Bank is Going Cuckoo for COCOA PUFFs - A True Shortsale Joke

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Bank is Going Cuckoo for COCOA PUFFs - A True Shortsale Joke

Henry M.
Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes

Ok, So I rarely post anything if ever, but I thought this situation warranted it.

I sent letters to homes up for auction (monthly/bi-monthly) and received a call from a woman who was in distress crying. She called me on a Friday evening (In September 2013) and her auction date was set for that following Tuesday.

I gave her options and she chose to file a TRO which stopped the auction of her home the morning of.


Make a long story short.

The property ARV is between $110-$115.

The Tax appraisal is $90K

It's current FMV condition roughly $30K (polled among a dozen professionals in person).

She owed $68K on her note.

It would cost roughly $30K to rehab and renovate (+/- $5K).

After successful completion of shortsale application (which is tedious and requires full cooperation of seller/owner) seven plus months later... The bank decides in the 11th hour to list it instead on the MLS for what she owes for at least 90 days..

I initially heard the BPO supported my assessment of $30 but later learned it actually came in at a whopping $85K.

Yes, you read that correct folks, $85K.

After I picked myself up from the floor from laughing so hard, I decided to wait it out until the 90 days are up. We are trying to renegotiate with the bank still but feel the Broker who appraised this home at an outrageous price has ulterior motives. Of course, that is just a guess but we'll see how this saga continues.

As for the homeowner, she loves me and everything I have done for her thus far and is too baffled at how the bank is handling the process.

Maybe they bulk it with other homes and sell it as a package, maybe they are genuinely in the dark, maybe they are not the sharpest tools in the shed, maybe the broker wants the property for himself... Nevertheless, I find myself more and more in these situations in shortsales since the bailouts.

I have been successful in the past. However, trust me, I hate shortsales. Unfortunately, at times they are a necessary evil.

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Am I the only one experiencing such incompetence or actions when dealing with Shortsales?

What say you?

Big Henry

Just a few snap shots (out of 60) of property:

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y

Henry, I understand that other investors may agree it's worth $30k from a "deal" point of view, but your own numbers $115 ARV and $30k rehab, put it's current value at about, yes you guessed it, $85k....without any profit/flip potential of course. Yes, I know this would require a cash buyer willing to buy and renovate, and be in at FMV.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Henry, I understand that other investors may agree it's worth $30k from a "deal" point of view, but your own numbers $115 ARV and $30k rehab, put it's current value at about, yes you guessed it, $85k....without any profit/flip potential of course. Yes, I know this would require a cash buyer willing to buy and renovate, and be in at FMV.

    1Reply
  • Patrick Henderson
    Dallas, TX · Member since 2014 · 68 posts · 33 votes
    12y

    Ok, I don't know where Wayne gets the idea that just because it needs $30k in repairs that it worth every penny after that towards the ARV. To me is flat wrong. If you're going to give cash or hard money niether scenario is a good investment and never will be. In simpler words, no way. My max offer, meaning the very most I would pay is $47,000. It must mak since as an investment. Just a note on banks. They have it way too easy. Look up the acceleration of money (old term, I know) and think about how this bank gets money from the FED at many times throughout history at %0 interest then loan that money to a home owner who defaults, they get it back and keep all the profits, often wanting as nuch as possible without regard to the buyer. they have virtually no money in the deal besides the acquisition. Builder may make $30,000 or more on a $100,000 house. wholesaler $5,000 or $10,000 the bank will make a couple hundred thousand if the loan goes to full term.

    Oh, this is not a bulk sale, for sure. Those deals are done at steep discounts for myriad reasons. They're buying in bulk. 10 to 15 percent will have title issues and so on.

    I hope that helps.

    Patrick

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  • Henry M.
    OP
    Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y
    Originally posted by @Patrick Henderson:
    Ok, I don't know where Wayne gets the idea that just because it needs $30k in repairs that it worth every penny after that towards the ARV. To me is flat wrong. If you're going to give cash or hard money niether scenario is a good investment and never will be. In simpler words, no way. My max offer, meaning the very most I would pay is $47,000. It must mak since as an investment. Just a note on banks. They have it way too easy. Look up the acceleration of money (old term, I know) and think about how this bank gets money from the FED at many times throughout history at %0 interest then loan that money to a home owner who defaults, they get it back and keep all the profits, often wanting as nuch as possible without regard to the buyer. they have virtually no money in the deal besides the acquisition. Builder may make $30,000 or more on a $100,000 house. wholesaler $5,000 or $10,000 the bank will make a couple hundred thousand if the loan goes to full term.

    Oh, this is not a bulk sale, for sure. Those deals are done at steep discounts for myriad reasons. They're buying in bulk. 10 to 15 percent will have title issues and so on.

    I hope that helps.

    Patrick

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    Patrick,

    I concur with most of what you said. We already have money lined up and a potential buyer or two for that area. At worst, we thought they may come in at approximately $47K (basically mid to upper 40's)... And we would have been prepared to make it work.

    The point of the matter, regardless, this BPO or Bank killed the deal and it is just another reminder of why this market is screwy. Especially, when you have those pulling the wool over anyone's eyes to see for one reason or another.

    It just truly behooves me why. We have the Realtor (ours) probing to renegotiate and send over all the pictures. I am hoping the bank (and when I mean bank, the account manager in charge of) reviews the proof and will adjust the price. Otherwise, that house will sit on the MLS as no one will buy that house in its current condition.

    I understand bulk sale, my point was why wait when inevitably it will have to sale at a low price. If they are not going to place it in bulk, then why and what is their exit strategy as this is a liability on their books?

    Note: I will keep this posted as time goes on.

    Big Henry

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  • Henry M.
    OP
    Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y
    Originally posted by @Wayne Brooks:
    Henry, I understand that other investors may agree it's worth $30k from a "deal" point of view, but your own numbers $115 ARV and $30k rehab, put it's current value at about, yes you guessed it, $85k....without any profit/flip potential of course. Yes, I know this would require a cash buyer willing to buy and renovate, and be in at FMV.

    Wayne,

    I am not quite understanding your post. If you could elaborate? ;)

    As for the professionals, general contractors, Realtors, Investors, and others... Were asked independently what their opinion of what this house was worth in it's current condition. The average response came back with approximately $30K. Which by the way, matched closely with our assessment of the property. In other words, confirming our opinion and what it would cost to rehab (an additional question we asked them).

    With our renovation, restructure, and addition, it would have been an easier sale. Even at $45K (asking price), we would have potentially made a minimum of $20K profit.

    It probably is a moot point, but we will see if there is any more development on this case study of ours. We did everything by the book and yet it ultimately may have come down to a crooked or an incompetent Broker and his Priced Opinion.

    Big Henry

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  • Henry M.
    OP
    Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y

    Just a side note for the title, the house reeked of urine and cocoa puffs... Lol. But thanks for all responses thus far.

    Big Henry

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  • Patrick Henderson
    Dallas, TX · Member since 2014 · 68 posts · 33 votes
    12y

    A note on dealing with banks. How sure are you of your agent. Do they truly understand the shortsale process. How many have actually been succesful closing at the wholesale level. Many will be succesful at retail. There is a difference. You might consider doing some of these yourself. And you can even call them and get the exact information they want, Many times in writing.

    Pay attention, The list is in a certain order for a reason. Send them all and I mean all of the reqested info and in the order they asked. That way you will be giving them what they want the way they want. It saves time and energy.

    No one person makes the decision. It's done by groups, with a loss mitigation clerk at the front, that for the most part take the calls and relay information which they for the most part only deliver if you persistantly call and update. You will never get to talk to the group directly at this level.

    Something that has helped me in the past. Be freindly with them and make a friend. These mtigation officers talk to people who get frustrated with the process day in and day out. While they won't reveal much info. you can ask things like this. Look **** can you just tell me what a bottom dollar is to these guys? I've had 3k to 5k drops in price on occasion.

    Patrick

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  • Henry M.
    OP
    Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y
    Originally posted by @Patrick Henderson:
    A note on dealing with banks. How sure are you of your agent. Do they truly understand the shortsale process. How many have actually been succesful closing at the wholesale level. Many will be succesful at retail. There is a difference. You might consider doing some of these yourself. And you can even call them and get the exact information they want, Many times in writing.
    Pay attention, The list is in a certain order for a reason. Send them all and I mean all of the reqested info and in the order they asked. That way you will be giving them what they want the way they want. It saves time and energy.
    No one person makes the decision. It's done by groups, with a loss mitigation clerk at the front, that for the most part take the calls and relay information which they for the most part only deliver if you persistantly call and update. You will never get to talk to the group directly at this level.

    Something that has helped me in the past. Be freindly with them and make a friend. These mtigation officers talk to people who get frustrated with the process day in and day out. While they won't reveal much info. you can ask things like this. Look **** can you just tell me what a bottom dollar is to these guys? I've had 3k to 5k drops in price on occasion.

    Patrick

    Patrick,

    I truly appreciate your response and concur with everything you posted.

    I did everything myself 100%. However, the bank stated the owner needed to sign up with a Realtor and submit all docs back to them. Regardless of my offer or release or the fact that this was post Shortsale Package completed and returned. They wanted it done this way... So we obliged.

    I thought this was unusual considering in the past the banks (we've dealt with many) would hire/use a Realtor to list their properties themselves. But according to their investor requirements, owner needed to line up with a Realtor, then submit our offer via the TREC forms.

    So that is the reason for the Realtor involvement. Otherwise, I did everything myself while guiding the owner along the way (on the docs she needed to turn in).

    I kept the chronology of all progress and updates via text and Email to all involved of each conversation I had with the lender and their reps.

    However, in the end, it was to no avail.

    I'm hoping for a change three months down the road... We'll see.

    Thanks for the input.

    Big Henry

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    @Henry M. I'm certainly not saying I would buy it for $85k. Just that if the bank thinks ARV is $115k, and repairs (they don't consider cosmetics, paint, etc. whether right or wrong) are $30 k, then it must be worth $85k, right? And If ARV is $115k, and repairs Are $30k, then Current FMV is certainly worth more than $30k, no matter what us rehabbers may be willing to pay for it. As for the BPO, I seen some real crazy ones, yes. Sometimes this is just laziness/incompetence, since they're only getting paid $50-$75 to do one. Also, sometimes the guidelines to the BPO dictate using no short sale or REO comp.s, again yes crazy. But, the bank Never hires/uses a realtor to list their properties, for a short sale, since they don't own it have no authority to contract with a realtor......unless there is some short sale never-never land I've never heard of.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    Did you submit multiple repair estimates for everything? Two quotes for hvac, two quotes for plumbing, two quotes for GCs doing the rest of the work. It's worked for me. Pictures probably won't do it. The short sale negotiator has to submit numbers to the investors. They can and do submit necessary repairs as it relates to value and it's not like they are sending contractors out there themselves. Help them do their job as much as you can.

    That being said, the lender is right to think the number is higher than $30K and you are right to want it for less than $85K. Have you ever been a lender? In this market, I'd never let you pay me off with $30K until I had proof that it had been listed and got no better offers.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    In one of my markets (with plenty of $120K houses of similar age/style), if that house was listed as an as-is short sale at $85K there would be no shortage of investor buyers making cash offers in the $50-60K range. The bank comes out way ahead with those offers. Are you saying your area doesn't have investor buyers that will offer $60K?

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  • Henry M.
    OP
    Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y

    K. Marie Poe,

    By no means am I saying there are no investors to buy rehab properties at $50K to $60K... I think the point is, I know this market very well and to solidify my research and due diligence, I had seasoned professionals give me their opinion to confirm my opinion (which they had no idea of).

    We've done this since the 90's and definitely understand where a home should be in the price of fair market value. Regardless of rehab or retail. This is what a pride myself in...

    We turned in everything to the lender however, the result was the same. Two million dollar producing agents also viewed the property and gave their independent assessments of what it could sell for... At the end of the day, it is the bank's property and I will have to either wait it out or move on once the final nail is in the coffin.

    Regardless if I am a lender or not, I would not want any liability on my books. And because this is a bank they should cut their losses quickly. To sell the home at let's say $45K today verses three to six months from now, just doesn't make sense. I am the buyer now. There is no need to place the property on MLS to find a buyer when one is here ready to negotiate.

    The bottom line, their price is unrealistic and most investors will not buy a house at 78% of the ARV before repairs. Especially, when 32% of potential repairs are of the ARV.

    With all that said, it is what it is and we will see what it sells for...

    I just wanted to see if anyone else has been through this...


    I read this on another forum with the following:

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    Originally posted by @Wendell De Guzman:

    Alright...I am going to post what happens every week in my real estate business. Why? So you will learn from my mistakes as well as get inspired by my successes. I also hope by doing this, BP Nation will help me achieve my goal of buying 10 houses a month (I am now at 4 houses a month).

    So here is Week #1(highlights of what happened last week):

    4. Property #4: Chicago (preforeclosure deal) - another dead deal. Bank did not accept our shortsale offer of $15,000 and countered $29,000. The bank (Chase) is so unrealistic with their expectations - they have to realize houses in the area sell for $5K to $20K and $29K puts them out of what buyers are willing to pay for.

    -------------------------------------------------------------------

    So I guess I am not the only one dealing with unrealistic banks.

    I will keep you all posted.

    Big Henry

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