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Allan, Home Buyer in Orlando, FL

Is 20-25% under loan amount reasonable for short sale?I am a first time homebuyer and I realize I got

Asked by Allan, Orlando, FL Wed Jun 4, 2008

screwed by being born 10 years too late. Now that the market is backtracking I figure now is my chance to make up a little room. I am interested in a property currently listed at $199k in Conway. The agent indicated that it would be a short sale. I researched it and the owner took out a $206k mortgage in early 07, and since has received a Lis Pendens letter. At $199k, the home is not too far of a stretch for the neighborhood, but I need to know how good of a deal I can get.

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Hello Allan. There are a lot of short sales out there in which the bank had to settle for less than 25% of the outstanding loan amount, but what really matters the most is what the bank could get for the house if they had to take it back in foreclosure and sell it. Once a short sale offer is received it's submitted to the bank(s) for their approval. The banks usually will get an appraisal to determine the current fair market value and at least one BPO (broker price opinion) to determine REO value.

Each lender has different ratios that they work with. For instance, if the BPO comes in at $180,000, they may be willing to accept $170,000 as they'd still be ahead of the game if they take the $170,000 and they don't have to pay for the cost of going through the foreclosure.

The fact that there's a lis pendens most likely only means that they started the foreclosure process as I believe in Florida foreclosures are started by filing an action in court and recording a lis pendens (in other states, including CA, most foreclosures are started by filing a notice of default). You should find out how far they have already gone in the foreclosure proceeding. If the bank wants to accept the short sale offer, the bank can postpone the foreclosure proceedings.

In summary, the bottom line is what the house is worth now, not how much is owed. Ask your agent to provide you with a comparative market analysis for this house. The CMA should also include some REO listings and sales. Best of luck to you.
1 vote Thank Flag Link Wed Jun 4, 2008
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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In the Lake Mary area we are seeing banks be particularly stubborn regarding sales price on short sales. Very few offers are being accepted, and those that are usually offer asking or slightly over. Banks also require that things be done their way, no room for negotiation, and be prepared to wait - response time is snail paced. While some banks may take the stance that some money is better then no money, others are more short sighted. They do not have to actually show a loss on their books until the property is sold, so several banks we've dealt with are actually holding on to the properties rather than sell them.
0 votes Thank Flag Link Sat Jun 7, 2008
The bank will order and appraisal and BPO and perhaps another appraisal. If the lender feels that they could do better by foreclosing and reselling- that may be the route that they take. My understanding is that usually a bank will take 40% less than what the morgage balance is. Every lender has their own set of guidelines when it comes to liquidating assets. Every transaction is unique and dependant on the current owner's cooperation and history.
0 votes Thank Flag Link Thu Jun 5, 2008
Hi Allan, in Naples Florida we are actually 50% less with a short sale. If the owner took a 206K mtg, then what you need to do is work with a realtor that understands and can negotiate for you the cost basis and the desires of the bank. Each bank is different in their own needs for each home that they are short selling. In my area, they are willing to take pretty much as much as they can get to liquidate their real estate and move on with some cash. If that home was here, you could and would get it for 100K presumably. We are selling homes that are 305K homes for 75K all day long. :0) Also the banks are paying the homeowners to vacant the premises without damaging the home. Anywhere from 20K to 25K certified funds. Let me know if I may help you by email or call me at 239-298-0600. I work with foreclosures and REO everyday as well as large estates.
0 votes Thank Flag Link Thu Jun 5, 2008
If there is a lis pendis on the home, you're not going to be able to buy the home until the lis pendis has been settled.
0 votes Thank Flag Link Wed Jun 4, 2008
Cindi Hagley, Real Estate Pro in San Ramon, CA
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Conway is a great area. It has the feel of stepping outside of the tourist part of Orlando, and you're surrounded my neighborhoods (old and new). It all depends in the Conway area. You can drive down one street and 199K would be a great deal! you can drive down another street and 199K wouldnt be a great deal. In a short sale you can make any offer you want. It's up to the bank to decide if your offer is good enough even if the seller accepts the offer. You can't go too low or the bank wont consider, yet you're trying to test how low they're willing to go. If it was bought in 2007, there hasnt been much of a dent made in the principal of the loan, so 199K might be good and what the bank is willing to take so they dont lose money on the deal.
If you're really looking for a home in Conway, I have one listed well below 199 and I truly love the area, and chose Conway on purpose, but my job i relocating me. here is the listing http://www.floridamoves.com/O4845680

good luck with your offer!
0 votes Thank Flag Link Wed Jun 4, 2008
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