Home Buying in Plant City>Question Details

Shelly, Home Buyer in Plant City, FL

My daughter found a house in the Plant City area they'd like to buy. It's a pre-foreclosure and It's listed

Asked by Shelly, Plant City, FL Fri May 16, 2008

with a realtor who informed us that he is doing a short sale. Does this mean that he has an option to purchase the property? I understand that he must have a listing agreement with the owner for some period of time. What happens if the bank accepts his offer before he finds a buyer? Will the Realtor be required to close on the new loan? or is that where the option comes into play? I think that it will be hard to sell a property in this area for that price. I'd like to go straight to the owners if possible. (Not that I'd want to step on his toes) I have another daughter who is going to Realtor school as we speak, but she doesn't have the knowledge yet to answer my questions..So, my next question is...Is it possible for me to go straight to the homeowner at this point (and still see to it that the realtor gets paid?) Any advice would be appreciated.

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Shelly, The realtor should not submit an offer without there being an actual buyer so I'm not sure I understand your question. If you are saying that the listing agent has made an offer to purchase the short sale property for himself, then yes he does qualify as a legitimate buyer. I know there are agents who will submit a "dummy" offer to the lender when they initially take a short sale as if there actually were a buyer making the offer in order to begin the arduous short sale process and ascertain what the lender is looking to bottom line on the sale. I'm not going to comment on the implications of an agent doing something like this but this may be what is occuring in your daughter's circumstances. In any event, if an offer is accepted by the lender the buyer is expected to close however if the buyer fails to deposit the escrow monies or fails to perform in any other way according to the terms of the contract, the lender will more than likely not pursue this. Their goal is just to move on and get the property sold.
1 vote Thank Flag Link Tue May 20, 2008
As a point of clarification...it was not out intent to push your daughter in the direction of practicing without a license but to point out the option that exists......since short sales and forclosures take such a long time she might have her brokers license by then. Lorraine is right again......

But if your daughter is close to getting her license, and she may be, you might want to hold off until she gets it, before playing that card.

The "Eckler Team"
1 vote Thank Flag Link Sun May 18, 2008
Hi Shelly. I am a Real Estate Professional with the Plant City Keller Williams office on Alexander Street. Before I respond to your question, I feel it would probably be best to explain what a short sale is and how this process works so please bear with me. A short sale occurs when a property is being sold and the outstanding note is more than the property will currently get on the market should the home be sold. Because of the accelerated appreciation we experienced during the period of 2003-2005, values have steadily dropped over the years of 2006-2008 in order to allow the market to stabilize. However, this situation has caused many homeowners who either purchased or refinanced their homes while values were up to suddenly be in a position where they were upside-down on their homes. Any homeowner having to sell in this situation would be a potential short sale. Let's just say that the seller of a short sale purchased their home in 2004 for $175,000 and did 100% financing. They currently owe about $173,000 but their home will only sell in today's market for about $150,000. There is still $23,000 of outstanding debt which would need to be paid off in order for a transfer of the property to occur to a potential buyer at a sales price of $150,000. Most sellers would not have this kind of money to be able to satisfy the debt so in order for a sale to occur, the lender that currently owns the note on the home must agree to forgive the $23,000 of debt in order for a sale to occur. Should the homeowner place his home on the market for sale, any offer for purchase not sufficient to pay-off the note and closing costs would need to be approved by the seller's lender. It can be quite the process if there are not just one but two mortgages on the property which is very often the case. It is important to note that a seller in this position must be able to substantiant financial hardship in order to be forgiven the debt and this is why many of these homes are in a pre-forclosure status. The process of negotiating a short sale can be a very complicated process and therefore it is necessary to engage the services of a real estate professional or a short sale negotiator. I suppose that a homeowner could attempt to do this on their own if they were fortunate enough to procure their own buyer but I would not recommend it. Regarding your daughter's specific situation, the fact that the home is currently listed with a realtor means that either the homeowner or their lender has employed the use of the realtor's services in order to facilitate the short sale. Your daughter does not have to use this realtor but she will need a realtor to assist her in making an offer on this home. She cannot deal directly with the homeowner and quite frankly the homeowner has very little say in the entire matter. Unfortuantely it is the homeowner's lender who must approve any offer for purchase who holds all the cards. For instance, back to my example, let's say the home that should sell for $150,000 gets an offer in of $125,000. After all it is a buyer's market and the buyer of this home is looking for a deal. Why wouldn't the seller accept it? Whether the offer is for $125,000 or $150,000 it is still not going to be enough to pay off their loan. They have absolutely nothing to lose in most instances. It is the lender who will analyze the market data and have the property appraised to determine if the offer is reasonable and if the lender determines it is not, then it doesn't matter that the homeowner accepted the $125,000. If the lender doesn't approve the sale price, the sale cannot occur. The lender may come back and counter the offer and attempt to negotiate but if they cannot come to agreeable terms with a potential buyer they will in most cases allow the home to go into foreclosure. So to answer your question, no, your daughter or any buyer may not go directly to the seller of a short sale home which is listed with a realtor. However, she may use the services of her own realtor whose fees will be paid by the lender approving the short sale as part of the seller's closing costs. My suggestion would be for your daughter to contact her own realtor for assistance and if she does not have one, then I would love to help. She may reach me directly on my cell at 813-716-3997 or by e-mail at Lorraine@MyHappyRealtor.com. I wish you all the best Shelly and please do keep me in mind should you need any real estate assistance in the future.
1 vote Thank Flag Link Sat May 17, 2008
Dear Shelly:
regarding your inquiry. First of all, the Realtor Must Disclose his/her personal involvement in any transaction.
The term SHORT SALE has nothing to do with what you seem to be thinking.
A short sale is when the owner of a house owes the lender a sum of money Example--$100,000 for a home. For whatever reason, the owner cannot make the monthly payments, he/she contacts the Lender, explains their situation and after deciding that even refinancing at a lower monthly payment is too much for hem to handle, the home is placed on the market. If Listed with a Real Estate company, which is extremely important to do, the house will be priced at less than what is owed Example---$75,000.
The Realtor shows the home, a prospective Buyer is found and he/she puts in an Offer.
This is where it becomes complicated. If the Lender is a large company, one could wait for months for a decision. So the Buyer must be patient with no guarantees that the Offer will be accepted.
I do not quite understand what you mean about the Realtor Buying the home.

Call me at (813) 716-0187 I can represent you daughter and can assure you, she'll receive unsurpassed service
Ken Lawrence-Realtor/Notary Public
Cetified Home Marketing Specialist
Community Commercial Agent
Coldwell Banker Real Estate
Email ken.lawrence@floridamoves.com
WEB http://www.kenselzplantcityrealty.com
0 votes Thank Flag Link Thu Aug 6, 2009
Shelly, If your daughter is still interested in the house, please have her call me if she's not already working with a Realtor. There are many choices and there are details that a well experienced Realtor can help her with. With preforeclosure, short sales, the contract price has to be approved by the Lender because the lender is likely taking a substantial loss on the mortgage. You may be able to buy an "ugly" foreclosure house at a fairly good discount but "pretty" homes will sell for close to market value since other buyers are also making offers on that property. The lender will not let the house be sold for too low below market value because they will have an appraisal done and know what the approximate market value is. Short sales can also take several months to close, depending on the Seller's individual circumstances, i.e. whether or not a Lis Pendens has already been filed, if they are filing bankruptcy, if the Seller owns any other properties, etc. etc.

It's not a transaction to go into without the aid of a well experienced Realtor.

If you're working with a Realtor, take her advice. If you're not already working with a Realtor, please call me or another Realtor.
Web Reference: http://www.soldontampa.com
0 votes Thank Flag Link Sat Jun 7, 2008
Thanks to all of you who responded! Your attention was more than expected. I was only curious to know what my options were since, since I believe that the realtors short sale offer was too high! I don't think I ever got an answer to my question though, about the option. If the bank accepts the offer made by the Realtor before the Realtor has a buyer, is the Realtor required to close or is this an option? If this was answered and I missed it, I apologize. It is my understanding that if the Realtor made an offer to the the Mortgage company, then He/She must also have a contract with the homeowner.
Also, I guess I failed to mention that my Realtor daughter is studying in Indiana!!
0 votes Thank Flag Link Tue May 20, 2008
Lorraine, New concept--the paragraph!! :-P
0 votes Thank Flag Link Sun May 18, 2008
Hello Shelly... (again!). I just wanted to comment on Bill's response regarding your soon-to-be agent daughter representing your home-buying daughter (is this confusing or what?)... Section 475.42(1)(a), of the Florida Statutes, provides that “a person may not operate as a broker or sales associate without being the holder of a valid and current active license. …” It is a 3rd degree felony to do so. Until such time that your daughter passes the State licensing requirements and is employed with a Broker she should not be showing property, etc. And she can not be compensated for having referred her sister to another agent prior to having been fully licensed and employed by a Broker. Speaking of which, I would love the opportunity to talk with your daughter that is in the process of getting her license about opportunities at Keller Williams. We are an exceptional company with very high commission splits (I currently keep 100% of my commission with the exception of a $50 transaction fee which goes to my broker) and we have terrific mentoring programs for newer agents to have the close supervision and training that they need and unfortunately most brokers have failed to provide them to help them succeed in this business. Please have her call me at (813) 716-3997 or e-mail me at Lorraine@MyHappyRealtor.com and I'll be happy to buy her lunch and tell her all about Keller Williams and how we can help her become a real estate success!
0 votes Thank Flag Link Sat May 17, 2008
Lorraine's answer is "right on target."
Additionally, if your daughter, studying to be a realtor, makes the initial contact and presents your daughter who is interested in purchasing property as a motivated buyer she might qualify as a "referral." This means she would be entitled to a percentage of the commission. Most referral splits are in the 25% range.
Since short sales involve the lending agency agreeing on the terms of the sale they are traditionally long and a true test of ones patients but in this case may benefit your daughter who is becoming an agent by allowing her time to pass her state test and become associated with a RE company.
We would be happy to entertain this type of relationship that would benefit everyone.

Please feel free to contact us for additional information as needed.

Good luck,
The "Eckler Team"
Century 21 Almar and Associates
0 votes Thank Flag Link Sat May 17, 2008
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