As first discussed here last month, we recently made an offer on a short sale property here in our new hometown of Bozeman, Montana and, now exactly one month later, there’s not a whole lot to show for that effort aside from a slightly higher level of stress, some insight into the short sale process, and growing impatience with the banks involved.
The seller signed off on the deal the day after we submitted it but we’ve yet to hear anything back in writing from the bank. About two weeks ago we were told that if we wanted to pay full price, we could have already closed by now.
Our all-cash offer is 7.5 percent below an asking price that is already quite attractive as compared to recent sales, but, it’s future sales prices that are of more concern to me – we had no intention of buying anything so soon, but the right house just happened to come along.
If this area is anything like the rest of the country, absent government life support (in the form of the homebuyer tax credit) sales are now in a virtual free-fall, down 25-30 percent or more last month based on leading indicators such as mortgage purchase applications.
We hear things third hand – from the bank, to the other realtor, to our realtor, to us – so, who knows what gets lost in the translation. Our weekly query went unanswered this week and the last we were told was the bank would take its normal 30-45 days to respond.
The reputation that short-sales have earned is well deserved and having such an important (and emotional) decision hanging out there for weeks or months at a time takes a toll that you can only appreciate if you’ve been through it. At this point, it’s not clear to me whether short-sales are more stressful for the seller or the buyer – at least the seller knows his fate and it’s only a matter of how long they get to live there without paying any mortgage or rent.
The buyer, on the other hand, basically gets their life put on hold with no assurance that the bank will ever respond. I think it’s safe to say that once you’ve been through this process and ended up with nothing at the end of it, you’ll never make an offer on a short sale again.
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
about two weeks ago we were told that if we wanted to pay full price, we could have already closed by now
Tell them that, if they were willing to accept your offer, you’d already be closed by now too.
I’m tempted to do what was suggested in the original post on this subject – submit a new, lower offer.
Yeah, I’d actively keep trying to drive their perception of the price lower. Some bank loan officer would have the psychological pressure to deal with which, given the downward momentum of the market, could force their hand into accepting a very low offer.
first offer expires in twenty days and will be replaced with a subsequent offer 3% below initial offer price
second offer expires in fifteen days and will be replaced with a subsequent offer 5% below initial offer price
third offer expires in ten days at which point other properties in the target rich environment are explored.
… or something like that. and yes, i’d tell ‘em that all up front. who’s interested in putting their life and their family on hold for these buffoons? on the one hand, you probably want the house; on the other hand you don’t want to spend your life waiting for the bankster to lower himself to actually speaking with you.
my 2¢ [which will soon be worth 1 1/2 ¢ ...
]
Yeah isn’t that how the Donald did it for Mar el Lago (as written in art of the deal). Every time they put him off he dropped his offer and ended up getting it way cheap.
Next time put a time limit on the offer. Force them to respond or walk away,
Do you know of any instances where this has worked?
Tim’s problem: ‘the right house.’ They sense that he feels that way – why wouldn’t they wait a few weeks to get another 7.5%? Instead of putting his life on hold, he should be looking for another. Your feet are your best bargaining tool.
well, as in any bargaining situation, the one who needs it the least, gets the most!
The English house-selling system is notoriously sluggish, but in the house price collapse of the early nineties our banks sold houses far more quickly than this. They just seemed to accept any quick, half-decent offer and strike the deal.
Sounds to me like there may be a second lien involved. Or some sort of securitization issues. I could be that no one know who’s holding the original note.
This is the problem with short sales. The bank who issued the note, the second lien holder if any, the investors who bought the security, and the mortgage insurance company must all sign off on the offer. That’s why it takes so long.
You would be better looking at repossessed homes listed by a reputable broker.
I wish you the best of luck with the short sale. Don’t hold your breath because the system is stacked against you.
If there is a second lien holder or a subordinate debt holder, then you are done for. In a short sale, the second in line will never get paid. Hence, they lack a motivation to take an offer, which should explain the lack of short sales.
Let’s say the mortgage holder has sliced and diced the mortgage. The mortgage holder will get paid some amount; let’s say 75 cents on the dollar. That amount leaves nothing for the banks and other investment houses who bought pieces of the mortgage. Why should they accept nothing? They can afford to wait.
We put a bid on a short sale and five months – an additional bid later – we walked away from the sale on the advice of OUR broker. I am glad we did because the house turned out to be in a terrible condition. We bought a house four blocks west and could not be happier. We paid more but our house is not falling down on our ears.
Do you have a broker on the short sale? If so, fire them now. Next, resubmit a lower offer bid (~$10k>) that expires in 45 or 60 days. When the new, lower bid expires (and it will), submit another lower bid still (now ~$20k>). Repeat until your bid hits $25,000 and then walk away.
Is your bid all cash? If no, then your bid will never get accepted.
Keep detailed records of all your bids and correspondence with ALL parties involved. After your final, all cash bid of $25,000 is rejected, send cover letter and all documents to your Congressman. Ask this person why banks refuse to help homeowners. Send a copy of the cover letter to every local, state media outlet and the Huffington Post. You might get media and/or political pressure applied to the bank.
Good luck. Keep house hunting.
Have you considered going to the county courthouse in Bozeman and asking for a copy of the documents recorded on/against this property? I did this in Georgia and the clerk was happy to provide it to me for $1 a page, which was reasonable enough, considering. I was able to see who had liens on the property, which is what I wanted to know. If you can do this, then you should be able to learn if there is a HELOC or second lien on the property which would, as a previous poster suggests, slow down the process by a little or a lot.
Tim,
My brothers girlfriend is a realtor so she gets more of the in the know
info not openly broadcasted info. Anyhow, even if you are paying cash you should make 100% certain you fill out and submit first time home buyer paperwork,
even if you a going to pay cash. Apparently the gov’t is leaning hard on banks to
be quicker and more liberal on closing transactions with the technical “first time”
home buyer. (note this does not mean your 1st home bought ever)
He made an offer like you and it was refused, then the found out the local agent (not his GF) had not
submitted his 1st time paperwork and he insisted it be done… boom! he got his
offer accepted and he also paid CASH!
I’m assuming it is in order to make sure flippers don’t exploit any possible gov’t facilitated leniency.
It was industry gossip/hearsay but it worked!!! It can’t hurt for you to try.
I understand the regional banks are foreclosing enmasse on homes that have some equity built ( profts for their dirty little pockets ) , ergo letting slide the homes which are underwater , till the “money-makers” are all used up . Old timers say this was the practice during the great depression as well . So I would bet short sales , where one ( or second lien holders as well ) will take a loss haircut , are being put on back burners . Rather than having a life on hold , I would keep looking for homes . You should not be obligated to buy the short offer at any rate .
Good luck
Thanks for all the comments and suggestions – a few points of clarification:
1. There is a second lien and that’s part of the problem. Ironically, if not for the second lien, it wouldn’t be a short sale and the first/second lienholder negotiations are part of the delay, though, when I heard some of the details of the negotiations (which, unfortunately, I’m not going to share here) I was quite stunned.
2. BTW – the second lien does not show up in court house records which we check periodically.
3. We do continue to look for other properties but, so far, nothing else has come up that we’re ready to make an offer on. It’s only been a month but, believe me, I’d love for something better to come along so we could withdraw this offer.
4. I’ll have to check into the “first time homebuyer paperwork”.
I’m going through the exact same thing in fort Lauderdale right now. Short sale, first lien holder accepted the offer immediately, second has not responded and it’s been several weeks. It sure does feel like a life on hold situation that you only understand if you’ve been through it as you describe.
Geez, no good deed goes unpunished, huh? GawainsGhost knows real estate so whatever he has to offer is worth a listen.
I just think of that scene in the Godfather II when Michale answers the Senator:
“My offer is this; Nothing!”
Good luck going forward.
Um, if the second lien isn’t recorded, it doesn’t encumber the property.
You are only bound by recorded liens. Talk to a local real estate lawyer.
And don’t ever put time limits on offers. That way you can retract at will.
Yes, well, here is the thing. And this really is the thing. The final deal will be determined by highest net to seller. Period.
This is my business. I work with asset managers all the time. Fannie, Freddie, AHMSI, MGIC, the list goes on. Most of these asset managers are responsible for up to 500 properties at a time. They have a regional manager, who has a senior manager, who is responsive to a pool of investors and a mortgage insurance company. All of them have to sign off on every deal.
The foreclosure process is very expensive. There are attorney’s fees, repossession expenses, including rekeying and securing the property, maintenance and utilities, repairs, realtor commissions, and taxes which must be paid by the seller upon closing. So they’re alread losing money on most foreclosures. They earn a profit on those that have a considerable amout of equity and break even on others, but more often than not they have to eat the losses. Thus, the only thing to be considered is highest net to seller, in order to minimize the loss.
Whether it’s a short sale or a listed repossessed home, I can assure you the bank or lender, the investor(s), the mortgage insurance company, the asset managers all have an appraisal on file. They also have two recent broker’s price opinions, written by reputable realtors in the area. I know this because I write BPOs for a mortgage insurance company every month. They have a reasonable idea of the fair market value of the home, based on comparable sales in the last six months. And they are not going to accept any offer very far below that.
We’ve sold well over 2000 repossessed homes in the last ten years, and I could count the number that sold for more than $1500 below list price on my fingers. That would be less than ten.
This is what these people who are advising you to make a low-ball offer fail to understand. The final decision on the sales price is not yours. It is the seller’s, and it will be based on highest net.
Here is what is going on with this deal. The seller(s) are calculating the expenses involved in foreclosure and repossession, estimating what they could reasonably get on the open market, and comparing that to your offer. If they believe they can get a higher net on the open market than they can by accepting your offer, that’s what they’re going to do.
The second lien holder is making things difficult because it wants to realize at least some return. In a foreclosure, it loses everything. If your offer is not sufficient for the second lien holder to get at least something, it is going to kill the deal, because nothing later is the same as nothing now.
By the way, it is not true that you are only bound by recorded liens. The lien, say a mechanic’s lien, attaches to the property, not the previous owner. If it is filed after closing, it attaches to the property and must be paid upon resale. That means you have to pay it. This is why it is imperative that you have title insurance. The title company then would be responsible, not you.
If a bank were to decide today to move to foreclose on a home, what would be the estimated cost to them going forward?
For a hypothetical let’s assume that there is no 2nd mortgage, no PMI and the home is located in Northern Virginia.