Have a question about foreclosures (short sales, real estate, mortgage)

[lauren810g]

I have a general question about foreclosures because I am not too familiar. If a house is listed as a foreclosure and the bank owns it and is looking to get rid of it, how likely are they to accept a much lower price.

For example if a house was purchased in 1997 for $300K and the ower was trying to sell it a little over $500K before it went into foreclosure, would the bank take a lower offer assuming a a portion of the $300K loan has been paid over the past almost 15 years.

I know every case is different and there are alot of factors that go into a banks decision..just looking for some general info on people who have had dealt with foreclosures.

[BobKovacs]

Depends on the bank. When times were good, the banks would try to sell as close to market value as they could rather than trying to just cover the outstanding mortgage amount, as they used the excess to offset losses elsewhere. With so many foreclosures now, some banks are just looking to dump properties for what is owed on them, while others are still trying to get as much as they can so they can offset losses.

[HalfFull]

Purchase price in 1997 is meaningless. They could have refinanced and leveraged it to a much higher amount based on circa 2006 values. Seek guidance from your real estate agent. If they aren't very familiar with short sales, you need to change agents.

[Kevin1975]

Like you said, depends on the bank. Nationally, foreclosures sell at about 60% of market value, short sales sell about 20%. In New Jersey, I would probably say its closer to 80% for foreclosures, and 10% for short sales.

[TechGromit]

Originally Posted by BobKovacs

Depends on the bank. When times were good, the banks would try to sell as close to market value as they could rather than trying to just cover the outstanding mortgage amount, as they used the excess to offset losses elsewhere. ...

Actually I believe if the bank sells the house for more than what is owed minus legal fees, the original owner gets the difference. So say you buy a house for 200k, you pay off 150k over the life of the mortgage, but lose you job and can't pay off the 50K remaining. The bank forecloses, sells the property at 120k, pays off the original mortgage note and say 30k in legal fees, that leaves 40k coming back to you.

Of course the bank is going to try and charge you top dollar for every staple and paper clip they used in the foreclose process, so i wouldn't except whole hell of a lot left over even if the house does sell for more than the outstanding mortgage note.

[nybbler]

Originally Posted by TechGromit

Actually I believe if the bank sells the house for more than what is owed minus legal fees, the original owner gets the difference.

This is only true if it's sold at auction. If it becomes an REO the bank keeps any amount above the mortgage amount, but if they sell for less than the mortgage amount they get to go after the original owner for the deficiency. Nice, right?