Christy, Real Estate Pro in Dallas, TX

Short Sale Challenges!

Asked by Christy, Dallas, TX Thu Dec 11, 2008

I have submitted a bid on a short sale property for $252K, which was originally sold for an inflated $400K. The owner was somehow scammed into thinking this property was worth $400K, and for some reason Chase bank thought it would be a good idea to provide a loan for this amount. The property has been on the market for more then 6 months and the asking price has dropped by $150K.

The problem is that our bid was automatically rejected by the bank...no negotiations. I don't even think they appraised this house. Given the economy, how can I make it clear to the banker that this property will NEVER sell for more then $260K? Should I just wait until the owner forecloses?

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10
T.E. & Naima…, Agent, Dallas, TX
Thu Dec 11, 2008
Around Dallas the average home price has dropped a whopping 1%!

That's right. Average prices are down, but a drop of nearly 40% sounds more like Las Vegas property than Dallas. Bruce has the correct way to handle it. You have to prove that the particular property has actually devalued by that much.

A 38% drop in value says that it has major repairs, not just overgrown weeds, to take care of. Is the roof bad, the foundation shifting, sheetrock cracked, copper been stolen? $150k in damage is nearly catastrophic.

Lately we have seen a lot of out of state people coming into the market thinking they can bid 70% of asking for a house. Ridiculous! It ain't happening here. Try Cali or Vegas. Florida has some tremendous discounts compared to last year, too. Those $800k condos are a bargain at $550k. Yes, you can buy the exact same structure here in Texas for $280k.

As to your last question about what to do. Yes, it sounds like you'll just have to wait them out. If it forecloses, then they will sell at market price later, whatever that is.
1 vote
Margaret T.…, Agent, Conroe, TX
Thu Dec 18, 2008
Christy,
If the price has dropped 150K are we not at your price, who dropped this price you , the realtor or chase.
Sometimes the realtor drops the price. Chase does not even entertain a Short Sale until they get an offer. This Realtor dropped the price to where he/she felt they would get an offer. I do not know how much is still owed on this home but if it is anywhere near the 400,K you are way too far off to be granted a short sale on this home. As far as waiting until the owner forecloses, Chase is the owner.

You need to work with someone that is familiar with Short Sales and the math if you want to buy a Short Sale.
If this house will never sell for more than 260K and someone owes near 400K on it it will not be sold on a short sale.
When Chase gets an offer within range they will then consider a Short Sale, the Realtor should submit comps and they will then do an appraisal
0 votes
Dallas Texas, Agent, Dallas, TN
Mon Dec 15, 2008
The appraiser used for Chase was the one who submitted value of home held by the standards of State of Texas. Could lose their license for scam appraisal.

Banks dont have time to counter offer majority of time, if it does not "fit within" box it goes file

It up to realtor comp property on buyers behalf prior to wasting money of buyer. However if an appraiser states home is worth $XXX,XXX all parties need to take appraiser report consideration. An appraiser 3rd party opinion to protect buyer, lender, seller if home is over priced.

If I can assist you contact my office
972-699-9111
Lynn
Web Reference:  http://www.lynn911.com
0 votes
David Chambe…, , Saint Petersburg, FL
Fri Dec 12, 2008
Sorry I made a mistake, Don't give the CMA to the bank. Hire a chase certified appraiser, have your agent there when when he appraises it whith his cma. present him with the cma then let him do what he does best. I have found appraisers are very good and detailed at what they do but sometimes they miss a couple of good comps.

You will have to have another appraisal orderd buy your mortgage broker dues to laws but this will help justify your offer.
0 votes
David Chambe…, , Saint Petersburg, FL
Fri Dec 12, 2008
I Would like to add a few items to bruces comment:
What you should try to do is keep lowering the price based on some items chase knows about ,some they don't.
Take the CMA then start deducting, deduct what? Deduct every cost the are going to have in order to foreclose. Such as Lawyer fees, eviction, prepare it for sale, cost to sell( ie 12 months on the market, how much interest could they have made on the money you are giving them). On repairs, I have a contractor come out and give me a written estimate add my pictures, then subtract that.

Once I have deducted every thing I offer them a price slightly higher than what it will cost them to foreclose. Its simple they are making more money by selling to me than foreclosing. Only one problem with this, twice the bank renegotiated the mortgage with the seller and dropped their rate to 5%. Good for them not for my buyer.
0 votes
The Hagley G…, Agent, Pleasanton, CA
Thu Dec 11, 2008
Chase is incredibly diffult to work with. Have your realtor call me and I'll pass on a number to their executive resolution department.
0 votes
Josh Thomas, , Austin, TX
Thu Dec 11, 2008
Hi Christy,
Tristan got it pretty close in his description. Another thing to consider is the fact that banks are overloaded with short sales right now. It takes a while to get them done (sometimes up to a month just to get a response). Feel lucky that you at least got an answer. Because of the flood in short sales right now, the bank may have developed a threshold for sales which automatically rejects offers below a certain price point. This could be for a number of reasons.

1. They may consider your offer unrealistic based on the available information.
2. Countering your offer may be considered a waste of their resources better spent on other concerns.
3. They may speculate doing better at an auction for the property than anything below a certain point.

One thing to understand about banks...they are in the business of MONEY, not real estate. They don't want to haggle over a home in their inventory, they want to sell it and break even. They get pummeled all day long with lowball offers from people trying to get the best deal, and have realized that many of them are not worth the hassle. A lot of buyers simply don't understand the situation enough to put in a realistic offer, and banks have caught on that these people will never offer what they need. So, they get rejected. Understand what the banks need, and give it to them. You will get your house.

Of course, if you don't feel like the home is worth what it costs, then by all means, don't buy it. But where is your information coming from? Have you done a CMA on the neighborhood? Is the home in disrepair? Just because the economy is bad doesn't necessarily make a home worth less than what a seller is asking. Perhaps that $150k adjustment dropped it way below market value and any lower offers will not be considered. What do the comps say? If you have a Realtor, what does he or she say?

You mentioned that it originally sold for $400k. How long ago? The price was dropped $150k over the past 6 months. What was the original asking price? And what was the asking price when you submitted your $252k bid?
0 votes
Bruce Lynn, Agent, Coppell, TX
Thu Dec 11, 2008
Have your realtor prepare a package for the lendor that justifies your case.
You may have to pay them a little extra to do this.
Have them get a couple of BPOs from different realtors of different companies.
Have them do a CMA for that property.
Have them get one of Chase's approved appraisers do an appraisal on the property.
If it is in bad shape, like yard overgrown, etc...take pictures and submit it as part of the offer.
Then have the entire package delivered to the asset manager for that property by FedEx.
Make the case for them to take to the investor.
They have so much to do they won't always go to this much work for you. You have to do it yourself.
There can always be more to the story though. Could be the seller has assets they don't want to give up like 401k, so the bank will not sign off on short sale if perhaps the seller has assets they are not willing to contribute. They'll foreclose first. Some of the lenders believe in shared pain or shared sacrifice. They're not going to take the hit 100%.
Something does seems a little wrong if the original list was $400K and now they are down to $250K with no offers. I seen numbers that are off, but that's a pretty steep number. Is there anyone living in it?
What is list price now and what do you think it is worth?
Web Reference:  http://www.teamlynn.com
0 votes
Tristan Cela…, , Marin County, CA
Thu Dec 11, 2008
Christy,

Short sales require maximum patience. Lenders are all over the board. Most of the folks involved in short sales are salaried, with little motivation to accomplish the deed and most operate with a cookbook in hand. Because of this reality you're going to have to be patient, try again and be willing to look elsewhere. I have had client loose homes because of the confused behavior of lenders, rather employees of lenders.

Learning seems to be happening slowly. Eventually economic sense will make sense to lenders. At present one must be patient and persistent.
0 votes
Bill Eckler, Agent, Venice, FL
Thu Dec 11, 2008
Christy,

You are probably thinking along the right lines. However, not knowing the property and not having a clear understanding of all circumstances involved, makes it difficult to provide an opinion.

Sounds like it would be best to not become too anxious.
0 votes
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