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We just made an offer on a short sale in florida. The seller has both a 1st mortgage and a 2nd mortgage on the home. there is also a special assessment fee and quarterly HOA fees that are past due. I know this may complicate things but we liked the home.
The listing was recently reduce by 18%
The selling agent said they want an offer,,any offer to take to the bank
Our agent suggested using the accessed tax valuation as a basis for our bid and reduce that figure by 15% , making our bid less than the 1st mortgage holder, also stated we would pay cash.
questions: is this a good way to calculate our bid? I understand the 2nd mortgage holder is last in line. thinking cash would help in all aspects.
also if accepted all hoa and assessments would be paid by the bank and we would recieve a free and clear title??
I know there are lots of little details to go over, we are counting on our realestate agent and will hire a lawyer to go over everthing carefully.
Johnny -- I'd be nervous about the "give us any offer so we can take it to the lenders" approach. Sellers agents will sometimes try to entice offers with an asking price well below market, but this often ends in frustration when after months of waiting you get a counteroffer that's much higher than your original offer, or your offer is just declined outright.
Has your agent been involved with short sales before? If so, then his/her approach is likely approriate for your market. From what I've read, though, first lienholders generally look to net somewhere around 80% of the market value determined by comparable sales ... after things like HOA fees and taxes are paid. Again, though, if your agent is experienced with short sales and this is how he or she came up with the offer, you're getting better guidance because it's based on what's actually happening in your market.
JM
Yes our agent is experienced in short/forclosure sales in the area, her guidance is how we came up with our bid, however the complex this unit is in has 19 other listings ( large complex) and are much higher in price than our bid( 50% higher) however they have been on the market for quite a while.. we actually are waiting now for the owner to accept or reject our offer, I understand that if she does accept it will go the the bank for them to do the apraisal by an agent which most likely will come back much higher,, we are prepared for that , but not sure how high ,, this particular unit should be one of the lowest priced in the complex, as it is on a lower floor with no bay/gulf view,,and that means alot,,
The seller's lender should be looking at comparable sales, not what else is on the market, in determining the amount they will expect to get. The seller's agent will probably try to be there when they do the BPO/appraisal, and can offer market information and point out the factors that might make your particular unit less expensive, like the lack of view.
As to your question about cash: it's my understanding that in a competitive situation, cash is a great thing compared to buyers who are financing. It will also let you move faster to close once you do get approval. But I don't think that it impacts how quickly the seller's lender reviews your offer.
As far as HOA fees/assessments -- let's put it this way. They will all have to be resolved before you can close, because the HOA will likely have a lien on the property for anything that's due to it. However, how it gets resolved is not clear. The lender may agree to pay them from the proceeds of the sale. The bank may tell the seller that he/she has to resolve it outside the transaction (e.g., by signing a note to the HOA). The bank or seller may ask you to increase you offer to cover those costs. And I'm sure there are other possibilities.
I don't know if it's the seller's obligation to convey the house with a clean title, or if it's your responsibility to find out what all the liens are and ensure that they have been resolved by the time the closing happens. If you aren't using a lawyer in the transaction, you might at least want to contact a title insurance agent, who can run the title and give you a quote for a policy. It might be worth it if you're concerned about outstanding liens.
well our offer was acepted by the seller! however with our low offer 35% below the list price,our agent warned us that it mayhave been accepted just to keep the property out of forclosure.
so from what i understand it is now up to the bank to order an appraisal and to then accept or counter our bid? is thiscorrect? or does the process start now on clearing the title,,there is a second mortgage that may complicate things.
i guess its a waiting game now since the contract states 30 days for a reply
.is there anything we need to do now?
...from what i understand it is now up to the bank to order an appraisal and to then accept or counter our bid? is thiscorrect? ...
First the bank must decide if the seller qualifies for a short sale - for exampled, can they show a reasonable hardship? Then the bank would assess market value either through an appraisal or BPO, then possibly counter your bid. The 2nd mortgage does further complicates the situation as they will also need to give their approval.
Quote:
...or does the process start now on clearing the title,,there is a second mortgage that may complicate things.
i guess its a waiting game now since the contract states 30 days for a reply
.is there anything we need to do now?
You should ask your agent to explain the process to you as it may vary from location to location and depend on your contract terms. In general, the escrow including title review should not begin until the seller receives full approval for the sale. Don't be surprised if you have to extend the date for a response. The banks don't care what your contract requires.
Johnny - first don't be surprised if you don't have an answer in 30 days. We're at day 100+and still waiting. We've haven't seen anything we like as much and have no pressure to move, but the un certainty is tough to take.
Our attorney did the preliminary title work to make sure all of the liens had been disclosed to us, but it can't be finalized until the contract is done. The seller's agent/negotiator will handle negotiation with the 2nd lender, but it might make the process longer. The title process (which in NJ is done by the buyer) and short sale approval are separate. Except of course, to the extent that the seller needs to clear the title to convey it to you.
At this point,you're basically waiting for a response. Your realtor is right that they may have just wanted an offer to slow things down. You should realize though that a pending short sale doesn't necessarily prevent a foreclosure. If a sheriffs sale date is set, your agent should get verification that it's being postponed. People have sometimes waited several months to hear about a short sale only to have it lost to a foreclosure
jm
so you hired a lawyer to do a title check before your offer was accepted?
How do I go about finding out if there is a sheriffs sale date? is is public record?
thanks
Johnny -- we're buying a house in northern NJ, and it's practice here to use lawyers in the process including review of the contract. Since we'd already hired him and knowing that you often have to close very quickly once lender approval is received, ours did some preliminary title work: at least that way we knew what we were dealing with.
Information on pending sheriff's sales is public info in NJ, and I can check a website in the county where we're buying for updates. I'm not sure about whether the same is true in Florida. If a sheriff's sale is pending, I'd think that would be public info, but you might have to go in person to get the details. The website RealtyTrac has info on "lis pendens" (preliminary foreclosure step) also, but you pay for that.
Here is the saga of our short sale adventure ( actually not too bad, we had a great real estate agent) any way we did receive a counter from the bank last week, which was only 5% below the original asking price, we made a counter offer at 9% below that ,, they just came back with a slight reduction off of their original counter so we have decided to pass on this property.. Our counter was in line with another unit that recently sold, but that unit had a much better view so we were a little under that sales price for our counter., I believe the BPO they received was too high by 10-15% and they did not use true comps as we did to calculate our bid and obviously should have,,, sorry to say but most likely this unit will go into forclosure and the banks and the owner will be holding the bag,, cant understand why they let us walk,, so now its on to look for another condo, hopefully in the same area.
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