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Hi Everybody, I'm new... so please excuse my newbness
I found this house that is impressively big and spacious with a lot of land and in distress. I made an incredibly low but fair offer on the house and they accepted. Now that we signed an agreement about the price of the house, my agent has told me that they have to wait for the bank to approve (Chase taking over WaMu). I'm willing to wait for the bank.
So my question is, now that we've signed an agreement, the owner still owns the house. Does the bank have the right to refuse my offer? Does the owners have the right to accept higher offers? And what might be taking banks so long? I know they can basically do whatever they want, but maybe there waiting for the tax-credit to be over, have me back out to accept a higher offer? What does it mean to be under "contract"? My offer is still on the table and they've taken the house off the market...
House:
4bdrm, 2.5bath, 3000sq/ft with unfinished basement on 9000sq/ft lot.
Listing was 370k I offered 300k.
I'm assuming this is a short sale. Yes, the bank can refuse to approve your offer, or they may counter back. Depending on how the listing agent is handling offers, some will accept back-up offers in case the bank declines yours. Some agents will submit all offers they receive to the bank. The bank has no interest in playing games with the tax credit. If you are hoping to get the tax credit from a short sale purchase where you've just submitted an offer now (Sept), then don't count on it. More than likely you will not get a decision until well after the credit expires.
Short sales are very problematic. Majority do not close due to various reasons, like bank not accepting offer, buyer getting tired of waiting, house going to foreclosure etc. Do a search for short sales in this forum for an ear full. Be prepared for a very long wait.
The technical value of being "under contract" on a SHORT SALE are quite different than with a normal sale -- generally with a normal sale the "under contract" banner is not flown until the buyer and seller have done everything that they can/want to before exchanging funds for title. The final exchange of funds generally can't happen until the lender of the buyer is all set and the seller is happy with all terms. In some states both buyer and seller will have an attorney review the contracts, but it is still basically TWO parties.
A short sale is significantly different as there is AT LEAST one other interested party - THE LENDER. If the lender(s) for the SELLER do not express a willingness to forgive the amount owed beyond what the new buyer is willing to pay the deal will DIE as the seller's lender will NOT give up their lien which they would do in a normal sale.
Thus, regardless of what the seller says about "taking the home off the market" the lender can stand in the way of the seller truly consummating the sale.
Technically the bank "takes so long" because they are being asked to take a pretty big loss and banks really really cannot do that too lightly or they would be out of business. Has very little to do with "tax credit" expiring and much more to do with their analysis / prediction of the market recovering if they allow things to drag on long enough... Despite the way it sometimes looks, banks are not stupid, and if there is some reasonable expectation that the seller can maintain the house is a sellable condition in an area that is not swamped with foreclosures it may be pretty smart for the bank to attempt to ride things out. OTOH in situations where the analysis suggests prices are not coming back up in any sort of time frame that the bank is comfortable with they may quickly OK a short sale... The keys are how big a hit the banks is being asked to take AND the details of the finances of the seller.
Thank you for the reply.
Yes this is a short sale.
What can I do to make this offer more enticing? I know that the debt owed is a total of 328k, one for 292k and a 2nd for 36k. The husband of the couple who owns the property died and I believe she just wants to pay off her debt. If I put in a second offer (if that's even a good idea) for 330k would the bank be more willing to accept the offer seeing how they would break even?
How do you know how much the total debt is? Normally with a short sale there are fees associated with it on top of the loan amount owed. Then there would be seller closing costs to take into consideration too.
I think that your offer of 330K is very generous, however, it wouldn't take any less time to hear back from the bank. I would stick with your original offer since it's been submitted and see what happens.
I have a listing that is a short sale with Bank Of America. The loan amount was 158K with all fees owed in March. We got an offer for 165K right away, the bank dragged it feet in answering and by the time they assigned a negotiator (3 months later) the fees had gone up so the payoff amount was now 164K. The buyer had walked by then then the next offers, all of them higher than 164K but the bank still hasn't answered. I call them every day. The negotiator told me that he has over 500 files by himself and he doesn't know when he will get to ours. The payoff as of yesterday is now 178K
How messed up is that???
I hope that you are dealing with a different bank and that you will get an answer soon.
If you offer more than the outstanding loan(s) the bank has no say, They just get paid off.
I am sure the seller would be thrilled if you covered his loans as he wouldn't have any marks on his credit.
Correct, at that point it is no longer a short sale. However, the seller still needs enough funds beyond the outstanding loans to cover other closing costs such as the Realtor fees, title fees, etc, otherwise, your back to a short sale.
Okay, thanks everyone. I guess I'll just wait it out more... I don't care about the tax credit as much as obtaining this piece of property. When they counter-offer, I'll raise it up my offer to about 330ish. Unless someone has better advice. Thanks again
I feel for you -- there ought to be a way to "jump to the front of the line" but the lenders are swamped and any amount that is less than the total amount owed to both lenders (with all fees / penalties) is still a short sale and if the market does not support a higher amount you will regret raising your offer...
hi, what does it mean when I put an offer on a foreclosure home and the bank replied to my realtor that they put a hold on our offer?
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