Home Buying in San Marcos>Question Details

J Melton, Home Buyer in 91942

What are the banks looking for when excepting an offer on a short sale or foreclosure?

Asked by J Melton, 91942 Sat May 31, 2008

What are the banks really looking for in an offer on a short sale or foreclosure? What are they looking for in the buyer? What can we do to ensure that our offer is excepted when their are multiple offers in to the bank?

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The bank wants the highest net offer. What that means is whichever offer will give them the most money. So, an all cash offer for $20K less than your 90% financing offer will not beat you out, IF your pre-approval and proof of funds (VOD or bank statement) are solid. What I mean by a solid pre-approval is a bank underwritten approval AFTER they have reviewed your financials and checked your credit. The bank will ALWAYS take the most solid offer that returns MORE of their money, UNLESS the bank never sees your offer. You see, it is a misconception among most uneducated Real Estate Professionals that your offer MUST be submitted to the lender. The truth is, the seller must allow any offer to go to the lender, they can decide to NOT send your offer if they don't want to. The bottom line is, get a strong pre-approval and have your proof of funds ready and make sure that your offer has been submitted for approval. Many times you are wasting your time if the agent or person negotiating the short sale is not too experienced. My company trains hundreds of agents each month on how to negotiate with the bank, so maybe the agent listing the home or your agent would benefit from a little education...
1 vote Thank Flag Link Sat May 31, 2008
Actually, the answer is not that simple. A new cause for concern in this market is the buyer being able to get financing. Banks have actually been known recently, to reject higher offers for lower offers (all-other-things-equal) due to the fact that they know the house will not appraise for the higher offer price and thus the buyer's financing will fall through. To avoid this hassle, they have been known to take a lesser offer.
1 vote Thank Flag Link Thu Jul 3, 2008
1 vote Thank Flag Link Tue Jun 24, 2008
Banks are looking for a non-contingent offer from a well-qualified Buyer. When there are multiple offers, the amount of money the Bank will receive as its net amount is what matters most. That translates into the highest offered price, with no credit to the Buyer in return, appealing most to the bank. Was this helpful to you?
1 vote Thank Flag Link Sat May 31, 2008
The banks are looking at their bottom line. Who will net them the most money, be most likely to close, in the shortest time with the least amount of problems.

This means that you will want to offer the most that you can, not ask for pest control or repairs, not ask for closing costs and close as quickly as your lender can close, or bring in cash, This is the best advice for properties under $450,000. If you are an FHA buyer, you have an additional problem. While you may be willing to take the property "as is", the FHA appraiser may insist that certain repairs be completed prior to
close of escrow. Banks know this and often will take a conventional or cash offer at a slightly lower price if they know there are some repairs to be done. Also, on rehabbed properties, FHA requires 90 days from when the rehab people purchased before they will finance. This is known as the anti-flipping rule.

Best advice. Keep making offers. It may take many offers to purchase the property that you want. Maybe set your sights a bit lower. People do not usually get their dream house the first time out. Choose properties that are priced lower than your maximum by $20,000 to $50,000. This will give you negotiating room when the bank calls for highest and best offer.

Best of luck to you.
0 votes Thank Flag Link Fri Jul 24, 2009
Make sure your are making a good offer in terms of price and remove reasons the bank would counter or choose another offer. First be fully approved for a loan and ready to close quickly, base your offer on as is condition don't ask for repairs or termite clearance (check though with the agent termite issues may have been taken care of already) Find out what size deposit they are looking for and in what form personal check or cashiers check etc. Make it easy to choose you. All that being said make sure you are not overpaying due to the real and/or sometimes percieved competition. It may take a few offers to get the right one to work out.
0 votes Thank Flag Link Sat Jul 26, 2008
Short sales are difficult, no questions about it. The banks want as mucha s they can squeeze out of the deal. They are already taking a loss so I would not suggest low balling on the purchase price. I would stay between 80% and 90% of list price and then get ready to wait. Banks are slow in their repsonse...your offer will probably cancel before a response is even received. Just make sure you have an agent who knows how to handle your offer during the process as this is very different that a traditonal sale.
0 votes Thank Flag Link Sat Jul 26, 2008
Some good stuff here.

Basically the bank wants the most they can get, period.
That being said, most of the banks have had a reality check and some are actually hiring people to get the deals done. The general rule of thumb is they want to net out (after all costs, selling, escrow, taxes, HOA, back payments, etc) no less than 80% of FAIR MARKET VALUE, not original note (sorry Chris) You should figure selling and closing expenses between 6-8% or more of the purchase price, so in reality you should be able to get a deal approved around 10% below market price. The big question is what is fair market value?.

If you are working with a competent agent or broker, they should be able to do a market analysis and get a number close to reality.

As others have said, CASH is King, but the bottom line is the banks wants to lose as little as possible.

Bear in mind, banks DO NOT want to foreclose. It is really really bad for their bottom line and it has a negative impact on their cost and ability to borrow money to lend. At the end of the day, they will take a reasonable offer so they don’t end up with a non-performing asset
I would be happy to sit down with you and go over what you are looking for and figure out the best way to help you make that happen.

Jay Gedanken
Broker Associate
PineappleHut Realty
0 votes Thank Flag Link Wed Jul 16, 2008
Hi J, I hope you have a Safe fourth, as you see you might be writing alot of offers on Homes, but Banks have tighten on the Lending side. If you currently are buying as a primary residence you will have to qualify for your new purchase as well as the current home if you own. We used to offset the payment with a lease aggreement but that is going away. The Banks are looking for an offer that is usually 80% of the note the seller is holding on a short sale. As we know the DATA from most Cities the Decline is around 10 to 15%, so 80% is a good starting point. Also, on Foreclosure pretty much the same, as you probably had noticed all of the nice foreclosed properties have multiple offers. The Realtors and these Banks need to stop playing the game, as the inventory would move quickly. If Realtors are accepting Multiple offfers after a verbal acceptance from the Bank, they might as well auction the house RIGHT!. You need to jump in and unfortunately Real Estate is a risk, and you need to either buy or wait. But it has hit bottom in most areas. Besides it is an Investment and if your trying to flip, you will have issues with Buyers as most lenders have a flipping rule. So you can call if you have more questions. The buyer needs to have a cover letter from the Bank and a Conditional Loan Approval, currently the Buyer should be approved, as I'm no longer just doing a Conditional Approval, I'm submitting to Banks with out a property so I can show and send the full blown approval with the Offer If I need to if I have it in hand. Again I wish you the best if you need anything let me know.
0 votes Thank Flag Link Thu Jul 3, 2008
the anser is simple...the bank wants money. They are not in the business of selling real estate, they are in the business of making money and that is exactly what they want. Low balling a bank on a short sale is a waist of time. The bank will consider all strong offers. That means a preapproved buyer who has a good down payment and ready to close escrow as soon as possible. And one other bid of advise I offer all my clients, prequal with that bank. Consider getting your loan thru them. This way the bank makes more money (with the loan) without you spending more money.
0 votes Thank Flag Link Wed Jul 2, 2008
A pre-approval letter is important to say you have the funds.
Then you have to hope you have the better offer, not just the right price that counts but how much you have to put down and your credibility.
Lee Symboli Realty Owner/Broker
0 votes Thank Flag Link Wed Jun 11, 2008
Hello J, As your question how to get your offer accepted, most REO properties, Countrywide or Wells Fargo, will have on the Multiple listing that specifically states that the buyer needs to get a conditonal loan approval from their lender. So keep that in mind, as you are paying cash, so they are going to want to see Funds that are liquid as you present your Conditional Loan approval letter, Provide a Statement from your CPA or Banker that demonstrates that you have the funds and contact their lender to get the loan approval letter. It will help but not guarantee you offer will get accpeted, how many offers have you written? Cdavis@statemortgage.net
0 votes Thank Flag Link Tue Jun 3, 2008
Welcome back J. You can never ensure that your offer will be accepted unless you know what the others are or overbid it a little high. As Deb said they are looking for the highest net. You can also focus on properties that are less desirable because they won't draw as many offers. Trent is giving good advice about having your financing, a strong approval letter from a direct lender and proof of funds. If your package isn't complete many listing agents reject it without submitting it to the lender for REOs. If you are doing a short sale and the seller's package isn't complete it will disappear into thin air too. Trent is right about always checking references. Just because someone says they are experienced doesn't mean they are. Everyone is # 1 in some way. Some listing agents collect short sale listings but haven't actually completed one. Interview 3 Realtors and ask them about their short sale and REO experience. Ask them the questions you've asked here the last couple of days. Get a good buyer's rep on your side and go write some offers. Good luck!

Diane Conaway, RE/MAX United, (760) 749-2888
0 votes Thank Flag Link Sat May 31, 2008
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