Short Sales

[Hawkgirl]

Has anyone bought a house that was a shortsale?

I am thinking about putting an offer on a home that just went on the market.  I just got an email from the listing agent (who is also my agent) that made it sound like my offer was too low (my verbal offer) Paperwork is supposed to be done tomorrow or Thursday.

The house is listed for $210K.  I put in an offer for $190K.  He sent me comparables that list sold prices from 200-245.  Those properties are not on the lake, mine is.  Also, it's a turnkey house...but does need a new kitchen as the kitchen is original, no granite.

Am I lowballing?  I don't think an offer of 10% below listing price, in this market, is not crazy?

[BEG]

The house next to us was a short sale.  The new neighbors talked like they got a great deal. They also commented that they knew how much we paid for our house which made them feel like they got even a better deal.  I know that they came in lower than the short sale price but I don't know how much lower. 

Your price doesn't sound like a low ball offer, especially considering what our realtor originally set our house in Dallas at (it wasn't a short sale) and what it sold for....$50k difference.  We lowered the price with in a week of putting it on the market as I knew her price was too high. We sold it twice for $20k more than it appraised for, ended up taking the $20k less (total $50k less than the original price).  Maybe they can afford to wait a little longer because it just came on the market.  You may want to consider going a little higher.  Although I don't know what the market is like in your area.

[Thor]

One can offer whatever they want on a short sale. HOWEVER, the bank is the deciding factor. If one lowballs a price, they may very well lose out.

[Hawkgirl]

One can offer whatever they want on a short sale. HOWEVER, the bank is the deciding factor. If one lowballs a price, they may very well lose out.

Yes I know.  These homes were in the 400K range 3 years ago...but we all know what happened to the market.
I've been reading about short sales and I learned that banks will ask for a BPO (Broker Price Point Opinions) and the house must be market value.  210 is below market value in my opinion...but I also learned some banks will accept 11-20% below Market Value...while others only accept at most 5% below market value.  Since the house needs a new kitchen (to be up to my standards), I took 20K off the "asking price".

Another thing is that this list price is not lender approved.  When I asked the realtor, he said they still had to submit a "short sale package".  The bank can come back and tell the seller that his listing price is too low...and I would have wasted 3 months thinking I'm going to move into this beautiful house.

Another friend of mine who bought a shortsale got screwed, in my opinion.  Short sale listing was 150K...he payed 180K
I think realtors may use a low listing price to get buyer action...and then get them to come up in price when they are showed the comps.

The ol "bait and switch".

[debk]

Has your agent pulled the tax records to see how much the mortgage is on the property?

Offer 30% lower than the mortgage borrowed amount listed on the tax records. That's pretty close to what will be the minimum bid on the courthouse steps, which is usually 70-75% of the amount owed....not borrowed.

Look to see who's conducting the short sale. If there is a first and second....go for the amount of the first if they are they ones where the offer is sent. If it's the second who's conducting the short sale, total the first and second mortgage, and then make your offer. First one gets money before the second, if there isn't enough to cover both...oh well, is how the first will look at it if they are the ones doing the short sale.

I do "interiors" for short sales for the lenders. I evaluate the property for repairs, take that into dollar consideration to bring it up to par with the comps. Also the price is based on 3 currently listed properties within a .5 mi radius of the subect and 3 solds in the same proximity that have sold within a specified time period usually sometime between 90-180 days depending on the lender's specific request. The comps have to fit within certain specified guidelines. A price for the property is determined for "as is" sale and "as repaired" sale, in specified time periods - 30-day, 0-90, 90-120 and 120-180 days. 30 day is usually 80% of the 0-90 day price.  

A bank will request a minimum of one interior and at least 1 or more drive-bys when determining their response for a short sale offer.  

A main thing to beware of on a short sale....the condition of the house when you see it....IF you haven't seen it yet -make sure you do!!....may not be the condition it is in when you close on it. There is nothing....absolutely nothing....to stop the homeowner from taking the appliances, light fixtures, plumbing fixtures, carpet, hardwood, etc out of the house before they leave it. They technically OWN it, they can do whatever they want...as without that short sale, they are going to lose it back to the lender in foreclosure. It is not unusual at all to see a house in various stages of "gutting" in a short sale or foreclosure.  

BPO's are the reports that I'm always talking about doing.

[Zeus]

The listing agent may be assisting you in the purchase of the property but as the listing agent it's fiduciary duty is to the seller.

Being a short Sale the listing price may very well be the short so lowballin an offer may be rejected offhand.

The Mortgagee and seller have to agree upon the sale, the mortgagee because it doesn't recoup it's money & the seller because they are still liable for any shortage or arrears.


All Markets are local meaning what shakes in Des moines doesn't necessarily play in Peoria.

[Hawkgirl]

Has your agent pulled the tax records to see how much the mortgage is on the property?

Offer 30% lower than the mortgage borrowed amount listed on the tax records. That's pretty close to what will be the minimum bid on the courthouse steps, which is usually 70-75% of the amount owed....not borrowed.

Look to see who's conducting the short sale. If there is a first and second....go for the amount of the first if they are they ones where the offer is sent. If it's the second who's conducting the short sale, total the first and second mortgage, and then make your offer. First one gets money before the second, if there isn't enough to cover both...oh well, is how the first will look at it if they are the ones doing the short sale.

I do "interiors" for short sales for the lenders. I evaluate the property for repairs, take that into dollar consideration to bring it up to par with the comps. Also the price is based on 3 currently listed properties within a .5 mi radius of the subect and 3 solds in the same proximity that have sold within a specified time period usually sometime between 90-180 days depending on the lender's specific request. The comps have to fit within certain specified guidelines. A price for the property is determined for "as is" sale and "as repaired" sale, in specified time periods - 30-day, 0-90, 90-120 and 120-180 days. 30 day is usually 80% of the 0-90 day price.  

A bank will request a minimum of one interior and at least 1 or more drive-bys when determining their response for a short sale offer.  

A main thing to beware of on a short sale....the condition of the house when you see it....IF you haven't seen it yet -make sure you do!!....may not be the condition it is in when you close on it. There is nothing....absolutely nothing....to stop the homeowner from taking the appliances, light fixtures, plumbing fixtures, carpet, hardwood, etc out of the house before they leave it. They technically OWN it, they can do whatever they want...as without that short sale, they are going to lose it back to the lender in foreclosure. It is not unusual at all to see a house in various stages of "gutting" in a short sale or foreclosure.  

BPO's are the reports that I'm always talking about doing.

OMG...I do not like the info you just told me in that last paragraph.  The original MLS list said the washer/dryer do not convey....The homeowner today said they did....so I emailed the realtor and he said he just needs to update it.  But now that you said the homeowner could take everything...even if it's listed in the contract??

Also, the broker said he owed 209,000 mortgage, and 65K for a home equity loan.  He also said he'd be surprised if the home equity loan got $500.

[Hawkgirl]

BTW...is it smarter to have them get a lender approved listing price before submitting an offer?  I'm not even sure they listed a price the bank would agree to?
I hate to waste months thinking I'm going to move into a house...only to be rejected by a bank

[debk]

OMG...I do not like the info you just told me in that last paragraph.  The original MLS list said the washer/dryer do not convey....The homeowner today said they did....so I emailed the realtor and he said he just needs to update it.  But now that you said the homeowner could take everything...even if it's listed in the contract??

Also, the broker said he owed 209,000 mortgage, and 65K for a home equity loan.  He also said he'd be surprised if the home equity loan got $500.

Is the list agent, the same agent that is your friend? Have you been in this house? It helps that there's a list agreement, and chances are they will leave everything as it is.

There's never a guarantee that a seller won't do something they said they wouldn't! I represented a buyer that when we went to the walkthrough... all the custom-made drapes that were supposed to convey had been replaced with very cheap ones from Walmart! My buyers' almost walked!! We were at the closing table going we get those drapes...today! Got back all but one set.

Had a seller who decided to take his basketball hoop that was cemented into the ground. I was also representing them in the purchase of the new house. His wife just happened to mention to me on the phone when I called about something else, that he was outside digging up the basketball goal to take to the new house!! (they closed on the new one a couple of weeks before the old one) I flipped out! It was clearly in the purchase contract that that sucker stayed put. By the time we got to closing = we weren't speaking to each other. She had taken down shower and curtain rods, removed an under the counter little oven thing and a couple of other things. None of which I knew until the other agent and buyers did their walk through right before closing. We ended up still closing, but the buyers were in a different room, they were so mad.

You need to remember that the sellers are selling because they can't afford to keep their home. If they take something out, there won't be money to replace it. The lender sure won't.    

[Hawkgirl]

Is the list agent, the same agent that is your friend? Have you been in this house? It helps that there's a list agreement, and chances are they will leave everything as it is.

The listing agent is not a friend.  I called him yesterday since he was the listing agent.  I was not working with any one else.
I saw the house today with the listing agent and the homeowner.  The listing agent said he could represent both (I guess that makes him a transaction broker)  The guy who sold me my Miami condo 10 years ago was also a transaction broker who represented the seller and buyer.
The house is truly turnkey.  I told him I wanted all the lighting, appliances and window hardward to be in the contract.  The last thing I want is holes in the wall from a bad job of removing window treatments.  He didnt' have a problem with it.

The seller is a county police officer, former military man.  His closets were immaculate...I don't think he's the type of person that would gut the house.  I just don't get that vibe from him.  But I didn't meet his wife, and since the reason they are getting out of the house now is because they are divorcing.

[Hawkgirl]

There's never a guarantee that a seller won't do something they said they wouldn't!

I remember when my parents were buying a summer home in Long Island when I was little.  The house had a big pool (over ground) that we kids loved.
On  the walkthrough, before the closing...they removed it!  I cried...but my parents still bought the house.   The sellers excuse was that the pool didn't meet code.  BS...it was an above ground pool.

[debk]

BTW...is it smarter to have them get a lender approved listing price before submitting an offer?  I'm not even sure they listed a price the bank would agree to?
I hate to waste months thinking I'm going to move into a house...only to be rejected by a bank

I doubt you can get one. The lender is going to want as much as possible. They aren't going to tell you what they will take.

It's kind of like playing poker....I'm not going to show you mine unless you show me yours.

Doesn't hurt to ask though.

If the lender has already had BPO's done, they may respond fairly quickly. It depends on if they only need an interior. I'm usually only given 48 hours max to get one done, but then it has to go back through QC and then to the requesting lender and appropriate departments.

They are also known to sit on offers to see how many they will get and will pick the one that gives them the best price in the shortest amount of time with the least amount of contingencies...ie buyer obtaining a mortgage, home inspection. I have known banks to take a lower price for a quick cash closing rather than a higher price depending on a mortgage and a longer time to close. Getting a mortgage will require an appraisal, cash doesn't. Short sale or foreclosed properties are more difficult to get acceptable (to the buyer's lender) appraisals.  

[Hawkgirl]

They are also known to sit on offers to see how many they will get and will pick the one that gives them the best price in the shortest amount of time with the least amount of contingencies...ie buyer obtaining a mortgage, home inspection. I have known banks to take a lower price for a quick cash closing rather than a higher price depending on a mortgage and a longer time to close. Getting a mortgage will require an appraisal, cash doesn't. Short sale or foreclosed properties are more difficult to get acceptable (to the buyer's lender) appraisals.  

The listing agent said he only submits one offer at a time.  Also I am putting down 25% and I have a pre-approval.  Also, my bank is the same bank that has their mortgage.  I hope that works in my favor.

Here are some photos



the View



the Patio



Formal Living Room
 


I love the vaulted ceilings. 

[debk]

The listing agent said he only submits one offer at a time.  Also I am putting down 25% and I have a pre-approval.  Also, my bank is the same bank that has their mortgage.  I hope that works in my favor.

Sorry, I'm calling  on only submitting one offer at a time.

It's the LAW in this state that ALL offers to purchase must be presented to the seller, regardless of who comes first. ONLY the seller has the right to instruct the agent to hold off any subsequent offers to purchase from other buyers. This state is reciprocal with yours for real estate agents, and while we still have to take FL law instruction, in order to sit for the exam, it's probably not too different.

Pre-approval letters for the specified amount of the offer are mandatory for all foreclosure and short sale offers, and mandatory to be included with the initial offer.

The fact that it's your bank that holds the mortgage probably will help you more than anything....any chance you know the bank manager? I wish you would have told me about this prior to you submitting the offer. I would have told you to go straight to the banker if you know him/her well.

[Hawkgirl]

Sorry, I'm calling   on only submitting one offer at a time.

The fact that it's your bank that holds the mortgage probably will help you more than anything....any chance you know the bank manager? I wish you would have told me about this prior to you submitting the offer. I would have told you to go straight to the banker if you know him/her well.

REALLY....I noticed he had a twitch in his eye when he said that.  he said it's confusing to the bank when they have more than one offer...so he only submits one at a time..but he does take back up offers.

As for the banker, no, it's not a local one.  It's just the same company (wells fargo) that I have my current mortgage with.  

[debk]

REALLY....I noticed he had a twitch in his eye when he said that.  he said it's confusing to the bank when they have more than one offer...so he only submits one at a time..but he does take back up offers.

  Many lenders require a 72 hour HOLD on submission of any offers on a foreclosure from the start of the listing. Then any offers obtained are submitted at once!

VA requires 10 DAYS!!! Then all offers are submitted at once. I once submitted 14 offers at one time...rather as fast as I could fax them....the bank picked one. They didn't seem to have any problem at all...just ok, this is the one we accept.

Fannie Mae REQUIRES that if more than one offer is received....each agent who has sent an offer in, is faxed a sheet of paper, that must be signed by the agent that we have informed our buyer that more than one offer has been submitted and all offers are under consideration. We are given "x" number of hours on that sheet of paper with a specific end time (like date/5pm ET), to contact our buyer, ask them if they have submitted their highest and best offer, if not, we have those hours to prepare an amended offer and re-submit it to the list agent by the deadline. As long as the list agent has received an amended offer, that offer MUST replace the prior offer submitted, and Fannie Mae will use the new offer for consideration against the other offers. Fannie Mae then picks ONE offer to negotiate or accept. If no agreement can be reached between Fannie Mae and the buyer, FM moves on to the next offer of their choice, of the ones they have, including any new ones that have may have come in during the prior negotiations that failed. I just went through this process with a buyer in March.

This is process that I just referenced is on foreclosure listings...but while not identical, it is still essentially the same on short sales.

If I had your house listed here in my state (TN) and I did not present EVERY offer given to me to give to you....not only could you have my head on a platter....so could the buyer's agent whose offer I didn't submit to you!

Most sellers - regardless of whether it's a fair market sale, a short sale, or a foreclosure sale....will only NEGOTIATE one offer at a time....but that has nothing to do with SUBMISSION of more than one offer at a time. There's a huge difference.

[Hawkgirl]

Yesterday, I emailed him again and asked if I needed to adjust the initial offer price, after looking at the comparables.  This is what he wrote:



 "I do not believe you need to adjust your price on the offer as long as we are aware that the lender may come back with a counteroffer. I believe this is a fair offer and certainly if we get it approved an amazing deal. Since this is a solid offer with money down."

[debk]

Did you get a letter from your lender saying that you were pre-approved and sent it along with the offer?

Sounds like the seller is just in a really bad situation.

This is a perfect example of someone who was qualified to buy a home for the price they paid, but because of a major "life" change, cannot afford it anymore. However, because of the declining market, their property appreciation is non-existant, and they cannot sell the property now, for even what they paid for it. 

This is what is happening everywhere. We are mostly past the people who had loans they couldn't afford. The majority of people who are losing their homes now...have had "life" changes....loss of a job and unable to get the same salary in another, transferring for a job and no transfer benefits, divorce, illness. Because there were so many foreclosures, over-built markets, now the economy, and lack of sufficiently qualified buyers, house values are declining and people can't sell their homes for what they paid for them and have no money to make up the difference.

I was talking with my broker about this on Monday. I just don't see a change anytime soon. I've done 21 reports already this month. Only about a third of them, if that, have been purchased in the last 5-8 years.

If this Administration doesn't start paying attention to the economy and making it so that business will thrive and hire people instead of trying to tax them more....we are going to continue in a downward spiral in the housing market which will have a very extensive ripple-effect.

Sorry I went off on a tangent.....

[Hawkgirl]

Yes, got a pre-approval from my lender.

This homeowner's situation is what you descibed....getting the big D, and a retired cop.  He said he's moving to Costa Rica after the divorce.

I watch House Hunters International and they had an episode that featured Costa Rica...he better hurry if he wants a deal...prices (especially homes in the coastal areas) are rising...even in "Third World" type countries.
I went to Costa Rica 2 years ago..and I would not want to live there.

[debk]

Yes, got a pre-approval from my lender.

This homeowner's situation is what you descibed....getting the big D, and a retired cop.  He said he's moving to Costa Rica after the divorce.

I watch House Hunters International and they had an episode that featured Costa Rica...he better hurry if he wants a deal...prices (especially homes in the coastal areas) are rising...even in "Third World" type countries.
I went to Costa Rica 2 years ago..and I would not want to live there.

I watch House Hunters Int too. I'd go to Costa Rica before Honduras or Roatan. We're looking at going to St Croix.

[Hawkgirl]

We're looking at going to St Croix.

To buy?  For retirement?  US Virgin Islands would be the way to go if I were to leave the mainland.

BTW...Offer today, contract sign...now it's off the lender....

And the waiting begins...

[debk]

To buy?  For retirement?  US Virgin Islands would be the way to go if I were to leave the mainland.

BTW...Offer today, contract sign...now it's off the lender....

And the waiting begins...

Hopin' for you!!!!

We went down there 2 years ago with Runnin' Buddy and her husband. Loved it. They are pretty sure that they will go there. He's already semi-retired, and she can't retire for a couple more years. Neither one of us can go anywhere until the value goes back up on our houses here, which we hope will be sometime in 3-5 years. Which will time out about right. We HOPE!

We always thought we would retire in Key West, until we sold the condo down there. It has become out-of-sight expensive, and for a variety of reasons.....we've pretty much decided against it.

St Croix is not as popular as St Thomas, nor as easy to get to, and stuff is still affordable there....affordable being a relative term. We'd still work there...and are contemplating what our choices are. We all have the type of personalities that we would go crazy in a relatively short amount of time, sitting around all day. We'd be into the "sauce" by noon, if we did!

[Hawkgirl]

Hopin' for you!!!!

We went down there 2 years ago with Runnin' Buddy and her husband. Loved it. They are pretty sure that they will go there. He's already semi-retired, and she can't retire for a couple more years. Neither one of us can go anywhere until the value goes back up on our houses here, which we hope will be sometime in 3-5 years. Which will time out about right. We HOPE!

We always thought we would retire in Key West, until we sold the condo down there. It has become out-of-sight expensive, and for a variety of reasons.....we've pretty much decided against it.

St Croix is not as popular as St Thomas, nor as easy to get to, and stuff is still affordable there....affordable being a relative term. We'd still work there...and are contemplating what our choices are. We all have the type of personalities that we would go crazy in a relatively short amount of time, sitting around all day. We'd be into the "sauce" by noon, if we did!

Sounds like a  great plan!  I hope the markets rebound here soon too...but I'm afraid the market is going to continue to squeeze out foreclosures.  I'm not even sure we've reached bottom.
I LOVE St. Croix....I just didn't like the fact that I had to wear watershoes when I went to the beaches.   The water is pristine though that's for sure.

Are you going to sell Real Estate in St. Croix too?  Dammit...I was hoping you'd move to Florida and open up a brokerage firm with me...

[debk]

Sounds like a  great plan!  I hope the markets rebound here soon too...but I'm afraid the market is going to continue to squeeze out foreclosures.  I'm not even sure we've reached bottom.
I LOVE St. Croix....I just didn't like the fact that I had to wear watershoes when I went to the beaches.   The water is pristine though that's for sure.

Are you going to sell Real Estate in St. Croix too?  Dammit...I was hoping you'd move to Florida and open up a brokerage firm with me...

We've thought of several things.

buying a bar....M and my son want to do this.
selling real estate.
concierge for vacation properties...I like this idea. among other things it's stocking up with supplies for people   
                                               coming in for vacation. (it's called provisioning
pool maintenance.....this is Runnin' Buddy's idea.
open a repeat shop for household stuff....furniture, decorating stuff, etc.
breakfast/lunch place
cater the food/drink for party/dive/fishing boats...they don't do this there! we chartered two catarmaran's to go 
                                                                   to Buck Island and it was a good thing we had some leftovers   
                                                                   from the wedding, or we wouldn't have had anything, as it was
                                                                   I think we only had enough each one to have a little roll with 
                                                                   some meat in it, and a bite or two of cake. we didn't know that
                                                                   no one would stop and get anything for themselves. snorkeling
                                                                   and swimming makes one hungry and I guess they didn't think
                                                                   they would be.
going to someone's villa and cooking dinner
wedding planning

I'm leaning towards building a business doing the concierge thing. We'd not only do the provisioning, but also provide gift bags if wanted, and assist with activity suggestions and booking. All that takes time, and a lot of people don't want to spend their vacation time, trying to obtain food, liquor and finding out what to do, if they aren't staying at a hotel. The one who had the villa where RB stayed and held her daughter's wedding, was a big help on where to obtain the stuff we needed for the wedding that we didn't ship in. Even to telling us where to get whole beef tenderloin and getting it at a lower than retail price because of how much we got. RB did this spiral bound booklet on St Croix that we put in each gift bag for each couple...it was really nice with maps, places to go, things to do, history of the island, etc....it was about 25 pages.

[Hawkgirl]

Hmmm...I like the 1st idea 

What do people do on vacation?  Drink.   I'm not sure where you'd open it because you'd have to make sure there is a lot of tourist foot traffic at the location.