Perfect House...Perfect Offer
MV=190K
Trustee Sale = 190K
House in excellent condition...don't anticipate alot of repairs...comps are looking to close to what is owed some even at 198K...I have come up with maybe 30K in repairs. I expect we can flip this house fast without alot of effort.
Can I still make the standard 30-60% below market value offer to Bank One? Or will they rather foreclose and sell themselves....Does anyone know what percentage deduction is the banks breaking point?
What would you offer?
I would think that 30% from the as-is, FMV would be the maximum allowable discount from an informed lender.
Anything more than that would be atypical. Frankly, I would think that 20% is closer to the norm.
Claims of 30% to 40% or 50% discount from the as-is, fair market value are, in my experience, questionable....
If the property is in excellent condition, how will you justify $30K in needed repairs? Lenders will consider repairs that are necessary to restore a property to marketability.... [ Edited by TheShortSalePro on Date 04/01/2004 ]
Thank you for responding! I was hoping you would!
So you are saying 20% is more realistic for the bank to consider?
I could make that work. The realtor is being very difficult. In his e-mail to me last night he wants to represent both the buyer/seller. We can represent ourselves as my husband is a comm agent. He does not have the SS pkg or info from Bank One...he is waiting to hear back.
He said, at 192K the bank is already taking a hit. I don't know how much more you think they can take? (The note is for 190K)....He says he has done several SS. I think he just wants a buyer who is purchasing for their own personal home and will pay FMV.
How do I handle this realtor...I have been very kind and let him know we want to work with him...I just feel he wants us to pay Full Value...
Can I work with the lender without the realtor? I don't mind him getting his commission since he listed it...I just don't know that he is interested in a real SS and will represent us fairly.
I keep asking him if he has a waiver signed with the homeowner allowing him to talk with the Lender but no response yet. Can we get this waiver with the homeowner so we can work with the bank and the realtor gets his comm when all is closed.
Your expertise is greatly appreciated as to how to go forward if it were you!
Firstly, for the folks who are expecting discounts from 30% to 50% from the confirmed, as-is, fair market value are setting themselves up for 1) disappointment, and 2) failure. It's not as routine as one might have been led to believe.
That said, I would respect the real estate broker's participation, and assure that you'll protect his/her commission... you might need his/her cooperation.
Have the Homeowner convey to you permission to speak with the mortgagee. You'll need that in writing.
You don't need a fancy, boilerplate form... crayon on a napkin will do just fine.... but a signed, typewritten letter from the Homeowner to the Lender giving them permission to speak with you is best. This can be FAXed to the mortgagee, as well as sent via reg US mails.
(Too many folks are hung up on forms, contracts, etc. If you know and understand the theory behind what you are doing... you won't let simple obstacles get in your way)
Request a workout package from the mortgagee... and ask specifically for a schedule for their short sale approval criteria.
This schedule of docs needed will be your 'to do' list.
Have the real estate broker provide market data in support of your Proposal...
comps recently sold, presently on the market, and those with listings that have expired.
Then, do your homework. Compare the 'comps' with the subject property for condition, location, neighborhood, and the all important DOM (days on market).
Manufacture that data into your Proposal so that it will be both factual, and supportive of your Offer.
Project in time and money what the lender will have to spend to recover the property, and estimate their antiicpated For you offer to receive serious consideration, it should be in the same ballpark as their estimated anticipated net recovery.
Their incentive would be to cut their losses, and save the time/expense of foreclosure proceedings... essentially a bird in the hand is worth two in the bush.
The key will be to influence their opinion of the subject's as-is, fair market value.
Here is the most recent reply from the realtor:
The seller has not made payments to the lender in 4 months and the NTR only reflects the loan amount. At the payoff of late fees and payments plus interest we are looking at approximately $196,000 and with all the costs of selling and fees which include escrow, Title insurance and normal closing costs we are looking at a sales price of approxmately - $211,900 just for a break even mark for this property.
At the $192,000 price the bank is looking at taking a hit of approximately $21,400 and you are telling me that the norm is 30-60% which would mean that the bank would entertain an offer of $137,200- which would mean $54,800 in reduction plus closing costs of $1715 for a total discount of $56,515
Re-read what SSP typed. 30% - 50% discounts are NOT the norm. Your last post made it seem like it was the norm.
Ryan J. Schnabel
Looks as if the realtor wants you to pay above FMV. I would get info from the bank directly but still be fair with the realtor. The object here is for the bank not to lose any additional monies on top of all they have already incurred. Sounds like the realtor wants to do a retail sale instaed of a short.
JMHO
Respectfully,
Barbann
The realtor is extemely arrogant and insists that he needs to protect the seller. He continues to rant about the seller being hit on taxes when he receives the 1099 stating the SS shortfall as income. So his stance is that he has to help the seller consider all offers. He intends for all offers to come through him. He hasn't said it in so many words, but I believe that he intends to be the one to negotiate the sale to the lender.
I am trying to get a hold of the seller to get him to sign the waiver so I can talk with the lender directly. I don't mind including the realtor's commission But I just don't think I will get anywhere until I can negotiate with the lender directly.
I think that you're trying to ramrod this deal yourself when you have a commercial agent in the family. Why not use your husband to transact with the Realtor in this situation???
I'm guessing that the property is listed with this Realtor. There has to be an agency relationship. His loyalty must be with the seller.
Why not make an low offer to see what the Bank ,at this stage of the foreclosure, will do??? When is the sale?
Personally, I don't think that there is a deal to be made here. There is really no equity since the total of the mortgages and back payments, realtor commission etc. puts the needed sale price over the fair market value. In my experience making these types of purchases, the lenders won't go short if they don't have to. They'll do the short down the road if they start to get desparate and the house doesn't sell. I don't think they are at that point. There are alway real estate deals to be found out there. This just doesn't sound like a good one to me. If you want to try an offer, go ahead and see what they come back with. Personally, I'd pass on this one and look for a better deal.
Thanks for everyone's advice. Yes, we were using my husband which was no problem...I guess my question is this basic...Is it unreasonable to expect the realtor to let me acquire a waiver from the seller and work with the bank directly? I will be happy to include his listing agreement in the SS pkg. I just wanted to work with the lender directly so the realtor doesn't dilute my offer.
I am passing on this one....but need to understand what I can expect the next time a realtor is as stubborn as this one.
My advice for next time would be to cooperate with the Realtor. No Realtor is going to give you a waiver and lose a commission. If you were him, would you? Your spouse can be considered the selling agent in this deal and you can offer a lower price while crediting the selling agent commission back to the buyer (in this case the bank). I'm a broker myself and I have purchased nearly every estate or foreclosure through another Realtor. I have found them to be extremely cooperative as long as I am fair with them and their client. Work with the realtor as one professional to another, not as an adversary and I think that you will have a better chance at making the deal. Everyone's job is to make money. That is why you do what you do and it is also why the Realtor has chosen their profession. You can certainly expect them to become defensive when you are trying to take their money away. Try to be respectful of their position in the deal and remind them that you both can make some money if they can get the deal to go. I always try to be both smart in my dealings and respectful too.
Sounds like Realtor wasn't difficult l- he represented current owner which was not the bank as of yet. Bank One had no ability to negotiate with you before foreclosure was completed. Did you get a title report? - this would have given you clear picture from the start as to how upsidedown the current owner is/was. If 190,000 was orginal deed & assuming it's recent, we'll guess the monthly payments were $ 1300x 4 months $ 5200 late fees and nod fees $ 1600. if sale escrow title in arizona $ 4000. property taxes probably are also not paid $ 2000 commission to listing $ 13000.= $ 215,800. Bank One would probably not negotiate with you as buyer.- but you were only 8% off of current value-- they may have taken a full price ( $ 198000) offer. Realtor was correct that Bank One would 1099 seller for the discount. Frankly Seller might have been better off taking the foreclosure on his credit and waiting it out a few months longer because the difference of nod short sale vs foreclosure on credit report is tiny. However, Seller probably doesn't have an money / or suffered death or divorce or disaster and can't afford to pay the income tax on $ 17000.
This is not what is usually ment by a short sale around here but dump the realtor and the seller. Go direct to Bank One. Offer them 50 cents on the dollar to buy their note which is in default. You will handle the foreclosure or whatever negotiations need to be done with the seller. They simply assign their note and mortgage.
This may not work. But I think its a lot more likely than managing to negotiate a short sale through the realtor.
Make it clear that what you are buying is the paper, not the title. Bank One gets a non-performing loan off their books now, takes the loss and moves on. You buy a foreclosure headache but thats what they make lawyers for.