Short Sale Quesations?

Question

Hi,

My wife and I are loooking to upgrade and saw a possible short sale home that we were interested in. This one is odd so I thought I would post it here see if anyone can help me. Here is the scenario.

The house payments are not yet behind (feb payment was made). The house is appraised at 190,000.00 in a subdivision that is not even 50% built out. The only sales in that neighborhood have been pre-construction homes. Realtor is under the impression that the bank might want to discount it more since it doesn't have any late fees etc.

Would the BPO take into account things that are missing, such as it doesn't have a privacy fence? there is some settling, so minor cracks etc? My realtor doesn't think they will, but I would think since the bank might have to fix it before they sell, it might be considered.

Thanks for any help in advance!

Dave Grosse · Answer

check with james ward - aka "crosswind" and scott hubbard here on BP. I know James negotiates nationwide and I'm pretty sure Scott does too

Dave Grosse · Answer

Ali, again I doubt that the lender will discount due to the fence and cracks. If it affected the integrity of the building then it would be a different story. As for the negotiator, it depends. Has your realtor successfully negotiated low payoffs or do they go the route of only submitting offers that the bank says they will accept? IE - if the bank says they want $190K for this place, will your realtor get them down or just tell you that you need to offer $190? In general I would say hire one anyway. The bank may or may not pay them, if the bank doesn't pay then your &/or your realtor will pay them. But if they do a good job, the added discount you should see will more than make up for it. I would prefer for my realtor to spend more time finding me new deals rather than spending that time dealing with the bank, even if they are good at it.

Dave Grosse · Answer

Also, how much is currently owed on the property? And I would doubt that the bank will discount "more" if there are no back payments/ late fees. they are just going to be looking at what the BPO comes in at and what they think they can get as REO vs. short sale. One more thing - has your realtor or the listing realtor ever done a short sale? If you are wanting to get the best deal possible I highly recommend that you gain the services of a professional negotiator.

Dave Grosse · Answer

Ali - the very first short sale I attempted was not behind on payments, but we were able to show the bank that time was running out and that the owners could no longer afford the property - they had been making the house payments on credit cards for 6 mos! The bank was wells fargo and they would've given an approval if Bank of America didn't screw us over, but thats another story. I agree with Nate that the bank will not make any repairs, although if you present your case correctly, they should give you some discount. I certainly wouldn't expect them to make a concession for a privacy fence as that is more of a cosmetic/ personal preference type of thing. If all of your comps have a fence, then you may be able to use that as a very, very small bargaining chip. cracks in the foundation - is the home structurally unsound because of them or can they just be patched up?

Ali Samana · Answer

Thanks Dave, will do. @Matt: Thanks for a great reply, here is the response. The reason we can make a good argument for a short with the bank is because there has been 0 movement on finished homes. The only activity has been on pre-construction homes. The seller has not lowered the price, but is giving away riddiculous upgrades. So, if one were to pay full price, wouldn't they just go to the builder and get a brand new home? The seller does have hardship, he is a realtor, need I say more :). He has signed a hardship letter declaring his income has dwindled. I did not know about the legislation, thanks for informing me. That makes me want to move on this even faster before the know-it-alls try to change the way we do business. If you know of any seminars like that in Corpus, or even Houston, please let me know. I would love to go. Thanks again everyone!

Matt Mathews · Answer

Just curious? Is the builder still in business and building new homes? If so did the builder lower prices in that sub division for the same model home? I'm just wondering why this New Home would be a short sale when half the project isn't even finished. Unless that builder is belly up and new construction is on hold or the lender owns the project-and unless that home owner has a serious hard ship (Job loss, missed payments, applied for a loan mod etc under Fed bail-out rules, No short sale can take place period!! To note! New legislation pending by you know who to virtually stop all foreclosures until home owner goes through and has exhausted all methods available to stay in home. I doubt if it will get passed, but until it does most lenders will have to stop foreclosure proceedings. Some already have. Sorry to be so negative, but I do this for a living. I seriously recommend that all investors get educated about what's really going on behind closed doors at the Fed and also learn about the changes being implemented already with banks and lender across the US. I just spent a whole day in a workshop given by BoA, Wells Fargo, Chase Top Executives, and asset managers etc. Some of the changes and procedures are already in place for serious Fed policys coming to a neighborhood near you.

Ali Samana · Answer

Thanks Dave, I am going to see if I cna locate a negotiator in my area.

Ali Samana · Answer

Thanks for the quick responses guy. Very helpful. @Nate: The listing agent is also my realtor. I am working with her because she has become an integral part of my RE investing team. Also, she will reimburse me half of her commission. @Dave: the current owner has submitted a hardship letter saying he can no longer make the payments. He still owes a little more than 190k on it. Concessions is what I was wondering about as far as cracks, fence. The cracks are just some settling that can be patched up, no foundation issues etc. On the professional negotiator, would you still hire one even if your realtor does several short sales a year? Currently working on 20. Just wondering because I have never worked with a professional negotiator.

Nate Cadwell · Answer

Hello, I understand that you are working with a realtor on this deal, but is the property listed with a realtor? As far as the bank discounting it more since it is not behind... I don't know about Texas or which bank it is, but out of all the properties we have looked at and made offers on, no bank has ever been willing to even consider a short sale unless the property is at least 2 months behind on payments. Don't ask me why - that's just how they respond to us. Another question - if there is a listing realtor, have they made contact with the bank that holds the mortgage? Is there just one mortgage? Has the realtor talked to someone with authority at that bank or maybe a loss mitigator? As far as the bank fixing the property before they sell it, Good Luck! I mean that politely. I know that here in Oklahoma there is no chance a bank is going to do any repairs on any property. Most of the time, the person representing the bank and handling the negotiations doesn't have a clue what the property even looks like... We have looked at houses that have been totally destroyed except for the outer walls and the bank was asking maybe $20,000 below retail! The property was going to need at least $50,000 in work! Anyway, I hope this helps. Good luck! I hope it works out for you. -Nate Cadwell Winning Solutions Specialist