Short Sale Advice-sales price vs. the bank's net (Sarasota: short sales, real estate)

[NYFL]

We are looking for some input, advice, suggestions on a short sale we are involved in. Our offer appears to be spot-on - just a week ago, another unit in the same development - exact size, etc- sold for the same amount we offered - and it was not a short sale. The bank ordered three different BPO's/appraisals and all came in within $3,000-$4,000 of that amount.

We thought we were home free- but now we are being told that the bank/investor wants to CLEAR or NET the amount we offered. With the back condo fees, title, realty commissions, etc, that would add about another $15,000 - $20,000. Clearly, we are not about to pay $20,000 more than what the market bears, and we can't figure out how the bank thinks they can get that, on a short sale no less. Being that we offered cash and a market price- we figured the bank was getting a pretty good deal on a short sale.

Our questions- we were told this is a "new technique" the banks have started using in the past 2- months, now that inventories are lower. Does anyone know if that's really the case, and if so, how do you deal with that?

Next, we were expecting the bank to come back and make a definitive counter offer, but they have not done that. We've just been told about this wanting to net a certain amount by our real estate agent- who we trust and has experience in short sales. But now we are wondering- are the agents and the bank just feeling us out to try to get a higher sales price out of us? Why wouldn't the bank make us a counter offer?

We are open to any ideas about best way to move forward- anything we could potentially do to make the deal go through - or how we should respond to this unreasonable request- or should we just walk away after months of waiting?

[TamRE]

Did the bank give the seller's a short sale approval letter? They usually ask the seller to come up with cash towards the sale or sign a promissory note to pay back a certain amount if the offer is too low. If the seller is not willing to do that, then they ask the buyer to contribute. The agent is not trying to get more money out of the sale. Each lender works in different ways. I have had the bank come back and say they need a certain dollar amount extra from the buyer and it has not been in writing. If the buyer agrees to it then they put everything in writing. If you cannot afford or are not willing to pay what the bank is asking, then you need to cancel the contract.

If you are unsure of what is happening and need advice, you need to seek the advice of a real estate lawyer. The lender should give you a counter dollar amount and then you go from there. It is not an unreasonable request for the bank to ask for money to pay for expenses such as back condo fees, back utilities, or ask the buyer to pay title. It is quite common. A lot depends on how much the sellers still owe on the home. It really does all come down to what the bank needs to net in order to make the sale happen. Otherwise, they would be willing to let it go to foreclosure.

Every short sale I have dealt with has been a different scenario. But it always comes down to the bottom net dollar amount. My buyers just closed on a short sale lot and the bank came back and asked for $10,000 more from the seller and the seller didn't have it, so the buyer agreed to pay it. I had another short sale that was approved at the purchase offer price but the buyer and seller each had to contribute another $2,000.
Best of luck to you in making a decision.

[NYFL]

Thanks, TamRE. This short sale stuff is all new to us and it's often difficult to figure out what's really going on.
We do believe the bank provided a short sale approval letter. When they do that- do they state what they want as far as a sales price or net?

I can understand the bank wanting to cover back condo fees, title and such. I guess if we had understood that better, perhaps we would have offered a lower purchase price. But then, who knows if they would have accepted it. Hopefully, we can come to an acceptable deal for seller, bank and us! Thanks!

[TamRE]

If the sellers received a short sale approval letter, then you should have received a copy of it. The letter will tell the gross sales price, commissions, closing costs, seller concessions, cash contributions, etc. as well as a closing date. You should also recevie a HUD settlement statement outlining all costs involved. Ask your Realtor to get you a copy of these if you have not received them yet.

[Sunshine Rules]

The short sale approval letter usually comes after negotiations have been completed. From your original post, it appears the seller's lien holder may not have agreed yet to final short sale terms or an acceptable sales proceeds amount. If they have, there should be a Notice of Short sale Approval letter and the listing agent should have provided a copy to your agent as all other dates of the contract (such as inspection periods) typically run from the date the written notice of short sale approval was received.

I recently had a short sale situation where the seller's lender wanted a specific amount of additional money from the seller and another specific amount from my buyer. The seller told the lender he could only come up with x additional funds, about 20% of what they wanted, and my buyer said no to paying more as the price offered was slightly above fair market value. The bank ended up accepting the counter offered amounts by both seller and buyer. I've had another short sale where the bank countered and then stuck to their number, take it or leave it. Each individual short sale case is different.

If an investor is involved in the short sale as the loan was placed into a portfolio and sold, the short sale process is often more difficult. Sometimes investors are less inclined to approve a short sale, especially if they do not wish to write off a loss for that loan in a particular financial quarter. They are also becoming less cooperative as the local market is now experiencing stabilizing prices and declining inventory.

Delinquent condo fees can also be a huge problem with short sales, which is why it's best to find out up front if the seller is current on the condo fees. Condo associations typically start adding late charges, penalties and legal fees to the account once a unit owner is more than 3 months delinquent. The fees and penalties can quickly add up to a sizable amount -- which the seller can't or won't pay, the bank doesn't want deducted from their proceeds, so the buyer is stuck paying if they want to close. Delinquent fees can quickly push the purchase price well above current market prices.


Your agent should be able to point you towards a local real estate attorney who deals in short sales that could better answer any legal questions you may have regarding your contract. Since you indicate that are currently under contract to purchase a property, we agents here have to be careful to stick to generalities so as not to interfere with the agency relationship you already have established with your agent.

[NYFL]

Thanks, Sunshine & TamRE. Truly appreciate all your advice and expertise.
No, there is not a short sale approval letter yet. Hopefully, we'll get to that point if everything can be negotiated price wise.
There is, unfortunately, an investor involved, which we believe is the major hold-up.
Also unfortunately, the seller is quite behind in condo fees, and this is quickly adding up as the months go by.

I guess it's 50-50 as to what will happen. If it does not go through, we have certainly learned quite a lot about the process and what to ask up front. Honestly, not sure we would go this route again as there are just so many variables and uncertainties. We'll chalk it up and move on to finding our future Sarasota home.

[kiggy]

Maybe I'm misunderstanding something, but shouldn't the bank put all the fees and additional money needed up front in the price? Seems kind of sleezy to tack on additional money after the offer is made.

[d4g4m]

Purchasing a home has become a cash cow for many people, businesses and government. The commissions, fees, charges have become excessive. Everyone now gets a 'good faith closing statement' to show purchasers how many checks they have to bring with them at closing. But even the statement doesn't portray good faith. You initially get a statement with six charges with an amount. But at closing, the amount has 12 charges and the amount doubled. Question anything and you can't close on the house. I'm sure many people have looked at the statement and said 'what is this charge and amount, are you kidding me?'
Concerning short sales - Banks gave a mortgage to someone with expectations of payback. If the mortgagee is under water, the bank still wants their outstanding balance paid but now it looks like they want the purchaser to pay back owed condo/HOA fees, unpaid utilities, back owed taxes and anything else they can add. When buying in a neighborhood, comparative value can be hard to judge. But when buying in a condo, all the units are the same and have the same value. The added costs involved in a short sale may exceed what the unit is worth.

[loves2read]

Just another way to put profits into the banks' hands--most of the time these businesses have only had paper losses to offset their profits
they can rig their books so many different ways
buying a short sale just seems like an invitation to be taken advantage of IF you don't have good grounding in true value of the property and know how to read all the legal docs--and ask the right questions...

[NYFL]

After going through this, I think what should happen in a short sale is that the bank and the seller agree on a price up front, that includes all the added fees the bank wants to recoup, so that a potential purchaser knows up front what they are dealing with. That would seem fair and logical. Then, if the purchaser still thinks it is a fair deal and is interested in purchasing, they can go from there. While I can understand the bank wanting to recoup as much of their lost investment as possible, from a purchaser's perspective, it's really difficult to deal with being informed almost after the fact that you are expected to pitch in thousands of dollars more.

As an aside- not of this seems even relevant in light of the fact that we have not had power, water, phones, etc. here in NY since Monday- just glad we have a roof over our heads!