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A house is listed for short sale.
The seller obviously owes more on the mortgage(s) than the house is worth.
Seller lists at $X.
He gets an offer significantly less than listing because the house is in terrible shape.
Ultimately the decision making power to accept the offer is with the bank/investors. Do they know the house is in disrepair? Do they typically do inspections of the property when considering short sale offers or before listing? Or do they only look at comps in the area and how much is owed?
A house is listed for short sale.
The seller obviously owes more on the mortgage(s) than the house is worth.
Seller lists at $X.
He gets an offer significantly less than listing because the house is in terrible shape.
Ultimately the decision making power to accept the offer is with the bank/investors. Do they know the house is in disrepair? Do they typically do inspections of the property when considering short sale offers or before listing? Or do they only look at comps in the area and how much is owed?
I think a BPO, Broker Price Opinion is performed, maybe a few, which gives the banks an idea of what the house is really worth.
OP - You are under the same misconception I was under when I started looking at Short Sales.
It may be that the Bank/Lender has the Final Approval of the Offer BUT( and it is a BIG BUT) it is the SELLER who has the initial say as to IF your offer will even be accepted to be put forward to the Lender. Even if this Seller has not made a payment in over a year he still is in control until the Lender forecloses on the property. ( Even with outstanding liens, check HOA) The Seller can turn down any offer he so chooses for any reason he decides, he may just want to stay in the house and turn down offers as a last chance at power and control, who knows. Nothing surprises me anymore in this market.
I had a Seller turn me down on a very fair offer because he did not get - in his words, “The Warm and Fuzzies” from us and I was not sympathetic enough to his situation. I do not know his situation (I’m not a Priest or a Rabbi or his Mother.) So he ended up in negotiations with the other lower offer and we went with another property. House has been on the Market for over 350 days!! As a Short Sale and a Lens Pen was filed in April, what is this guy thinking!
The Agent called my Agent back, but we did not respond due to - we are presently in negotiations with another property. It is bizarre.
From my personal experience some of these Sellers are angry at the world, and blame everyone except themselves, but most especially you - the potential buyer - for their situation. But then you will find one who has come to terms with their situation, who has possibly lost a deal or two and/or has realized it is the best solution and is willing to negotiate with you and the Lender and begin the process.
Back up your offer with comps and mls pictures and request a new BPO due to market re-evaluation. Depending on your locale and Lender they may allow and give you the price never hurts to try.
Do not take it personally; this is a business transaction, set a limit and do not become attached to a property.
From what the listing agent is saying we should be getting a signed contract back from the seller. I see what you're saying about irrational decisions from seller but we've not experienced that yet in our situation. Plus the owner doesn't live there, he has a tenant who I'm sure would love to stay as long as possible. The tenant has already tried to scare us off by claiming the house has so many problems. Maybe he's telling the truth, maybe he's bluffing. We'll see what the inspection result is if it gets that far.
I don't know why the seller would reject any offer. It is my understanding they aren't going to see a dime from this transaction since they owe more than the value of the house. What's the difference to them if I offer $100 or $100,000?
... What's the difference to them if I offer $100 or $100,000?
In a recourse state, it could make a large difference. The higher the offer and less loss on the loan, the less deficiency difference to be liable for, not to mention possible tax consequences.
In a recourse state, it could make a large difference. The higher the offer and less loss on the loan, the less deficiency difference to be liable for, not to mention possible tax consequences.
Again everyone, just to get the record straight....
Just because someone has to short sale their home, it doesn't mean their home is in chaos or will need lots of repairs..... just because someone has to short sale, doesn't always mean that it is THEIR own doing..... sometimes people are forced into a situation due to matters outside of their control.
Yes, AZ is a non-recourse state (I'm in AZ too). However, the non-recourse laws primarily pertain to foreclosures, not short sales. From the AZ Dept of RE Short Seller Advisory guide:
Understand that a Short Sale May not Discharge the Debt
Even if a lender agrees to a short sale, the lender, the VA, or the FHA may not agree to forgive the debt entirely and may require you to pay the difference as a personal obligation. This outstanding personal obligation could result in a subsequent collection action. For example, a lender may accept the short sale purchase price to “release the lien” on the property as opposed to agreeing to accept the purchase price as “full and final settlement of the debt” on the property. Therefore, be certain of the terms of any short sale before making a decision, consult an attorney regarding whether the lender is entitled to pursue a deficiency judgment and obtain any debt forgiveness agreements with the lender in writing.
Last edited by rjrcm; 07-14-2010 at 08:02 PM..
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