage (seller is probably “up-side-down). So the BANK is going to get less, right? Now, say YOU were the bank. How would you feel about getting less? Ahh. The problem. Dealing with (working with) a bank under these circumstances is RISKY for the agent (at least frustrating, free wheeling, often lacking rules and what might seem like fairness). While certainly not ALWAYS the case, it is quite common for the BANK to play different groups off against each other (if there is a demand for the property). It CAN become a brutal negotiation with seemingly minimal communication — like the rules are thrown out the window. Agents can put forth a ton of effort only to end up with nothing at the last moment (for themselves or for their clients). In many cases (not all), the rules of real estate (time controlled and state law guided) seem to take on a whole new look.
Look at it this way. Theoretically, you get a home for a fraction of what it is potentially worth (something for nothing). It is that mentality that got us all into the mess we are now in today in the US (nothing down, no proof of earnings and the same loan as someone with a great credit rating able to put 20% down on a conventional mortgage). If it was so easy, everyone would be doing it. Are they? It’s risky. The wild west. Be weary.


Here area a couple of LINKS on short sales to bolster your confidence. Draw your own conclusions.
0 votes Thank Flag Link Sun Aug 17, 2008
In a short sale, the bank has agreed to take less than the outstanding balance of the mortgage. Unless the seller has agreed to pay part of the difference, the bank has the final say as far as the lowest price they will take.
The seller may be doing the negotiating, but they'll need bank approval to accept any offers.
Web Reference: http://MikeSellsNWA.com
0 votes Thank Flag Link Sun Aug 17, 2008
In most instances the bank has the final decision what lender will or will not take for short sale. Usually listing/buyers agents and sellers have "the back seat" bank is in drivers seat. Perhaps rare exception to rule. http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Sun Aug 17, 2008
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