Is that part of what to expect at short sales?

Question

Hi.

I am pretty new at this game, so please excuse me if what I describe is routine. In summer I put a short sale under contract with the seller, awaiting a reaction from the bank. Nothing moves for almost four months until I see the property on auction.com listed as trustee sale. My realtor finds out from the listing agent that all of the sudden there is a bank counter offer. I don't understand why the listing agent didn't inform us. I also don't get that there is no written and signed document sent from the bank. Only a brief email from the listing agent states that the bank counter offered at a certain price. Meanwhile I countered the counter offer, and again, no response from bank or listing agent while the trustee sale date is getting close.

How can the bank go forward with a foreclosure when it is in contract negotiations with me? Is that legal or do they get by with it because they know they can? And why doesn't the bank bother to document the counter offer?

Andreas W. · Answer

Thank you for all your helpful suggestions. This is a great site. Meanwhile, my short sale fell apart. The bank never countered my counter offer and proceeded with the foreclosure. I saw the property change owners for $55000. Of course, I am perplexed why they didn't accept $69000 from me but were willing to let it go for $14000 less. I would have been thrilled to bid as well but didn't want to blow though my cash stack. There will bee more opportunities for me to finance. although, the market has become very quiet here.

Wayne Brooks · Answer

If the foreclosure auction occurs, the short sale is dead.  If the bank takes it back, they will list with one of their REO agents.

Steve Babiak · Answer

If you don't have cash to pay the full bid amount at the trustee sale, then you are not a trustee sale buyer IMO.

Andreas W. · Answer

I like the financing idea after a cash offer is accepted. Next time I will try that. This PA only speaks about financing, no cash offer. I couldn't find anybody running a same day title search. Auction.com lists a Foreclosure Property Report in which only one lien is displayed. Of course, they don't guarantee anything and I have no idea how reliable these reports are. Does the bank have the option in this process to fall back on the short sale offer if they realize that they make more money that way? I assume, should the bank gain ownership, the REO process doesn't come cheap.

J Scott · Answer

In my experience, this has no effect on the banks timeliness of approval/counter, nor with the likelihood of approval (or amount of counter).

Just my experience...

Wayne Brooks · Answer

Andreas, not to belabor the point, but sometimes this is actually a "short sale offer solicitation auction" assuming it's an auction.com.  But, if it is the foreclosure auction, and you buy it, then the bank no longer owns it and your counter is irrelevant.  What do you think FMV is, what was their counter, and yours?

Matt Devincenzo · Answer

@Andreas W. something to consider going forward.

I buy and hold in FL, a standard FL purchase agreement (PA) specifically states that a cash offer is a cash offer but the buyer reserves the right to use any form of financing if they choose contingent on you still being able to close. So if you have the cash available, and have confidence in your lender being able to close then remove your financing contingency submit a straight clean cash offer and then after it is accepted get your lender to fund it. The bank cannot refuse to accept the financing because they accepted your cash offer that still reserved your right to pursue financing and you still have your "ace in the hole" of having  cash if you did have to use it.

Obviously confirm that the PA you are using does not have language preventing this, but it may help you get deals like this closed.

Mark Ferguson · Answer

the listing price is usually determined by the listing agent and has no real bearing on what the bank will accept.  FYI, I have bought many short sales with financed offers. They can take their time responding to offers and will base their value on appraisals and bpos.

Account Closed · Answer

Did you tell the bank you are a cash buyer with funds in hand?

Joe Gore

Andreas W. · Answer

Wayne, Joe, thank you for taking time to shed light on that topic.

Here are the numbers that play a role so far:

LP: $69000

My offer: $68000, seller accepted

Bank counter: $75000, discovered on auction.com one day prior

My counter: 69500

Trustee bid ( I guess this means opening bid) is $57000

I was in the property and estimated a $7000 to $8000 upfit. Mostly appliances and cosmetic stuff. Regular same size sales were in the upper 90s in that neighborhood.

I will see if I can have a title search being performed in time. Without it I will not consider getting my hands on at the trustee sale.