We placed a bid for house on a short sale but I want to know what the chances are that the bank will choose us to sell too. The house was listed at 350K and we bid $365K as that is what we can afford. Our credit is excellent, my husband and I have stable jobs, we are pre-approved and have 45K in the bank and are willing to put down 20%. This house has been listed since August. They did a drive by BPO (if anyone knows what this means, please let me know) and are waiting for the appraiser to come do the appraisal. What would be a sure way of securing this property? This is my dream home. I just couldn’t afford to pay anymore. It looks like the median price is about $360K in this are. Any short sale experts that want to give me some insider tips?
I am very experienced and knowledgeable in purchasing short sales and my clients get the best deals. Here’s the strategy you need to use (it might be too late on this one since you are paying too much and the bank already knows about your offer):
As a buyer, you will need to have your agent look at the lowest comparable sales and offer around 10% below that (for your area). For example, if in the last 1-6 months the low sold prices were 360, 355, 365 your offer will be for around 320k. You will also need to ask the seller to pay for all cost and 3% for your closing cost. If the home is owner occupied, then you, not your agent, can contact the owner and tell them that you will give them $1,500 if they use your purchase offer only after close of escrow/sale. The seller gets nothing from a short sale and offering them money will motivate them to use your purchase offer for the short sale. Plus it gives them money to move. Now, the only people who will get the house are people who will offer the owners the opportunity to rent it back or offer them more money (homeowners tend to catch on quick when they realize they can profit from a short sale). If the owners are out of state or nowhere to be found, be creative. 
The second part is the BPO. The bank sends an appraiser to the home. It is very important that one of the agents meet the appraiser and give them 3 low sold and 3 low active comps. They should let the appraiser know that the house is in foreclosure and any value at or below 320k would be appreciated as it will help the owner out. Ask for a business card and say that when this is over and if it becomes a success, you will like to send the appraiser a special thank you. The business card will also let you know if this an appraiser or a real estate agent. The real estate agent doing BPOs is doing so in hopes that the short sale will fail and that they get the listing. So they purposely give the bank high numbers. So by knowing who you are dealing with, you know what to expect and what your next strategy is. There’s more, but these two points should help you out.
Also, DO NOT SPEND A DIME until you have an approval letter in hand from the foreclosing lenders. A verbal confirmation means nothing as the banks might counter the terms or ask the owner to sign a promissory note. Also, make multiple offers on every short sale you like and go with the first one that materializes first with the terms you like. No need to give an earnest money deposit or start the purchase (escrow or settlement) until you have a written approval letter.
A lot of real estate agents and buyers think that making and submitting high offers will ensure a purchase of a short sale. It is actually the opposite being true. As a listing agent of a short sale you want to negotiate a low ball offer with the lender in order to find motivated buyers and to easily flip it to another buyer should the original buyer decide to flake or their loan is no longer valid. Nothing worse to be sitting with an overpriced negotiated short sale where the buyer backed out and no one else wants it because the price is too high, so it goes into foreclosure. As a buyer, you want to make sure you are getting a good deal and to protect yourself in a downward market where prices drop, especially since short sales take anywhere from 1-5 months to negotiate.
Good Luck!
November 29th, 2009 at 3:29 am
Make your offer and let the chips fall where they may. A BPO is a Broker’s Price Opinion and in many cases, a bank will ask a local real estate agent to do one in order to set a ballpark value of the property. If it seems like the offer price (or in some cases the list price) is in the ballpark, they will then order an appraisal which is a more detailed study of the true market value of the property.
A short sale process may take a while and there may be bumps along the way. Recently, we have been seeing situations where a bank will agree to the short sale, only to inform the seller a day or two before closing that the only way they will allow the sale to close is if the seller signs a document saying they will personally be liable for the balance of the mortgage. If the seller says they won’t sign, the bank will not accept the payoff and the deal falls through. In several cases, the seller told the bank to take a hike and again the sales fell through. In the meantime, you are laying out fees to your lender, inspection fees, etc. because you, as the buyer, are operating in good faith the buy the property and there is no way to recoup any of this money.
You should have a really good real estate agent to steer you through this process and explain all the pitfalls you may encounter to you. If you do not already have a real estate agent working on YOUR behalf, get one and make sure you ask if they have had experience with short sales. If you do not want to work with a real estate agent, you should have an attorney working for you who specializes in real estate transaction law.
Unfortunately, there is no SURE way of securing this property unless you want to find out what the total amount is that is owed on the property and offer higher than that to cover all the real estate fees, transaction fees and taxes, etc. Make your offer and prepare to be sitting on eggshells for quite a while.
References :
November 29th, 2009 at 4:13 am
First of all, are there multiple offers on the property or is yours the only one? If yours is the only offer and you came in above list it sounds promising as you appear to have solid financing and ability to purchase.
Second, do you know if the seller or their agent have a "pre-negotiated" sale price-meaning has the bank already agreed to accept a purchase price of $350,000? If so I would say you are a shoe in!
If the bank ordered the appraisal on this then they are definitely considering this offer for acceptance. Often responses from banks on short sales can take a very long time-months in some cases! If the bank ordered this appraisal that is a good indication you may have a response soon.
Unfortunately you as the buyer don’t have much control over the matter. If you are offering fair market value for this property the bank will very likely accept your offer. If the bank feels the property is worth more than your offer they may decide to take this property back and sell it themselves-contrary to popular belief the banks don’t want to "give" these properties away and are NOT selling them for "pennies on the dollar". The bank like any other seller wants what the property is worth-and they will get market value for it-so if you are in line with the current market value you should be all good!
If all else fails-if the bank does not accept your offer now and if it is likely a higher offer from somewhere else is not coming in, then upon the home being foreclosed on you should see it come back on the market for a second chance to buy it. Although-there is no guarantee it will be available again as a regular listing-it could be placed in an auction etc.
Banks generally will take the offer with the highest net to them provided the buyers are solid buyers with ability to close.
Good Luck with your offer!
References :
Broker
November 29th, 2009 at 4:45 am
I am very experienced and knowledgeable in purchasing short sales and my clients get the best deals. Here’s the strategy you need to use (it might be too late on this one since you are paying too much and the bank already knows about your offer):
As a buyer, you will need to have your agent look at the lowest comparable sales and offer around 10% below that (for your area). For example, if in the last 1-6 months the low sold prices were 360, 355, 365 your offer will be for around 320k. You will also need to ask the seller to pay for all cost and 3% for your closing cost. If the home is owner occupied, then you, not your agent, can contact the owner and tell them that you will give them $1,500 if they use your purchase offer only after close of escrow/sale. The seller gets nothing from a short sale and offering them money will motivate them to use your purchase offer for the short sale. Plus it gives them money to move. Now, the only people who will get the house are people who will offer the owners the opportunity to rent it back or offer them more money (homeowners tend to catch on quick when they realize they can profit from a short sale). If the owners are out of state or nowhere to be found, be creative.
The second part is the BPO. The bank sends an appraiser to the home. It is very important that one of the agents meet the appraiser and give them 3 low sold and 3 low active comps. They should let the appraiser know that the house is in foreclosure and any value at or below 320k would be appreciated as it will help the owner out. Ask for a business card and say that when this is over and if it becomes a success, you will like to send the appraiser a special thank you. The business card will also let you know if this an appraiser or a real estate agent. The real estate agent doing BPOs is doing so in hopes that the short sale will fail and that they get the listing. So they purposely give the bank high numbers. So by knowing who you are dealing with, you know what to expect and what your next strategy is. There’s more, but these two points should help you out.
Also, DO NOT SPEND A DIME until you have an approval letter in hand from the foreclosing lenders. A verbal confirmation means nothing as the banks might counter the terms or ask the owner to sign a promissory note. Also, make multiple offers on every short sale you like and go with the first one that materializes first with the terms you like. No need to give an earnest money deposit or start the purchase (escrow or settlement) until you have a written approval letter.
A lot of real estate agents and buyers think that making and submitting high offers will ensure a purchase of a short sale. It is actually the opposite being true. As a listing agent of a short sale you want to negotiate a low ball offer with the lender in order to find motivated buyers and to easily flip it to another buyer should the original buyer decide to flake or their loan is no longer valid. Nothing worse to be sitting with an overpriced negotiated short sale where the buyer backed out and no one else wants it because the price is too high, so it goes into foreclosure. As a buyer, you want to make sure you are getting a good deal and to protect yourself in a downward market where prices drop, especially since short sales take anywhere from 1-5 months to negotiate.
Good Luck!
References :
I am a CA Licensed Real Estate Broker specializing in helping people in foreclosure and helping people purchase foreclosures.