We recently tried to buy a short sale. The bank approved the offer but at the last minute the investor rejected it. Who/what is the investor?

Asked by Johanna, Dexter, MI Fri Jul 22, 2011

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Scott Godzyk, Agent, Manchester, NH
Fri Jul 22, 2011
Johanna often the "investor" is the person who actually owns the note or insures the note. Most negotiating is done with a servicer who simply services the note, collects payments and has customer service duties. The Investor than has final say if they will take that loss on teh short sale. Most loans are insured by Freddie Mac or Fannie Mae and are the investor people speak of, They will look at the current value in toays market and make sure the sales price is at or near that amount. Often times they will only accept a short sale if the short sale price is at least 80% of the loan amount.


Please see my blog with tips and advice on buying a short sale
Web Reference:  http://www.ScottSellsNH.com
1 vote
Ginny Miller, Agent, Ann Arbor, MI
Fri Jul 22, 2011
Short sales can be very frustrating for all parties involved. When you make an offer on a home that is a short sale, the local bank may agree to it, but they have to run it by the investor for final approval. Who is the investor? Well, that varies from loan to loan, but it is the corporate investor that bought a bunch of loans all bundled together from the local bank you are dealing with, back when the seller first got the loan and the house was worth more. The investor bought them thinking there would be an positive return on their investment. Because there has been a decline in values, investors aren't getting the return on their investment, and are taking losses. They negotiate with the local banks trying to minimize their loss. So while the local bank may think the investor will take, say $50,000 for their loan, they may say no, they want $60,000. Therefore one of 2 things has to happen, either the seller has to come up with the $10,000 difference, or the buyer does. This is just a simplified example of how an approved offer can then be rejected by the investor.

If you have any other questions, please feel free to call me, or speak directly to your lender to find out why exactly it was rejected. They will be able to tell you what your specific situation was.

Ginny Miller
Realtor, Edward Surovell Realtors
Web Reference:  http://GinnyMillerHomes.com
1 vote
Dan Malaski, Agent, Dexter, MI
Wed May 29, 2013
The investor owns the loan, its up to them its their money. Lets find you another home. Contact me at 734 329-4128, danmalaski@realestateone.com or visit my web at danmalaski.realestateone.com and let me and my 23 years of experience go to work for you
0 votes
ranee.seal, Home Buyer, Dexter, MI
Wed Jun 27, 2012
Well They already have it listed with a Realtor and that is what she told me when I inquired.
0 votes
Tammy Lehman, Agent, Chelsea, MI
Wed Apr 11, 2012
The investor is the one that holds the note. Typically you don't get an approval without investor approval. Did you have a verbal approval or was it in writing?
Short sales are very difficulat. Most dont work out in the end. I would suggest finding a home with a real seller that will follow thru. Good luck with your home search.
0 votes
Johanna, Home Buyer, Dexter, MI
Sat Jul 23, 2011
Thank you all for your great answers. We don't kow why the investor rejected the short sale. It turns ourt our offer was only 6% less than the BPO.
Thanks Again!
0 votes
Chuck Gollay, Agent, Traverse City, MI
Sat Jul 23, 2011
Most banks today issue mortgage notes, then bundle them up and sell them on the secondary market as collateralized debt instruments. The largest purchasers of these collateral debt instruments are the government sponsored entities (GSE) known as Fannie Mae and Freddie Mac. There are other institutional investors, but Fannie and Freddie combine to purchase roughly 80% of the mortgages in the country. This minimizes the risks to the lenders, and allows for more money to flow back to the banks so they can issue more mortgages.

So, when you made an offer on a short sale, the seller undoubtedly signed it contingent upon short sale approval,or words to that effect. The short sale packet is then sent to the bank, who is actually just servicing the loan. Once they peruse the file, crunch their numbers, and approve the sale, they then have to send it to their investor, who actually has the final say in the matter. It's a long, cumbersome, frustrating process, and it's unfortunate for you that your offer was not approved by the investor. For more information on short sales and foreclosures, please visit http://MichiganHomeRescue.com.
0 votes
Karen Paytas, Agent, Clinton Twp, MI
Fri Jul 22, 2011

I think Scott explains it perfectly.

Good Luck,

Karen Paytas, GRI, CMS
Real Living Kee Realty
0 votes
Renee Badall, Agent, Ann Arbor, MI
Fri Jul 22, 2011
Dear Johanna,

The investor is the person who owns the note. When the seller closes on a home and obtained a mortgage from a bank or mortgage broker, or even a builder, often times that mortgage is sold. The investor would be the person that the note was sold to.

Banks are getting better and better at handling short sales -- hard to believe, I know. You may be wondering what it was like when they weren't "better!"

Banks would much rather have an owner short sell a property than to allow it to go into foreclosure. In an effort to handle all these short sales, they have hired an intermediary -- a servicing company -- to manage the short sale process for them. You probably thought that the person making the decisions on your transaction was the bank or investor, but it was not. Sometimes the servicing company makes recommendations and decisions that the investor does then not agree with.
This is when a short sale falls apart.

More often than the above scenario, the servicing company will approve the details of the sale, including the purchase price, BUT, the seller then has to accept all of the terms of the bank. This ranges from not having to pay back the gap/loss on the mortgage at all, to having to pay back the full amount (over time) usually with an unsecured, interest-free loan. If the seller and the investor cannot come to terms on this, the deal falls apart and you -- the buyer -- hear about it with the language, "the investor rejected the deal."

Good luck with your future purchase. If I can be of service to you in the future, my website is listed below. I am Short Sale and Foreclosure Certified.
0 votes
Derek Bauer, Agent, South Lyon, MI
Fri Jul 22, 2011

Not entirely sure what your question is here? Do you mean the seller accepted the offer and sent it to the servicer where it was then declined by the investor?

Ultimately it is the investor that makes the decision, and/or the PMI company (if there is one). Find out why the offer was rejected. It may have had nothing to do with you or the offer ... it may have had to do with the seller's qualifications or lack thereof to do the sale.

Hope that helps. Good luck.
Web Reference:  http://DoorToDreams.com
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