Foreclosure in Newburgh>Question Details

Kaycollins, Home Buyer in Newburgh, NY

My fiance' and I put an offer of $187K on a SHORT SALE house listed for $196K. The offer officially went to

Asked by Kaycollins, Newburgh, NY Thu May 22, 2008

the bank (GMAC) about three months ago. Three weeks ago, the bank told us that they had received the appraisal from their appraiser. When can we expect to hear from them? I just want to know a general timeline. A consultant from Short Sale Headquarters Inc. told us that the appraisal usually means the bank will respond in about two to three weeks. We are first time homebuyers who just need some reassurance in this seemingly nonsensical process of a short sale. The house has been on the market for over a year now and the only other two offers were significantly lower than our offer according to the realtor. Are they eventually going to accept?

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You may never see a response from the Bank. See a recent article that I published below, and note particular attention to recent legal counsel on the matter and why Lending institutions are keeping the property as an assett rather than claiming a loss on the transfer:

The Scoop on Short Sales:

“Short Sales” are real estate listings that are trying to be sold for less money than what is owed on the property. The current owner has a loan (or loans) on the property that exceeds the listing or sale price.

On the surface, the property seems like a really good value… almost too good to be true. The enticement of the possibility of purchasing a property for less than market value certainly seems very appealing. It is natural to get excited about getting a great deal when purchasing real estate.

So what’s the downside? Unfortunately the downside is that Short Sales rarely mature to an actual sale. When you understand the dynamics of what has to happen, it becomes easier to understand why Short Sales hardly ever work out. Essentially, when an offer is submitted to a lender for Short Sale approval, the lender is put in the position of determining if they are willing to take less than what they are owed (a LOSS) to release the mortgage lien from the Short Sale property. Because the lenders often have an appraisal in the file that is higher than the offer price (because an appraisal was needed in order to fund the loan(s) to begin with), they are typically very reluctant to take less than what they are owed. The decision is further complicated when there is more than one loan on the property (i.e. a first mortgage plus a second mortgage, or home equity line of credit). Negotiating Short Sale acceptance on two loans is extremely difficult, if not virtually impossible.

Another dynamic that plays into the Short Sale dilemma is an interesting bit of information that an attorney recently provided at a conference I attended. Amidst all of the lending turmoil going on in the market right now, lenders have to be very careful to keep their assets in line with their debts. It is important to know that when a lender transfers interest or releases their loan, they are accountable immediately for the gain or LOSS. This means that if they agree to accept a Short Sale, they have to account for the LOSS on their books at the time of closing. Losses are not a good thing for lenders in this market… in fact, losses are precisely the reason why so many lenders are closing their doors and going out of business. According to the attorney presenting at the conference, it benefits the lenders to let the property go to foreclosure, and take the property back as an ASSETT, vs. having to report the property as a loss on their books. In theory, it is better for the lender to sit on the property, hoping that the market will get a little better so they can recover their loss, or at least break even on their loan, thereby not resulting in accountability for a loss.

The most frustrating component of a Short Sale, is that the majority of the time, the lender will not even respond to Short Sale offers! Instead, many offers continue to accumulate on the Short Sale property, of which each Buyer hopes to result in a great deal for the Buyer, and which the Lender hopes will be close to, or above the amount they are owed. There is new legislation that was passed in January 2008, and further revised in April 2008 (Oregon), that provides that Agents must disclose Short Sale “language” in such listings. Unfortunately there are many agents that don’t follow the rules too closely. If you would like to read more about the summaries, you can see more at

I am happy to further discuss how a Short Sale transaction may or may not work for you. It is a complex phenomenon new to the industry, and never before seen by most homeowners or Realtors®.

Mark Vandervest
Real Estate Broker / REALTOR
RE/MAX Equity Group, Inc.
9790 SW Nimbus Avenue
Beaverton, OR 97008
888-864-6789 Ext. 4973
2 votes Thank Flag Link Thu May 22, 2008
Short Sale Headquarters huh? Just be cautious throughout this process. Do not pay anyone above or beyond any commissions that are built into the closing transaction. As you can see from your responses, the short sale process is complex as you're finding.
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1 vote Thank Flag Link Fri May 23, 2008
Short Sales can be a bit frustrating, but the frustration can be worth it to get a great price. You agent should be in continous contact with the bank. Many agents have limited experiences with short sales. Don't be affraid to be the squeeky wheel. Sometimes you have to push a bit to get what you want.
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0 votes Thank Flag Link Fri Jan 2, 2009
Hi Kay,
I am curious to know if someone from the Bank got back to you about your interest to buy the property and if your transaction was finalized. As you may have experienced short sales are not really short but long term sales... a result of the waiting process that takes to finalize these transactions. if your has not been successfully completed just keep going there are many other homes available; foreclosed, existing homes or new homes at very good prices. Your realtor can better attest to that and provide you guidance for you to decide the best course of action for you and your family.
0 votes Thank Flag Link Sun Dec 7, 2008
We have NOT paid anyone anything; we instead built the payment into our purchase agreement dependent on a successful sale. And, though the realtor (our buyer's agent) informed us that it was a short sale, she was not very helpful in describing the process or the amount of time that it would take to complete the sale. She's not very good about getting back to us about anything for that matter. I have researched short sales all too much at this point, and I am all too aware of this waiting game that may never end. Is anyone having success with GMAC or hearing back from them?
0 votes Thank Flag Link Fri May 23, 2008
Talk to the seller's agent. The seller's agent should have authority to talk to the bank. Ask for a conference call with the bank to discuss the status of the short sale. A personauthorized to talk to the bank msut be on the call with you.
You experience, sadly, is common. The bank's are overwhelmed with short sales and the process is lengthy.
Don't pay anyone any money other than the closing agency (lawyer or escrow), or buyer's inspections.
0 votes Thank Flag Link Fri May 23, 2008
That is the downfall to all of this forecloser and short sale need patience and the banks make up their own rules....I recently did an MLS search and found it interesting that out of all of the foreclosure properties now pending, some for months...most have not closed. Why not? Only the banks know....Good luck to you.
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0 votes Thank Flag Link Fri May 23, 2008
Is the Realtor your referred to representing you, as your buyers agent? This would be the best person to ask since they would have more info about the particular listing. There are lots of reasons for the above scenario. It could be very simply that someone hasnt passed on the paperwork to to the person with the final authority on the offer. With a property address or mls number, I could give you a little more insight. Your agent really should be doing though. And if you dont have your own agent, you should definitely have one. By the way, there is typically no cost to the buyer to have their own agent.
0 votes Thank Flag Link Thu May 22, 2008

At the risk of "hijacking" your question, when you were considering the house, did your Realtor explain the short sale process? I'm seeing a lot of questions on Trulia like yours--first time homebuyers who somehow have ended up trying to acquire properties via short sales. That, frankly, is the last thing I'd want to subject a first time homebuyer to. And I'd be interested from feedback from Realtors and other homebuyers on whether the process of a short sale (the unpredictability, the lengthiness) was explained to them.

I'm also wondering about your reference to "Short Sale Headquarters." That's a rather odd website without any real contact information. And I'm concerned that the site says: "Congratulations on considering this great value! As a savvy home buyer you certainly realize that the best buys available today are most likely to be in short sales. All costs, fees, commissions, payoffs, etc. are subject to the lender’s approval. We have found that your offer will have the highest chance of being accepted if you go ahead and present it with the buyer paying the $2500.00 fee to Short Sale Headquarters as part of the buyer's closing costs."

Kay: Did you pay these people $2,500?
0 votes Thank Flag Link Thu May 22, 2008
Don Tepper, Real Estate Pro in Burke, VA
Thanks, everyone! I appreciate the feedback. I keep hearing the same things over and over- short sales are anything but "short." I'll let you know what happens...
0 votes Thank Flag Link Thu May 22, 2008
The banks are inundated and trying hard. I just had an accepted offer on a short sale of my own in another state...the blessed buyers waited patiently for months, but were finally told yesterday...we have a deal!

The buyers got the best price in the area and the banks have rid themselves of a non-performing loan. Keep the's worth it!
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0 votes Thank Flag Link Thu May 22, 2008
Unfortunately, it's the nature of the beast --- it's a waiting game, and it is all dependent on the loan negotiator, his case load, the number of offers on the table, how much is owed, etc.

It is not unusual for a negotiator to be working with as many as 300 files at one time. There is no guarantee on when to expect a response, regardless of when the appraisal is done. Set your expectations that it will take a l-o-o-o-n-g time before you get an answer.

In the meantime, continue to may find other properties that are not short sales or foreclosures, but that are on the market at reduced prices competitive with those short sales/foreclosures. These will be easier (or at least won't take quite as long to hear back from) to work with, you have room to ask for credits, repairs, etc.

And....think of what kind of loan you are getting. Typically, short sales/foreclosures are sold AS IS, and the lenders don't give any credits back. If you're getting an FHA loan and you're asking for 3% credits towards closing costs, for example, don't expect to get your offer accepted.

Take care, and truckloads of good luck to you.
0 votes Thank Flag Link Thu May 22, 2008
Kay, buying a short sale is not easy, sometimes it could take months to get an answer and it doesn't mean they will accept. Some banks are dealing with hundreds if not thousands of foreclosures and short sales and the decision makes sometimes meet once a month. So don't get your hopes up. They might counter at full price, depending on the appraisal. I hope they accept your offer and everything works out for you. Angel
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0 votes Thank Flag Link Thu May 22, 2008
Keep the faith. All the stress right now of not knowing will be with you until the minute you walk out of closing but then it will have all been worth it. I closed on my new house via short sale last month after 3+ months of being jerked around. If the bank went through all the trouble to get a BPO then at least you know that they're willing to consider a short sale. As long as the BPO was not drastically less than your offer and as long as you have no contigencies, they should at least come back with a counter offer, if not just accept your offer as is. Ours was accepted as is at ~3-5% less than the BPO (you usually dont get told the actual number but the sellers agent somehow got a roundabout number out of one of the bank people).
0 votes Thank Flag Link Thu May 22, 2008
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