Brendan Coots

Matthew is right, I was describing the short sale process. I must have accidentally posted that comment to the wrong thread, so thanks for the correction! - Tue Jul 14 2009, 18:05

One other point to add to the good answers below. If the home owner had multiple mortgages etc. then the bank has to run the offer by all of the other lenders for approval and wait for their responses. Each interested party is going to take a hit, and therefore must see the offer and okay it. You may be waiting on several banks and the IRS, not just the bank that owns the house.

If the property owner owes back taxes, things are even more sticky because taxes are first in line for payback on a foreclosure, and they won't accept a reduced payback. A a result, while your offer may sound good, if the previous owner owed $40k in taxes that is $40k less for the various lenders to recoup and makes the whole thing sound less attractive to them to accept.

You may want to ask your agent to look up the property info and see if there were multiple mortgages, taxes etc. This is something they can pull up for free and very quickly, surprised they didn't do that for you already. This may help inform where you stand, and should have been done before you even made an offer. REOs and short sales can take a long time and can be very frustrating. If you're going to pursue a foreclosure just accept now that you will have to be patient and wait it out. - Sun Jun 7 2009, 10:33

One more point to add to all of this - Unless I'm mistaken you only have until November 31st to sign a deal if you want the $8,000 Stimulus Tax Credit for first-time home buyers. Right now, a short sale could cost you $8k if the bank sits on your offer for several months and plays their little games. At that point, you would have little to no time to find another home to buy within the cutoff. - Thu Jun 4 2009, 22:13

I know this question has a lot of responses already, but here's my take from a buyer's perspective. My wife and I found what seemed like a great deal, turned out to be a short sale. The price seemed too good to pass up and they hadn't had offers for 2 months so it seemed like a sure bet. Here's what happened in a nutshell:

- Homeowner did in fact insist on rolling his back taxes and other "goodies" into the offer, as well as a boosted commission for the selling agent (? are you kidding ?) - all told these items raised the price by about $20k and seem totally unscrupulous because the seller gradually added these things over a month or more, stringing us along so we'd go along with it just to close the freakin' deal. This was annoying, expensive and added a lot of time to the deal.

- The bank took forever to respond, and all told the negotiations took 3 months. The seller had 2 mortgages, endless back taxes and fines, etc. and this stuff boogers up the sell in a big way - every party has to agree to the deal, as if waiting on ONE bank wasn't bad enough...

- On the day we were supposed to get our final word of acceptance and everything was in place, the selling agent magically lined up another buyer out of thin air who would pay the same price but without contingency of inspection, and the bank accepted their offer on the spot without even giving us a chance to match it or negotiate. This is a short sell for you, talk about frustration.

All told, it was an absolute nightmare experience and I will NEVER bother with that again. The agents hate it, buyers who have "been there" hate it, and there is a good reason. If you're bent on getting a foreclosure deal, I would avoid the shorts and go for REOs, at least then most of the "interested party" complications are out of the way. And finally, I would just say that your gut shouldn't affect your decision more than the vast first-hand experience of others! - Tue Jun 2 2009, 18:01

There is no rule saying you HAVE to offer higher than list, especially in this economy. Some agents will tell you anything to get the price (and their commission) up. There are many excellent agents out there that do a terrific job, but this industry certainly has its share of people looking out for their own financial interests. Keep your eyes open during every phase of your deal, and read up on what is considered "normal" rather than blindly accepting everything your agent tells you. There is a lot of valuable data here on Trulia that, when combined with answers from your agent, will give you a good idea of what offer might be needed to be taken seriously.

- What is the CURRENT median SALES price in the zip you are looking to buy in? I would ignore median list price (way inflated) and median sales price data older than 6 months (outdated).

- How does median sales price compare to their asking price?

- What is the trend in that zip - are prices way down, only slightly down, or perhaps even moving up?

- How long has the unit been in foreclosure? Was it a failed short-sale?

- How many similarly sized/appointed units are on the market?

- Probably the most important question, how many offers do they currently have on the property?

Your agent should be able to answer all of these questions for you, but you would be wise to take a "trust but verify" attitude on any data from any source, including Trulia, just to ensure it is accurate and up to date.

Think of the answers to the above questions as a power balance, or negotiation balance. If their asking price is well below median SALES price for your zip, it's a point in their favor. If it's been in foreclosure for a long time, point to you. If the market in that zip is moving downward quickly, point to you. If there are a lot of similar units on the market (especially if they have been on the market a long time) point to you. And most importantly of all, if there are no current offers on the property, double bonus points to you.

Either way, an offer at asking price or even below will be taken seriously unless they have other offers that are higher than yours. They will just counter-offer, which they will probably do no matter how good the offer. If your agent tries to tell you that they can't reveal the number or value of other offers, don't believe it. They probably just want you to panic and overshoot your offer, making the sale more likely and making them a tasty commission. - Sat Dec 13 2008, 11:10