We have an opportunity to purchase a house at a great deal that is currently in pre-foreclosure; We would like to make a contingent offer if/when it goes to bank owned.

I’ve been told that YES they will accept and NO they absolutely will not accept the offer.

Our agent tried to ask the seller’s lender, but they won’t give a straight answer (although she said it may be an issue). And I’ve tried calling banks to find out their standards, but couldn’t reach a human and the automated system didn’t know.

Hopefully someone here does. Thanks!

We put in an offer today for a short-sale deal. Found out that the bank has already received an offer from somebody else on the same house. We really like the house so we’re hoping ours gets approved.
I was just wondering how the bank goes about evaluating those offers, though. If the offer was for the same amount, would the bank automatically select them because they submitted it first? If our offer was higher, would the other person be given a chance to counter-offer (or vice versa)? How does that process work?

We are actively looking for a home and there are 3 homes out of a BUNCH of homes that we would be happy with. The 3 homes are short sales. Can we submit an offer for more than one home at a time or do we need to submit one - wait to see if it gets accepted/rejected and THEN submit another one?

My concern is if we submit 2 or more offers and they all get accepted, know what I mean?

peggyslappeyproperties.atlantanewhomesdirectory.com The Springs at Rock House offers bank approved short sales with 100% percent financing and owner financing available. Amenities include an oversized swimming pool with mushroom water feature & a large clubhouse and playground. Plus great Gwinnett schools!

i am interested in a short sale property, the lender has already approved the short sale, if my offer is less than the approved amount is there a chance that the lender accepts it? thanx

peggyslappeyproperties.atlantanewhomesdirectory.com The Springs at Rock House offers bank approved short sales with 100% percent financing and owner financing available. Amenities include an oversized swimming pool with mushroom water feature & a large clubhouse and playground. Plus great Gwinnett schools!

peggyslappeyproperties.atlantanewhomesdirectory.com The Springs at Rock House offers bank approved short sales with 100% percent financing and owner financing available. Amenities include an oversized swimming pool with mushroom water feature & a large clubhouse and playground. Plus great Gwinnett schools!

It is in the past that we find the quaint efficient way to handle the negotiations of the real estate contract.

The simple concept of  ‘in good faith’ has (over time) been strengthened by the holding of earnest money. Earnest Money and Faith are held hand in hand. Hence, the seller and the buyer have typically agreed to earnestly act in good faith in order to make a real estate deal happen.

The Realtors and the real estate attorneys involved in the transaction take on the roles of coach and referee, while the mortgage lender provides the ball. Pulling a fake out will be grounds for a penalty, so remember to act earnestly (and always) proceed in good faith.

The subject at hand, has to do with today’s real estate market.
The market has had a huge shift in prices, and reasonable sellers have lowered their expectations along with their prices. It took some time, but the adjustment seems to have taken place across many real estate markets.

Unfortunately, the adjustment has not made it over to the buyers side.
Rumors and misinformation have filled the minds of reasonable buyers and turned them into vultures looking for road kill. There is a supposition that all sellers are in foreclosure and desperate to sell their homes. The news media reiterates this information daily.

And, here, below, is a look at how this type of transaction works in real life:

The sellers get the offer, it’s 30% below list price.
NOTE: The sellers have already priced their home 30% below market value (what they would have received a year ago. Their home is adjusted for what is now current fair market value.

The sellers counter offer looks something like this:
“We will reject your offer. See, we are not desperate. We just want a reasonable offer, not a low ball offer 30% off our asking price. Okay, to be fair, we will counter the offer.
Absolutely, counter it at full price, not a penny less.”

The buyer then cops an attitude:
“There are plenty of homes on the market  and I will just keep looking until I find someone who wants to actually sell their home.”

As the Realtor, let me interject:
“The sellers have made their home sparkling clean, model perfect;  they have packed up most of their daily possessions; they have brought the home to new current market values…they have had the home pre-inpsected and are offering a home warranty with it as well. It should handily appraise. The sellers aren’t in foreclosure, what  information are you basing your offer on other than you were told all sellers are desperate and they will accept any price? “

The buyer:
“This is a buyers market and if the seller is going to be unreasonable, I will just keep looking.”

A thought about this. The sellers may be facing a difficult selling market, but unless you are a cash buyer, the seller has to take it your offer on good faith; that you will earnestly march forth and provide the lender with all the documents that they may need to get you (the buyer) through to the closing table.

What if sellers took the stance that all buyers  (except cash buyers, got to love’em) were unqualified because of new strict lending policies or  looming layoffs. Yes, you may qualify now, but rumors that the ax is falling on more jobs means that you may never close.The negotiation of real estate purchases is still a two way street.

People typically buy houses to make them into a home. If you are an investor, stick with the foreclosures. If you are honestly looking for a house for you and your family to call a home, then proceed in such a manner.

Again, from the sellers:
“When you get serious about offering a negotiable price, we can move forward. We are not overly proud nor are we desperate. If you don’t want the house at a fair price, and don’t want to act in good faith, maybe this house isn’t for you. We are looking for someone to work with. Someone who will love our home, the moment they enter it. Not someone looking for roadkill. In the mean time, we are going to seek other buyers.”

This conversation, sprinkled with a little attitude and you have a perfect recipe for a terrible sandwich. One that will leave a bad taste for real estate in everyones’ mouth.

 
A Home Quiz for you:
Have you heard any of these sayings before?

Home is where the heart is.
Home is where my honey is.
Home, sweet home.

Ahh, I thought so.

Real estate is a good sound investment.  The home buying and selling transaction is like none other. It is tied to heart strings…emotions. If you find a home you love, proceed forward with your negotiations, and be realistic. Eventually, the shoe will be on the other foot, and someday you will be the home seller. You will find yourself hoping that someone will come along and buy your home, and that they too, will love it like you do.

Often times an agent will list a home as a potential short sale and state the asking price too low. A short sale list price normally has no connection to the actual price a bank may accept. The list price may be too high to pull in an offer or too low for the bank to accept. The house needs to be listed at an appealing price to entice an offer from a prospective buyer, but not too low that the bank will inevitably reject it.

The seller may not qualify for a short sale opportunity. If the seller is asking for debt forgiveness and they have assets they are at a disadvantage if they are unwilling to work out a repayment plan with the bank. The bank will want to see documentation of their current financial status and a hardship letter from the seller that explains why they can not afford to continue making mortgage payments. The seller needs to explain what hardship they have suffered. Just wanting to walk away and get a cheaper house is not a reason to do a short sale and most likely the lender will deny the short sale request.

The downfall may also be on the buyers end. The desire that many prospective buyers have to purchase a home at a great (below market) price and the financial means to do so are two different are not contingent on one another. It is important to have a qualified buyer before an offer is made. Banks will require proof of funds or pre-approval letter at the time an offer is made. They want to see ability to obtain financing before starting any negotiations. If a buyer is unable to prove funds, the offer will be objected immediately.

It is extremely important to have assistance putting your short sale package together to submit to the lender. These lenders are overwhelmed and understaffed. If the package is not labeled or not packaged as they instructed, they may reject the short sale just because it did not meet their specifications. It is vital to include all the required documents at once. Although it seems simple, this may be the most common pitfall in rejected short sale offers.

There are many reasons why banks reject short sales. Short sales occur when a bank agrees to accept an amount for the sale of a home that is less than the balance owed. Typically, a highly motivated seller is looking to unload their mortgage obligation and avoid foreclosure.

The three most common reasons a property does not qualify for a short sale are: the offer price is too low, the buyer does not qualify, or the seller does not qualify for the short sale.

The Offer Price is Too Low

Typically, the bank will require an appraisal to establish the value of the home before going forward with any approval. The bank may also request a broker price opinion (BPO) be performed instead of the full appraisal.  A BPO measures the home’s value by looking at the comparative sale prices of three recently sold homes in the neighborhood. This process is usually quicker and cheaper for the bank and is common with short sales.

Should the offer price be significantly lower than the BPO, a bank is less inclined to accept the offer for the sale of the home. It is the bank’s discretion whether or not to accept the terms of the offer.

A bank will typically weigh the cost to sell, cost to hold and foreclosure costs when making a decision to sell a home.

The Buyer Does Not Qualify

A bank will require evidence that a borrower qualifies for the home before accepting an offer from them. A borrower must be financially capable of purchasing a property. The items a bank will typically ask for are:

Credit report Evidence of sufficient assets to close transaction Preapproval lender from lender with sales price specifically detailed The Seller Does Not Qualify

If the seller is involved in foreclosure proceedings, the bank may consider holding the property. If the bank has already invested money into the foreclosure, they may want to hold the property and try to sell it themselves in the open market.

A seller should work with their lender to avoid foreclosure proceedings and keep all lines of communication open. A seller should contact their bank’s loss mitigation department and find the representative that can assist them. Once the relationship has been established, communicate regularly about pending offers to keep the bank from beginning the process of foreclosure.

If you are a buyer, keep in mind that a home listed as a short sale is not necessarily approved by the bank. The short sale advertisement does not indicate that a bank has approved a sale.

Foreclosures in the country have pushed past over one million homes. Couple that with folks just trying to sell their home for whatever reason and there is a glut of homes in many markets. While this level is high it is within many historical swings of the past. The point of this discussion is to point out the incredible buyers market that exists in many areas of the country.

Arbitrage in the financial markets takes advantage of price differentials between more than one market. Money is made taking advantage of the differences. In real estate, with the benefit of trained Certified Property Managers and the like, there exists the potential to invest in areas, which are depressed and hold good value in the future. Like examining the financials of a company so the same type of play can be marshaled with investment situations across the country. In crafting offers, returns in the 25% plus range over say a two-year period must be factored in even consider the ramp up into these venues outside of one’s backyard. Finding deals in the backyard would be best, however, lacking that one must look elsewhere. In an example of buying a rental condo in a resort area that has abundant inventory and has plenty of foreclosures forcing prices down some investment play may be possible. If a rental condo is listed at $300,000.00 and has and existing mortgage of $280,000.00 with a pending foreclosure pressing the owner this might be a deal worth looking at. Owners with ARM mortgages with accelerating payments and/or other pressures have come to bear on owners who find themselves in a fix. Many of these condo rental properties with onsite rental offices make for a decent cash flow. In some water front properties the gross rents will approach $30,000 plus per year. In trying to negotiate with a lender with a foreclosure action in hand it is best to have ones own financing or cash to bring to the table. That lender will not cut the price (mortgage) if they are being asked to hold the mortgage. In this example, a proposed “Short Sale” would be probed as a possible action. In this case, the owner receives nothing. The owner may save a foreclosure nick on their credit but that’s it. The lender on the other hand will be offered an offer in the $240,000 range IF the return is figured. The lender takes a $40,000 plus hit on the deal with additional costs for legal fees, past payments, late charges, etc. in addition to the “short” settlement. This is a big hit for the lender. However, Real Estate Owner (REO) properties have to be liquidated. If the lender foreclosed and sat on the condo for another six months and took another hit at sale time, the proposed $40,000 plus hit starts to look pretty good.

An investor needs to determine the condition of market place in a year or two. The economy still has strength, employment is strong, so then it is a question of what will be happening in the market down the road. If that analysis comes up positive then one would continue on the track. An outside force on these waterfront investor condo properties will come to into play as when possibly the dollar falls against the Euro or Pound. Those buyers coming into the market with stronger currencies will see these situations as strong buying opportunities and prices may spike back up. A Realtor needs to market to these buyers immediately. In addition, with stronger currencies abroad vacations in these waterfront condos can almost look cheap with a good deal of safety. A few years down the road, the rentals could be pumping and the demand could be up for these specific properties which can be rented when not being used by the owners. Naturally, there is no guarantee that this will play out exactly that way, but it is an educated analysis basis on the facts currently in hand. When depreciation, interest deductions and other factors are put into the equation, perhaps a $40,000 “short” is not enough. Perhaps it will take a little more. In any case, an investor’s numbers should be shared with the lender to shore up the case for the “short sale” and give a little cover to the work out specialist who is signing off on the deal. The lender will have several BPOs (Broker Price Opinions) of the value as several AVMs (Automated Value Models) to further peg the value. However, if things have not been moving with say six months exposure to the market place, then the lender may be compelled to pull the plug.

Much like when the accelerated depreciation plug was pulled in the 1986 Tax Code, properties must stand on their own. Limited Partnerships and REITs were being offered with low (50% LTV) leverage to realize any kind of cash flow. In this case, a highly leveraged mortgage would insure a negative cash flow. Thus the return on investment will be calculated on a low leveraged situation. The 25% plus return then would be possible. Each case needs to be turned inside out before making an offer. If there has been several price reductions over the listing period with offers of paying all the closing costs and such, then this will garner further investigation. To save a lot of time, the question phased as: “To save us both a lot of time, I’m looking to buy at a deep discount from a motivated seller or a lender who will consider a deep “short sale. I’m very liquid in cash and can close quickly. Is there any shot at a deal on this property?” If not move on.

This glut of properties won’t be here forever. It took a few years to absorb the Savings and Loan fiasco and major write-downs that took place, but it was absorbed and money was made by many. The original owner being in an overly leveraged mortgage situation may have cast the initial foreclosure situation. High leverage kills when the underlying financing is an Adjustable Rate Mortgage in a rising interest rate market. Cash flow disappears. The bleeding begins.

It’s no place for the faint of heart. Like arbitrageurs in the financial markets, it takes a strong will, liquid cash and a good feel for the current market and the future market and how it will all play out. The climate for a play is here and now in some targeted areas. Over 1,000,000 foreclosures, a glut of listings on the market, a falling dollar making attractive situational buys to foreign borrowers makes for a play now. “Knock, knock.” “Who’s there?” “Deal” “Deal Who?”

“To Deal Or Not To Deal, That Is The Question”

Dale Rogers
www.BrokenCredit.com
www.sellerhelpsbuyer.com

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