In a short sale, do banks generally have an issue with the condition that the buyer's property has an offer before the closing?

Asked by Bob Jackson, Decatur, IA Thu Oct 27, 2011

We've gone through the process of submitting an offer on this house and having an inspection done and this is the one condition we'd like to add to the contract. We're waiting to hear back from the seller's attorney. Really like the property but concerned with this one aspect.

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Jerry Cibulski’s answer
Jerry Cibuls…, Agent, Southold, NY
Thu Dec 22, 2011
If you are using an FHA mortgage, the bank writing the mortgage will require the condition of the house to meet preset standards and that will be a condition of the mortgage. If you are not using an FHA mortgage then it will be far more difficult for the property condition to be added to the purchase contract. It is always best to present an offer with all of the conditions in place at the start of the negotiations. It can be done if they are motivated to add this condition but it is not required for the sellers to accept this condition. It is good insurance on your side of the transaction to be sure the house stays in the same condition at the closing as it is during the time you completed your home inspection. There is language in the contract of purchase that describes how changes in the condition of the home at time of purchase will be handled. Let your attorney advise you on the best plan of action.
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, ,
Thu Apr 25, 2013
Good afternoon Bob,

I've been helping First Time Buyers for 23 years as a mortgage professional and I will tell you what I have always told my clients here in New York: If you are a First Time Buyer, steer clear of foreclosures and short sales.

Foreclosures are someone else's headache. The home probably has not been well-maintained and you're a First Time Buyer adjusting to paying a mortgage. Do you really want to walk in the door to someone else's deferred maintenance that YOU will have to pay for? Also, if you're thinking there are deals to be had in terms of lower prices, mostly those "deals" go to professional investors who can pay cash, negotiate hard with a Lender, and close fast.

For Short Sales, my attitude of late is that First Time Buyers should steer clear. Short Sales tend to be a better deal for the homeowner than for the Buyer. You'll wait MONTHS for the homeowner's Lender to approve the short sale; maybe as long as Six or Seven Months. Meanwhile, you're stuck in a contract to buy that home. I closed a short sale recently with a Buyer who, after seven months said this at the closing table, "I don't even want this house anymore."

And he didn't even get the "deal" on price he thought he was getting! The house appraised for only slightly more than he paid for it at the short sale price. He walked into this deal thinking he was buying a home for $100,000 less than it's value. In the end that wasn't the case.

There are plenty of motivated Sellers with their homes listed on your local MLS. Go find a good Local Mortgage Banker, get prequalified, then find a great, experienced Realtor, and buy the home you want at the price you're willing to pay.

Trevor Curran
NMLS #40140

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Nina Harris, Agent, Williston Park, NY
Thu Oct 27, 2011

It's extremely hard to get a bank to renegotiate a price after it has been accepted. Have there been any other offers made on the property? What does your lawyer say?
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, ,
Thu Oct 27, 2011
Bob, yes, in my experience, adding a clause that you need to have an offer on your home first before you buy the new home often is a big issue for the bank approving the short sale/being shorted - especially if it is brought up after they have initially approved the short sale contract between you and the seller.

The reason being is that they don't know how long it will take your home to get an offer on it, it could be a few weeks or it could be months, and as we are approaching the winter months in Iowa that doesn't bode well for a high amount of buyers. So if they knew that you were going to require that to happen before they accepted your offer, it probably would have impacted their decision to accept your offer in the first place. If it's being brought up after everything has been agreed to, then could make them pretty concerned about your ability & willingness to go through with the agreed upon contract.

But all you need to do is ask if it can be done, worst is you'd hear no. Sounds like you are already in process of that, so I hope you get some good news.
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Anna M Brocco, Agent, Williston Park, NY
Thu Oct 27, 2011
Not knowing exactly what you would like to add to the contract--much will depend on the lender, what is your attorney adivising...
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Dan Tabit, Agent, Issaquah, WA
Thu Oct 27, 2011
If you need to amend your contract, do it right away. Requesting an inspection is not unreasonable just be prepared to either take the house as is or walk away if it's too much. If you already know the house needs something major like a roof or septic issue, note that with your amended offer at a reduced price.
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Scott Godzyk, Agent, Manchester, NH
Thu Oct 27, 2011
bob when making an offer on a short sale, everything and anything needed should be in your initial offer, once a bank approves a short sale, they are not going to want to renegotiate, you will have to start over. if you notice a house needs work or repair, ask for the credit with your initial offer, sellers often do not have the money to fix anything and the bank will not pay to fix anything, credit or discounting the price is best. yuou should incude a description of the repair, lots of pictures and at least 2 estimates on letterhead of the contractor.
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