If a short sale has been under contract for 8 mos, can the bank require more money from the buyer due to a higher re-appraisal?

Asked by Karen, 33406 Sat Sep 10, 2011

I have been interested in buying this property and the listing agent told me I can make a back up offer if the buyers can't come up with the additional money.
How can the bank change the price after it is under contract???

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Craig Fialko…, Agent, Wellington, FL
Sat Sep 10, 2011
Karen, I noticed some people encouraging your to get an attorney. Unfortunately there is little to nothing they can do for you. They do not represent the seller, or the sellers lender.

The listing price is what the agent feels the home is worth. As we know, buyers NEVER want to pay what the listing says, so the offer comes in low. The bank knows the value of the property, since they probably perfromed 2 Broker Price Opinions, and will want to negotiate as close to that amount as possible.

Banks are not giving anything away, so your agent should have informed you of the mine field of problems short-sales posess.

Generally the bank will tell the selling agent what their NET needs to be, and the agent or title company must then add in all the expenses. Real Estate Commissions, Sellers Closing Costs, Taxes, Homeowner Association Fees, and any other liens/expenses. That is the final number needed to close.

If you do not wish to pay what is needed to finalize the transaction, the transaction fails and the property goes back on the market.

I understand how frustrated you are, but then again, short-sales are not for the weak at heart. You have to be flexible, and patient.

All the best.

Craig Fialkowski CRI,CDPE
Realty Elite The Palm Beaches
Wellington FL
1 vote
John Bennett, Agent, Orlando, FL
Sat Sep 10, 2011
While the contract maybe said to be between seller and buyer, seller can not complete the contract (preform) until the bank agrees, Bank would be the 500 pound gorilla in the room. And there maybe many banks, and others, some you don't even know about.

As a practical matter, the bank has to be happy, or at least agree, so they are not exactly mute point.

When seller accepted your contract, they did so, or should have done so, conditionally on banks and maybe others, as required and need, approval. In as much as a conditional contract by third parties goes, one might wonder if there is a contact , as seller can not preform, as seller can not deliver a clear and free title.

So in short, there is NO contract between buyer and seller until bank (and maybe others) approves. Should bank approve, then there might be a contact, depending what the contact says.
In short, seller does not have capacity to preform.

Only a lawyer can help you here, as they are the only ones that can render a legal opinion on this matter. In a short sale, there can be huge issues, many of them sitting around like land-mines, waiting to explode.

I would not pay much (NO!!!!) attention, nor give any credence to what any REALTOR told me about the law.
RUN to the nearest and best Real Estate Attorney you can find and afford.

1 vote
Lindsey Tayl…, Agent, Wellington, FL
Sun Sep 11, 2011
I respectfully disagree with the previous poster's answer. You can absolutely get a great deal on a short sale and in my experience, most short sales do close. In fact, short sales & foreclosures account for about 30% of all sales right now in this market; therefore, they are closing in massive numbers. I wouldn't discourage any buyer from trying to buy a short sale given a few things. They are willing to wait 30-90 days for a response and the person handling the negotiations is experienced and works at it full-time! I have obtained over 100 short sale approvals for my clients so I know a few things about how short sales work. I agree with Tim Priester that 8 months to wait signals a problem. The maximum a short sale should take is about 4 months. If they can't get it done in that time frame, they are most likely not experienced and not working on the file diligently. I may consider moving on at this point. To answer your question about appraisal. It depends on what kind of "appraisal" they got. Most lenders just require what is called a BPO, 'Brokers Price Opinion'. This is just a local agent giving an opinion of value to the bank. BPO's generally stay on the books for 90-120 days before the bank orders a new one. If the bank got an actual appraisal, they stay on the books for 6 months. The bank will accept a certain percentage of the appraised value based on who the investor on the loan is (Fannie Mae, FHA etc...) and the first counter is typically the appraised value they have. Counter back within 5% of that and you shouldn't have a problem getting approval. You should not have to pay full appraised value but usually close to it. That depends on other factors as well. I could go on and on...

Hope this helps!

Lindsey Taylor
Realty Elite - The Palm Beaches
0 votes
Gary Hitchco…, Agent, Coral Springs, FL
Sun Sep 11, 2011
Hi Karen,

Because the contract most probably has a short sale addendum, just like the backup offer you would write. In that addendum it states that and I am paraphrasing the bank has to approve the deal. They can demand all kinds of different terms including price, etc. If the bank does an appraisal then they will be seeking to get market value and this is why most short sales fall apart. After 6 years of short sales, it is very rare now to get a great deal when you consider the head ache of a short sale and the home improvements that most of them need.
Web Reference:  http://www.garylisa.com
0 votes
Tom Priester, Agent, Tequesta, FL
Sun Sep 11, 2011

It is very, very, very common for a buyer to walk from a short sale. And it is also very, very, very common for a lender and/or their investors to counter a short sale contract purchase price so if there is not a back-up in place and you are interested in the home get your offer in. However 8 months is a long time for a short sale offer to be out there so I would wonder why it has taken so long because with that length of time it usually signals a negotiator who is not pushing the file. This one may end up on a dead end street.

The short sale contract if properly written to protect the buyer is really nothing more than a free option on the property so do not be shy about getting your name in the ring. It will be contingent on the banks approval and the bank is fully within their rights to ask for more money and they will if the contract is not within the range of value they consider the property to be worth. With a short sale the key is the bank valuation and as a buyer you are hoping for one on the low end of the scale to secure the best deal.

I also would be very leery about working with the listing agent directly, especially one who has been handling a transaction that has been dragging on fr 8 months. Find your own buyers agent who will look out for your best interests.

I work almost entirely as a buyers agent and would certainly be honored to be on the list of Realtors® you may decide to interview. You will find that some of the best opportunities go very fast and buyers in order to be successful must be teamed with a professional who can react quickly. I hope this information is helpful but if I can offer anything additional please feel free to contact me at your convenience.

Always at Your Service,

Tom Priester e-PRO
"Results Driven Real Estate"

Keller Williams Realty
561 308-0175
Web Reference:  http://www.tompriester.com
0 votes
Bob Brubaker, Agent, Lake Worth, FL
Sun Sep 11, 2011
Karen- You have good perspectives offered here already. One factor to consider ALWAYS
is the relationship the seller and representatives have wiith their bank! What communication
do they have, what is the latest and most recent feedback? What they know or don't know
will give you an idea of what you are venturing into. Also ask directly what does the listing
agent see as the "hold-up". This way you can better judge how and if your offer can
change the deal from being "on stuck" best of luck!

Web Reference:  http://pbc-realcam.com
0 votes
Judith, Both Buyer And Seller, Largo, FL
Sun Sep 11, 2011
either party, buyer or seller can change their offer at any time. If the price goes up, if the price goes down, listing price is only the starting point. The the value goes down, the buyer can reduce the offer, but the bank has the same opportunity. The bank can say they will pay for closing cost, the day before closing, they can say the buyer has to come up with closing cost. The bank/corp. is in charge. If the buyers can not come up with the extra money, it will go back on the market. You're dealing with a corporation, by draging out the process, the corp. can see what the market is going to do or get higher offers. Corp. take risks to make the most money. With a corp. it's all about the money, not the contract or how long a house sits empty.
0 votes
Genevieve Ra…, Agent, Punta Gorda, FL
Sun Sep 11, 2011
The banks often ask for additional money. It is a fact of Short Sales. They are taking a loss anyway. Making a back up offer is a risky business, unless you love the property and nothing else and you don't mind the wait. It could be a while. Do you ant to wait for a few months for property that you may not even get or would you rather just keep looking?
To make an offer on a short sale, you must be very patient, and to put in a back-up offer on a short sale you must have the patience of Job! I wouldn't advise it!
Good Luck on whatever you decide.
Genevieve Ramachandran
0 votes
Gordon Teles…, Agent, West Palm Beach, FL
Sat Sep 10, 2011
Yes the Bank can do whatever the Bank need to satisfy their Balance Sheet.
0 votes
Kathleen Lor…, Agent, Baxter, MN
Sat Sep 10, 2011
The contract is between the sellers and the buyers, not the bank. The bank gets final approval on what they will take to release their hold on the property. That may not be the price that the buyers and sellers have come up with. Yes, the bank can require more money if the appraisal indicates that.
Web Reference:  http://topbrainerdagent.com
0 votes
Ron Thomas, Agent, Fresno, CA
Sat Sep 10, 2011
This sounds like a Pandora's Box;
Things just keep coming out.

The Bank is changing their price; but that isn't YOUR PRICE, that is the current Buyer's?

If you know how much THEY offered, maybe you would want to offer more than them and less than the Bank wants; half-way, you know?

Or maybe you want to walk away for now, and wait it out: Don't let the Bank control you.

Good luck and may God bless
0 votes
John Bennett, Agent, Orlando, FL
Sat Sep 10, 2011
Karen, you need a Realtor and a Lawyer- if not both then a Lawyer very experieced in Short Sales. You can get into more trouble than you think.
The bank and not require, but they sure can say: " the price is $ XXXX.XX meet than our contract is dead".
This is NOT EASY! Even the pros have problems.

0 votes
Anna M Brocco, Agent, Williston Park, NY
Sat Sep 10, 2011
When it comes to short sales, the seller can accept whatever offer he/she wishes, but the lender decides to accept, reject, or counteroffer, no matter the agreed contract price...
0 votes
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