Dramatic House Price Drop? (buyer, property, violation)

[Captain Bill]

Originally Posted by Boompa

What if I put a 30 day limit on my offer

Your offer is to the Seller/owner, not the bank.

You should put a standard 24 hours, typically until 5pm the following day for the seller to respond. There is no reason why a seller cannot respond to an offer within 24 hours if they want to get the house sold.

If the seller wants to get the short sale process started and sell the house, they will sign the contract. It really does not matter to the seller what the sale price is. However, the closer it is to the current market value, or the banks acceptance guidelines, the more likely the bank is to accept it. But the bank is going to negotiate the price after they assign the negotiator/loss mitigator.

Until a contract is submitted with a short sale package to the bank, they will not take any action toward a short sale. They are headed toward a foreclosure sale up until they receive a short sale package with a contract.

There is no place on the contract, nor on the short sale addendum that gives the bank a set amount of time.

However, the short sale addendum states that the contract is "contingent" upon both the seller and the bank agreeing to sell the property at less than the loan amount. It states that "Buyer and Seller acknowledge that it may take weeks or months to obtain creditor(s) approval of a short sale".

While you acknowledge that it may take weeks or months, you are not obligated to that time. Line 41 of the SSA states that "buyer may unilaterally cancel this contract by notice to seller at any time before receipt of a short sale agreement notice from seller".

So, you may cancel the contract any time by giving (written) notice. However, if you have given a non-refundable deposit, you will lose the deposit.

It states that the Seller can accept subsequent offers from subsequent buyers and submit those contracts as back up. Further, that all parties understand and agree that sellers creditors may elect to allow the seller to sell the premises only to the holder of the contract with terms and conditions most acceptable to creditors.

When a listing agent says they "require" a non-refundable deposit, then they are either working with a client who is not wanting to get the house sold right away, and/or the agent wants to attempt to tie the buyer up so they won't walk, thereby saving the agent time in working other offers on the same property.

It is all to that agents advantage, with absolutely no advantage to the buyer. If an agent asks for a non-refundable deposit on a short sale, walk away; it's not worth it.

[Captain Bill]

Originally Posted by roosevelt

If banks take advantage of the new foreclosure law in that the home owner is liable for the balance owed, what is to keep the banks and lenders from dumping the houses even cheaper because they can go after the home owner now personally. I think you will see an incredible number of bankruptcies which will hurt many businesses that are owed money by buyers and get stiffed in a forced bankruptcy.

Remember that this law applies only to an owner who has not lived in the home for the past 6 months. That would mean investors and 2nd home owners. You can expect to see them moving into the home and setting up a residence to get around that law.

Also, the real estate lobby and other interested parties are lobbying heavily to get that law repealed before the effective date.

The reason for the law was to protect the local banks who knowingly made the bad loans in the first place. This law is placing the burden on the wrong people, in my opinion.

Because of the strong opposition to the law, and the strong accusations that the law was drafted not entirely in the open, my guess is that it will be repealed.

It ain't over 'til it's over; and it ain't over yet!!!

[Rick Lee]

And if a bank came after me for $100k, they wouldn't get it. Doesn't matter who owes whom what or how much I'd like to be able to pay them back. They might be able to sell the debt to a collection agency, but they ain't gonna get blood from a stone.

[Boompa]

Originally Posted by Captain Bill

Your offer is to the Seller/owner, not the bank.

You should put a standard 24 hours, typically until 5pm the following day for the seller to respond. There is no reason why a seller cannot respond to an offer within 24 hours if they want to get the house sold.

If the seller wants to get the short sale process started and sell the house, they will sign the contract. It really does not matter to the seller what the sale price is. However, the closer it is to the current market value, or the banks acceptance guidelines, the more likely the bank is to accept it. But the bank is going to negotiate the price after they assign the negotiator/loss mitigator.

Until a contract is submitted with a short sale package to the bank, they will not take any action toward a short sale. They are headed toward a foreclosure sale up until they receive a short sale package with a contract.

There is no place on the contract, nor on the short sale addendum that gives the bank a set amount of time.

However, the short sale addendum states that the contract is "contingent" upon both the seller and the bank agreeing to sell the property at less than the loan amount. It states that "Buyer and Seller acknowledge that it may take weeks or months to obtain creditor(s) approval of a short sale".

While you acknowledge that it may take weeks or months, you are not obligated to that time. Line 41 of the SSA states that "buyer may unilaterally cancel this contract by notice to seller at any time before receipt of a short sale agreement notice from seller".

So, you may cancel the contract any time by giving (written) notice. However, if you have given a non-refundable deposit, you will lose the deposit.

It states that the Seller can accept subsequent offers from subsequent buyers and submit those contracts as back up. Further, that all parties understand and agree that sellers creditors may elect to allow the seller to sell the premises only to the holder of the contract with terms and conditions most acceptable to creditors.

When a listing agent says they "require" a non-refundable deposit, then they are either working with a client who is not wanting to get the house sold right away, and/or the agent wants to attempt to tie the buyer up so they won't walk, thereby saving the agent time in working other offers on the same property.

It is all to that agents advantage, with absolutely no advantage to the buyer. If an agent asks for a non-refundable deposit on a short sale, walk away; it's not worth it.

Captain Bill you are my Hero, I would be paying cash.

[Steerpike]

Originally Posted by Captain Bill

...
It states that the Seller can accept subsequent offers from subsequent buyers and submit those contracts as back up. Further, that all parties understand and agree that sellers creditors may elect to allow the seller to sell the premises only to the holder of the contract with terms and conditions most acceptable to creditors.

...

Is there any significance to the use of the term 'back up' here? Putting another way, is there any benefit to being the first accepted offer on a short-sale property? It sounds to me like the bank and/or seller can pretty much pick and choose at any time along the way.

Question about HOA/CCRs on a short sale: A second floor condo I saw had quite nice tiling on the floors. A quick read of the CCRs says no second floor units can replace carpet with tile (etc). So this property is in violation of CCRs, but is 'as is' so no point harping about it to the seller. Is there any chance the HOA could force me to rectify this situation as the new owner?

[Boompa]

There's a "short Sale" I was looking at that was a really low price yesterday. Today it says Short Sale Approved at $_______K which is $5K more than the price yesterday. If that's the case it might be worth the extra $5K not to have to wait. Perhaps this has something to do with the new amendments to the Bankruptcy Law?

[rjrcm]

Originally Posted by Boompa

There's a "short Sale" I was looking at that was a really low price yesterday. Today it says Short Sale Approved at $_______K which is $5K more than the price yesterday. If that's the case it might be worth the extra $5K not to have to wait. Perhaps this has something to do with the new amendments to the Bankruptcy Law?

More than likely they had a buyer with an offer under bank review that was not accepted. The bank may have given an indication of what they are willing to accept, which is now advertised as the "approved" price.

[Captain Bill]

Originally Posted by Steerpike

Is there any significance to the use of the term 'back up' here? Putting another way, is there any benefit to being the first accepted offer on a short-sale property? It sounds to me like the bank and/or seller can pretty much pick and choose at any time along the way.

Question about HOA/CCRs on a short sale: A second floor condo I saw had quite nice tiling on the floors. A quick read of the CCRs says no second floor units can replace carpet with tile (etc). So this property is in violation of CCRs, but is 'as is' so no point harping about it to the seller. Is there any chance the HOA could force me to rectify this situation as the new owner?

Yes, there is an advantage. Notice that the language states the "Seller can" accept offers from subsequent buyers and submit those contracts as back up. They don't have to.

The Seller is the current owner, not the bank. In most cases, after the seller has signed to accept the first contract (contingent on lender approval) they will not want to deal with other offers because of the extra work, and the extra time involved. So unless the first offer is a low ball that they feel the bank will reject that one, they probably would just hold any back up offers without submitting them to the bank.

However, if the original offer is a low ball that the bank may reject outright, then they most likely would submit the back up to the bank.

[Captain Bill]

Originally Posted by Steerpike

Question about HOA/CCRs on a short sale: A second floor condo I saw had quite nice tiling on the floors. A quick read of the CCRs says no second floor units can replace carpet with tile (etc). So this property is in violation of CCRs, but is 'as is' so no point harping about it to the seller. Is there any chance the HOA could force me to rectify this situation as the new owner?

Yes, the HOA can enforce the CC&R's on the new buyer.

With tile, there is probably a noise issue that resonates to the first floor, hence the reason for the restriction.

You can put a term in your contract that states "Seller shall cure any existing HOA violations".

If you're dealing with a bank, I would get photos of the tile floor and a copy of the covenant and send it along to the listing agent, and let him/her know that this is in violation.

At the same time, you would personally go to the management company and show them the photos and get them to expidite sending the violation notice to the bank. That way you have it on record that they were in violation prior to COE.

[Steerpike]

Originally Posted by Captain Bill

Yes, the HOA can enforce the CC&R's on the new buyer.

With tile, there is probably a noise issue that resonates to the first floor, hence the reason for the restriction.

You can put a term in your contract that states "Seller shall cure any existing HOA violations".

If you're dealing with a bank, I would get photos of the tile floor and a copy of the covenant and send it along to the listing agent, and let him/her know that this is in violation.

At the same time, you would personally go to the management company and show them the photos and get them to expidite sending the violation notice to the bank. That way you have it on record that they were in violation prior to COE.

Your recommendation above is exactly what I would do in a conventional sale, but given this is 'as is', and neither the seller nor the bank is likely to want to spend anything on the property, is this likely to do any good - it could in fact 'sour' the offer, encouraging them to go with another buyer who does not raise it? Thanks for your input.