I'm new to short sales and I am representing and investor that placed an offer of $1.2M towards a short sale property listed at $1.9M. Why would the seller say no to a deal they do not stand to gain from? Shouldn't the bank make that call?
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ALWAYS case by case, but we will generally take ANY offer in order to get things moving with the bank, and it is MUCH easier to stop a foreclosure with an offer in place.
ALWAYS ALWAYS ALWAYS case by case - but generally speaking, get something in!!!
As with ANY negotiation, whoever is forced to give their number first loses.
If the bank REQUIRES an offer, go in low and let them counter.
Rule #1 for investors - you should be EMBARASSED by your first offer.
If you justfiy your numbers and how you arrived at them, it is MUCH easier to get accepted.
WAY WAY WAY to much to get into on here, but my 2 cents - tell the Selelr to take the offer and get things moving!!!
This is a difficult one because in that price range the market has a lot more "leeway" if you will. The banks will and do accept lower than market value offers on high end properties due to the fact that they REALLY clog up their balance sheets. Perhaps if you (Dennis) had more information it would be helpful to try to determine if indeed your investor's offer is too low. Are there repairs? Who is the investor on the short sale (i.e - note holder)? How far behind is the seller and is there a true hardship?
Many times these issues weigh far more heavily on the bank's decision to approve that the full market value being paid. What if there never is a 1.9 million dollar offer? Does the seller know that even if the bank takes the property back in foreclosure there could still be tax consequences?
I agree with Joseph the seller needs to be educated as to what the true goal is - avoid foreclosure, deficiency judgments, and if possible, taxes.
Lastly - Dennis - can your buyer justify his or her offer? Are the low comps? Does the property need major work? Is it irregular compared to other high end properties? Just because the bank "feels" the property is worth 2m doesn't mean that it truly is or that they won't accept a lower settlement.
Dennis, I don't know what State you're in, but here in California it's the SELLER who decides which offer to accept if any. The Bank does NOT get to make that call! Why should they? It's not THEIR property! They only get to decide whether or not to approve a transaction that the seller has entered into. IMHO they stick their noses in too far anyway by deciding whether or not the transaction can include certain negotiable costs or costs typically paid for by the seller.
The Seller may have several reasons for not accepting a lower than list-price offer. Perhaps he'll be liable for taxes on the forgiven amount? Not every transaction qualifies for the exemption. Or maybe there were other terms he didn't like, like personal property or possession. Nope, it's not up to the bank, it's up to the seller SUBJECT TO approval from the bank as to the net proceeds.
You should have a little chat with the list agent, and find out why the seller is doing this. If its a short sale, the bank will say what price it will be sold for after an appraisal, they may order 2 on a home like that
Roy - Seller still OWNS the property and has the right to decline any offer they do not believe to be a Fair Offer. Bank ONLY approves the amount of LOSS they are willing to accept.
Yes , I know this. One reason the seller turned it down is maybe he is working on a Loan Modification. or he wants to stay in the house longer. Theres so many different reasons a seller can do this, Maybe he or she is hoping it wont be a short sale later . Its hard to really know why unless you are the listing agent. Some people want to get it over with and move on, and some want to stay until the last minute . ITS a hard thing to go through losing your home, it could be personal . Hard to say why
Dennis -
Who is the "Servicer" and who is the "Investor" (the owner of the note)? That will make a big difference as well. I would suggest, with all due respect to you, that you find another agent / broker who has a lot of experience in short sales to work with you on this one. Yes, you will likely have to share some of your commission but that would be better than setting incorrect expectations to your client. An offer of $1.2 Million on a property that is truly worth closer to $2 Million is an absolute waste of everyone's time. If the seller accepted that offer, the Servicer and Investor who owns the loan might be less likely to work with that seller. Short Sales today, unlike 7 years ago, are sellng at True Fair Market Value (at least in CA they are)
Good luck and ask for some assistance from your local Realtor Community.
Dennis: Many brokerages in our area require agents to shadow other succuessful short sale agents prior to taking a short sale listing on their own. If there are a number of short sales still in your market (not many left in ours) and you are representing a buyer and offering on a short sale, I would recommend teaming up with a successful short sale listing agent in your office. You will get their help by paying them a small referral fee for their time, but you will learn the process so that you can best represent your current and future clients. Short sales are not just about selling real estate. There are many tax and legal implications and the process is complicated in many cases. Banks want a certain percentage of the home's value at the very foundation. If the seller had accepted your offer, it would indicate that the listing agent might have also been uninformed about short sales -- A disappointment waiting to happen for all. Thank goodness that didn't happen to you or your client or the seller. Short sales also require a realtionship between the listing and selling agents in order to keep everyone informed. Buyers must be educated as to the process so they know what they're getting into. Even if the seller accepted your low offer, the bank likely would not. As others said, that would likely be a waste of everyone's time and cause frustration for your client resutling in you possibly losing them to another more experienced agent. Get some education and all the best to you.
Hi Dennis, did you complete a BPO yourself first before making an offer? if so, you should feel confident in knowing if the offer is offensive or within reason. Try not to shoot a low-ball offer based on the list price of what the seller is asking. In my opinion the best bet for any short sale or sale is to keep it simple, if your not offering the sellers asking price & terms and your offer is your highest and best and that the homeowner say's “NO” to your offer then let it go and move on. Short sales can be and are deeper than what meets the eye, people can be emotional about there homes. To us realtor's, we are simply doing our job working to earn a commission, and since we are not out to harm anyone as we see it, we may not see that there maybe underling intentions from the sellers side i.e. bank, home owner, second lien holder etc...and at times those intentions might be to not sell the property at all, so again move on save time & a big head ache. This just my opinion Dennis and I hope I was of help.
It's also possible that there was a previous offer at a higher price that the bank rejected. With the numbers you stated, it's possible the bank could limit their loss by foreclosing than to accept your buyer's offer. Its a business decision for all involved and the bottom line is how to best limit loss.
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