Hey Barb,

Good luck w/ your short sale and here is my two cents.

I personally have an offer pending on a short sale as we speak and based on my research I think in most cases a short sale is still better/cheaper for the bank/lender than going thru foreclosure.

As far as the lenders bottom line I think any deal in todays market is still flexible and the worst thing the bank would say is no..........Plus I agree that maybe the listing agent didn't present all of the details of the property to the lender/REO dept.........I really think if you outline some notes regarding what needs to be done to the property and add some supporting evidence along with your offer..... that would help your chances of getting a lower offer accepted.....this is assuming there aren't any other stronger offers on the table...........and we all know price is not the only issue with a multiple bid situation.

If there are 5 offers and they are all first time buyers with 85-95% financing contingencies and your buyer is paying cash.........you are in a better position obviously.

I have an offer right now for myself on a short sale and have been patiently waiting............there are 6 other offers on this property and it has been almost two weeks now...........the selling agent has told me that the other people are backing out and don't want to wait any longer for a decision.......he said if I stay patient I just might get my price............I went in much lower than the "lowest price" that was advised by bank/listing agent.

So my advice is go in with what you feel is fair.........back it up w/ supporting evidence and as long as there are not a lot of other interest............you may just get your price accepted.

Worst case is they come back and say no or counter higher.

Best of luck.

Justin Stranere

RFW Realtors

Doylestown, PA

I know very little about short sales, Barb. But I will be watching this thread with interest. And I hope and expect you will get some great insights from it.

Jana? Joe L? There are others who know this process inside out. It will be good info!

Barb,

Here is my opinion on your questions:

1:  Don't believe the agent when they tell you the banks bottom dollar is XXX.  They have NO IDEA what the banks bottom dollar is.  Secondly if they do know, they have fiduciary responsibility to the sellers and disclosing the bottom dollar is not acting in their clients best interest.

The Bank (sellers lender) is going to have an appraisal or bpo done on the property to determine "Fair Market Value".  This is a important step!!  This is where they should take into account the condition of the property.  If they have not done an appraisal or bpo, find out when it will be done and make a list of repair items you feel need to be done and estimate cost and leave it for the appraiser or bpo agent.

Once the bank has this value, they will then work off a percentage of that number to determine what is an acceptable loss.

                      Example:

                      Mortgage                                      $125,000

                      "Fair Market Value" by appraisal    $100,000

                      Offer                                             $ 85,000

       Most banks want to recoup 80% of the "Fair Market Value" of the home, NOT what is owed on the mortgage.  So if someone made an $85,000 offer and after all closing cost the bank can net $80,000 you would have a deal.

2:  I do not follow you on this 2 week period the home is in.  Is there a sheriffs sale date yet?

3:  If you feel the listing agent does not have a good grip on the "Fair Market Value" of the home and your offer is much less than the list price, then yes you should offer some supporting documentation to back up your offer.  You could get some bids to repair the items needing done.  You could also make up your own bpo to show the bank what you feel the home is worth

4:  All the statistics I have read about short sales vs. foreclosures is that it is MUCH less expensive for the bank.  If they foreclose, they have attorney fees, holding cost, possible damage when vacant.........

5:  All the short sales I have done, the lender will 95% of the time give a counter offer.  They want to get as much money as possible.  If you don't like their counter and are to far apart, resubmit your offer.  Or wait a few weeks and submit again.  The closer it gets to Sheriffs sale the more motivated they will become.

Good Luck

Joe, thanks again for that info you sent me. On this subject,  I am having a hard time with the second mortgage bank on the short sale I am trying to do. They are trying to take possession of the place (re-key and winterize) under the terms of the mortgage.  The place is vacant (well there is a bed, washer, and refrigerator and stove) and that is the clause they are trying to use.

Barb if this property was a owner occupy would it be a good deal?  If the property is at value and the buyer is expected to pay for all inspections and repairs then you might want to keep looking.  If it is below value then go for it.  But don't low ball a short sale, you won't get the property.

We have been fighting with the lender on our short sale.  Even though everyone says it is better for the lender to sell a property in a short sale rather than foreclose, ours doesn't seem to feel that way.  We have lost over $100K over a $25K difference in June.  Plus we have had 8 offers in the last 2 months that were "not sufficient."  They did not ask us to counter, however I have heard of others who do.

There doesn't seem to be any consistency here.  If this was a seller I was dealing with I would have fired them long ago.

Use common sense, treat your offers as if you are dealing with a seller and not a lender and make sure your client can wait.  They do not respond quickly.  In fact I found out that when I fax something to my dept. rep. it can take up to 5 days for her to get it.  I now have her email address and mongo fax directly to her.

Good luck,

Jana

Gregory with out foreclosing can they change the locks in your State?  I find this very disturbing and seems it should be very illegal.  I would think that the owner is still the owner until they legally take possession by foreclosing.  Does the first know what the second is trying to do?  The second usually doesn't get much if anything in either a short sale or foreclosure.  I have even heard of a second buying out the first.  But I have never heard of them taking possession without court approval.

Jana

I think it is bologna as far as the "bottom dollar amount" I have done many shoirt sales in Georgia and the bank has never given me a figure. Normally the bank says bring an offer and we'll talk. I would offer whatever you think is fair. The bank will have an appraisal and a BPO to determine value and surely they will take into account what the listing agent has not as far as repairs. I am sure they will come back with a counter offer and if it is not acceptable to your client I would counter back again with your lower offer and pictures of the work that needs to be done. Pictures always seem to work for me with foreclosures and short sales.

Also, I and several agents in my office have been very lucky getting the bank to come down in price after the home inspection for repair money. Hope you all are finding the same.

Traci

Jana, I was just made aware of the banks intent the other day. The owner had died and the administrator of his estate has been trying to get the place sold. Renting it was out of the question because the rent amount would be less than the monthly expenses. Since it has been on the market there has been one problem after another. The 2d bank said no to the short sale almost immediately. The first mortgage holder says that they are in charge and claims to be reviewing the sale. The first week they had the papers didn't count because the file had not been assigned to anyone. It was suppose to take 3 to 4 weeks which they now claim is a 6 to 8 week window because they are "backed up".

Jana said:

    "The second usually doesn't get much if anything in either a short sale or foreclosure. "

Jana, what then happens with the 2nd? I have heard that the buyer must beware of the 2nd due to the fact that the 2nd lender would still have a lien or that the new buyer would essentially be buying that 2nd mortgage with the home.

Your statement above makes me think that the 2nd just disappears which I would have hard time believing. If I were a lender I would certainly want my money! hahaha

When dealing with a short sale with a 1st and 2nd mortgage, it is complicated business.  

If the 1st forecloses more than likely, the 2nd will get NOTHING.  It is important to show the second what the TRUE MARKET VALUE of the home is so that they understand that if it goes to sheriffs sale and will likely sell for less than the 1st is owed, then the 2nd gets nada.  If that is not the case, then the 2nd is going to feel like they have some power to negotiate a short sale.  

If you can show the 2nd that there will be nothing left over after a sale, then get the 1st to offer the 2nd $1,000 to release the mortgage.  This is VERY common.  

Scott,  

If a home sells in short sale with a 1st and 2nd, both of the lender have to agree to take a smaller amount of money than what is owed and release their mortgages.  This way the seller is able to provide clear title.

A friend & Broker is acting on behalf of a buyer in a short sale.  Neither are knowledgeable in that area.  An offer was accepted with a sale price of $220,000 less 3% commission, and less $2300.  The contract called for 100% financing and seller to pay $2800 in closing.  Both the broker and the buyer somehow did not notice the discrepancy of $500.  All along they believed the bank, was in essence, the seller.  The closing was to be the 14th.  When the HUD statement was prepared, a state lien of the owner (seller) was there, along with $810 in owners closing costs + the discrepancy of $500 of seller paying toward buyers cc's.  Does the seller (bank) pay all costs of the seller, owner?  Who pays the lien in order to pass clear title?  This seller has no money!  Help!  The bank did not return their calls on Friday, the 9th and today was Veterens Day.  The original loan on this home was way out of line at $305,000.  Appraisel in the $260.000 area.

Thank you for any help you can pass on pronto!

Andy  

Andy, from the way you wrote the story, it appears the bank is going to forgive a loan amount of $305,000 for $210,600 and send the IRS a 1099 on the lucky home owner for $94,400 of unearned income. I believe the home owner can then deduct certain costs (improvement, selling and attorney fees) from the gain. The Bank will then release itself from the title and you will have "clear" title. But, that's just the way "you" wrote the story and the way I read it. The title company, the bank, and lawyer may read it differently, or, have other facts. Good Luck!

Gregory,

That is essentially correct.  The banks response came in letter form stating their bottom line (exact amt is $211,098.65 representating pay-off amount) asking for copies of receipts for goods/services paid from proceeds.  The difference between sale price and payoff covers the commision of $6600 and approximately $2300 of  "buyer/seller or whatever" costs.  This is clear to them with hindsite.

Unfortunately, the seller owner was never told that their would be "costs" the day of closing plus the Ohio lein of $1467.38.  In fact, everyone thought the bank/mortgage holder would pick up ALL owners costs to sell.  I gather that thinking is nieve and probably will not be the case, although I have not heard if the bank has responded.  If the seller/owner cannot come up with the $'s by closing (essentially $810 + the state lien...(buyer would absorb the other $499 of closing costs)  it will not close?  Is it unheard of for a bank to change their bottom line and absorb those cc's?  Shouldn't someone have told seller/owner their would be expenses to close this home.

If the bank/mortgage holder or the owner/seller is not willing or able to provide the owners cc's + the lien, should or could the buyer pay the costs?  May be in buyers best interest to pay additional funds to purchase a home in a top suburb worth approximately $260,000 (certainly $245,000 -250,000) for $220,000.  Your thoughts?

Thank you for your previous response!

Andy  

Andy, it is pretty much Standard Operating Procedure for banks to require a HUD-1 form prepared and showing all costs associated to the sale. It would be my guess that the title company that prepared it; did it in a kind of quick and dirty fashion. Now that all the costs have been brought forward, the owner could go back to the bank and plead his case to the stuffed shirt. That would kick back the closing again another six weeks. That is because the bank does not allow any one individual the power to clear the write off. It will go to a board meeting. If the buyer wants the house then he would be better off getting the monies from his bank that is doing the 100% financing. But, if the buyer thinks the market is only going to get worse and doesn't really care if he buys "that" house, he could tell the seller to go do a cash advance and draw from one of his many credit cards. Anyway you cut it - it's not an easy undertaking and the best most buyers and sellers can hope for is a ball park figure on the closing costs. Good Luck!

Gregory,

You won't believe this!  Bank is picking up all of owner's costs including credit of $1768.05 to buyer on taxes from June to day of closing....and the entire $2800 toward cc's!  Buyer has to pick up the lien...   Since the buyer was looking at a possible $3300-5800+ to bring to closing...the new figure, including lien, is around $2800 and looking pretty good!

Thank you for your quick responses.  Very few people I know have actually been able to put a short sale together, so it is nice to hear it really can happen! We have been told we'll be seeing many in Ohio over the next year.

Andy

PS: This is a good site...helped to pull my thoughts together...and nice to hear the views of other agents.  I shall have to register!

Very good info!

I'm really frustrated with CountryWide taking their sweet time to process the short sale!  I've been waiting since Aug. 8th and I did not expect to move when the winter hit.  already took out some of my retirement fund to fix the house, and been sitting since August.  They say 60 days will be the longest and then 90days, I think they will wait until the foreclosure is at their door step.  I've lost all interest in the house.  Is there a way to back out when they finally approve and get my earnest money back?  I just dont think, short sale process is fair.  They must be waiting for better deals.  

Andy,

Like you said.  The agent did not know what he is doing!  It is VERY important to submit an estimated HUD to the sellers lender.  This should include ALL the expenses involved in the sale.  The agent should have also done a preliminary title search to see if there were any liens against the home (beside the mortgage).  Sometimes, depending on the size of the lien, the bank will pay liens against the property.

Good Luck

Chris,

Countrywide is the worst bank to do a short sale with.  They have so many short sales on their books and not enough man power to handle it.  

Persistence is the key to any short sale.  The agent needs to be calling countrywide once a day if they are not responding to the offer.  If that does not work, they need to ask to speak with a supervisor.  

Your contract should have timeliness on it to define when closing is going to be.  If you are past that time and the bank has not agreed to the short sale, you should be able to back out and get your em back.  You should talk to an attorney to get professional advise on the contract.

My neighbor owes $400,000; her loan is with Wells Fargo in Northern Virginia. They told her to do a short sale as opposed to deed in lieu of forclosure.  She is moving out; I told her not to because I think the bank will consider the property "abandoned". I was going to put it on the market for $350,000. But from what I'm reading, it appears the bank won't accept that. Anyone done any short sales with Wells Fargo?

I haven't done a short sale as yet, and don't want to cause her any more grief than she already has.