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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Ron, well said! I was trying to address the Financial Impact only to the Seller in my comments, you make a great point about the states not having reciprocity to the federal law. I read my comments over again and realized some may be confused tax on forgiven debt and liability for deficiency, so thanks for your clarity and reply.

John, first of all I believe  Dennis is in Fl, a recourse state.  The owner has chosen, so far, not to do the BK for what may be sound reasons.  And of course, if the owner cashed out with a refi, forgiveness of that wouldn't be exempt under MDRA.

More importantly, I can't see where it is ever wise for an owner, trying to prevent foreclosure, to EVER take a low ball offer that has no reasonable chance of being approved.  It's just another 90 days closer to the foreclosure auction.  Usually the main goal is to affect a short sale with a waiver of deficiency, and stalling the process with stupid offers benefits no one. 

Wayne, well said. You are right about the cash out refi and the implication of taxes. As far as the Owner taking a low ball offer please refer to my comments to Stephen below. If the Seller in Dennis' deal has a house that should bring $2 million based on all the objective criteria and he is early in a Short Sale Listing then by all means he needs to hold out for a reasonable offer. In some markets a $2million house may not comp out unless you go back 12 months or farther out around the zip code. Typically the banks do not want to take a $2 million home back as an REO, and may, on a selective basis take less. But totally depends on the market for the house. 

John, maybe you should stick to conventional sales. The bank and mortgage holder are often different entities and neither are a direct party to any sales contract in a short sale situation. The seller decides who he sells to and if you came to my client with this low-ball nonsense I'd let my client know that it's an investor, it's your 1st short sale, and it's a waste of time.

Stephen, I think the others that have replied about getting a BPO done ahead of time should have preceded my comments, I have done many BPOs and any SS Listing or Buyers Offer should start with an Accurate CMA or BPO! The bank values the property using an internal AVM (Automated Valuation Model) which includes "Delegated Authority" which is a rarely known or discussed issue in these forums, that is used by the Servicer on behalf of the Investor to arrive at their minimum "Net Proceeds" based on a -20% of market value. I have actually had servicer tell me the exact number! In Dennis' case that would have got him only half way there. Unless there are Sales Comps in the $1.2m range there maybe a serious problem in getting it accepted, everyone is right there, In Dennis case, Scenario One: if he is the only Buyer and there has been adequate Market Time, the Seller may (at his discretion) decide within Delegated Authority limits to send in a lower offer (not happening much in the rising market), Scenario Two: If the Seller is facing Foreclosure and he is running out of time it would be important to get the Buyer to commit to at least the average of the 2 lowest comps before sending a low offer in, and that Agent should completely document the projected value or provide their own BPO. But there are still overpriced Short Sales Homes (at high retail $$) that have no hope of getting offers and will end up in foreclosure. If we are to save a Seller from that demise it should be a balance of all the factors combined with some cooperation and compromise between Buyers, Sellers and their Agents trying to facilitate a positive outcome all things considered. 

With a short sale, the seller is still the owner of record, not the bank. The seller must accept an offer before it can be sent to the bank for consideration. If the bank does have an appraisal for $2M, there is no real reason for anyone to think they are going to just knock $800K off and sell it to your buyer.

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.

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.

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.  

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.

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

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