Worried about my short sale, supposed to sign listing agreement tomorrow

I owe: $265,000

Current tax assessment: $251,000

Recent sales (only 3 in the past 6 months): 11/9/2010 @ 245,950 - 11/16/2010 @ 215,000 - 2/17/2011 @ 198,000

Servicer: Navy Federal Credit Union

Investor: Fannie Mae

My short sale specialist wants to list the home for $175,000. The plan is to sign the listing agreement tomorrow and to hold an open house on the 14th. I was told that I would meet the realtors the following Tuesday to discuss the offers and submit the best to the bank. They explained that the offers may be too low for the bank, but even if the bank rejected it, we would then know how much they need to get a deal done. They also said that they will try to negotiate with all potential buyers to get the highest possible offer.

According to Fannie Mae, we have to stop paying our mortgage to be considered for a short sale. Each month that we wait is significant. I'd like to avoid being 90 days late, if possible. My concern is that our house will just be sitting out there while the bank goes through the process of rejecting an offer that we expect them to reject in the first place.

My other concern is that this is only priced to attract short sale investors. A cash offer is nice and all, but investors have nothing to lose by making a crazy low offer. My fear is that this open house will only be investors that are trying to snag a great deal. If that's true, then the realtors have nothing to lose by submitting an offer the bank won't accept. Either it goes through and closes or they reject it and we start over with a higher price in mind.

This brokerage specializes in distressed property and allegedly has closed hundreds of short sales over the past few years and have numerous deals in the works.

Thanks for your feedback.

Dang Harry, sometimes I have to remember that Mike is not my seller :) Sure do want to help him though. Thanks for your contributions here at short sale superstars

Harry Clay said:

That explanation would certainly qualify as a reasonable hardship, which is something all listing agents need to verify if we expect a reasonable chance of success with typically reluctant to cooperate lenders.

I would still expect your credit union to stall you out, & really make you work hard to achieve short sale approval. I highly doubt it's going to come as fast as you hoped.

That's why so many of us are suggesting that you systematically work the price down from a more realistic starting point, & establish a marketing history that proves to the lender that you have judiciously pulled the highest & best offer possible, given the allotted timeframe.

Mike said:

Hi Harry, the company that I worked for when I qualified for this loan went bankrupt and closed in 2006. I've scraped by with the help of my parents ever since. I tried to sell the home in 2008 at FMV and eventually took the listing down when I dropped the price to my loan balance and still did not get showings. I applied for HAMP in 2009 and was denied because my deficit was too big. My parents agreed to help me through 2010 while I went back to school to get a more marketable degree. I graduated last Saturday. I have an entry level job lined up that will require me to relocate out of the country. It's a great opportunity for me, but I will make less than 20k USD per year. It's sufficient in the third world, but obviously not enough to cover my $1900/month mortgage payment.

My desire to avoid a 90 day late is simply an effort to mitigate the damage to my credit. I realize that a short sale is going to do some damage. If there are ways to lessen that damage, I simply want to understand what they are.

Everyone on this board has been more than helpful and I really do appreciate the wisdom and experience that I have found here.

Replies

Janice MacMillan May 10, 2011 at 8:46am

Mike,

I too use the stategy mentioned above. You will save yourself a lot of frustration and headaches if you price the property accordingly, then make price adjustments every so often.

I typically set up the price reductions when I do the listing agreement so everyone is on the same page. And will schedule several price reductions and have a predetermined amount for that reduction. Then have homeowner sign it.

Your agents duty is to get an best offer possible and get as close to the FMC as possible. If you start too low you will risk buyers walking due to the bank declining the ever so popular low ball offer that can not be worked with.

I have come to expect, at least in our market, that once those the words "SHORT SALE" are put into the MLS it sends up a red flag to every buyer and buyers agent out there that this is some sort of fire sale and they can throw out any number and have it accepted by the bank. (no offense to buyers agents, there are some out there that are wonderful but there are some that simply do not have a clue or have never been involved in a short sale)
Jeff Payne May 10, 2011 at 3:42am

You did not waste anyone's time! The agent wasted your time
Samson_is_Furry May 10, 2011 at 2:47am

Hey folks, I've taken your advice as well as the advice of some local realtors and asked that my listing to be removed. We are going to go in a different direction. The listing agent was very resistant to removing the one-day old listing. She actually did not agree to do it on the first call and will be calling me back later today. Thankfully, I had her write into the agreement that we could cancel the listing at anytime without reason. Should this be an issue?

I feel terrible for wasting her time, but my wife and I are very uncomfortable with this listing.

Thanks!
Samson_is_Furry May 9, 2011 at 4:51am

Makes sense to me. I'm going to call a few realtors and see what I can come up with.

I really appreciate your help. Furthermore, I have a new appreciation for your profession as well. I can't imagine the hardships that you find yourselves in the middle of when dealing with distressed property. Real estate expert, bank expert, negotiating expert, and counselor...it has to be a tough job.
Jeff Payne May 9, 2011 at 4:43am

Dang Harry, sometimes I have to remember that Mike is not my seller :) Sure do want to help him though. Thanks for your contributions here at short sale superstars

Harry Clay said:
That explanation would certainly qualify as a reasonable hardship, which is something all listing agents need to verify if we expect a reasonable chance of success with typically reluctant to cooperate lenders.

I would still expect your credit union to stall you out, & really make you work hard to achieve short sale approval. I highly doubt it's going to come as fast as you hoped.

That's why so many of us are suggesting that you systematically work the price down from a more realistic starting point, & establish a marketing history that proves to the lender that you have judiciously pulled the highest & best offer possible, given the allotted timeframe.

Mike said:

Hi Harry, the company that I worked for when I qualified for this loan went bankrupt and closed in 2006. I've scraped by with the help of my parents ever since. I tried to sell the home in 2008 at FMV and eventually took the listing down when I dropped the price to my loan balance and still did not get showings. I applied for HAMP in 2009 and was denied because my deficit was too big. My parents agreed to help me through 2010 while I went back to school to get a more marketable degree. I graduated last Saturday. I have an entry level job lined up that will require me to relocate out of the country. It's a great opportunity for me, but I will make less than 20k USD per year. It's sufficient in the third world, but obviously not enough to cover my $1900/month mortgage payment.

My desire to avoid a 90 day late is simply an effort to mitigate the damage to my credit. I realize that a short sale is going to do some damage. If there are ways to lessen that damage, I simply want to understand what they are.

Everyone on this board has been more than helpful and I really do appreciate the wisdom and experience that I have found here.
Jeff Payne May 9, 2011 at 4:38am

Mike, where did you get the 90-92% of BPO number? Keep in mind that 90% of 200,000 is 180,000 BEFORE any expenses come out, take probably another 8 to 10% off of that and you get a NET of $162,000. I might believe the 90% number if you are talking about NET numbers but not gross numbers

You have to start somewhere and my thought is you start at FMV and do systematic reductions in price until you get to what is really FMV or what a buyer will pay. You can then show the lender that you tried to get as much as possible for the property. A good listing agent will document, document, document EVERYTHING, all showings, all sign calls, all inquiries.....etc.

Mike said:

Jeff, what I have learned is that Fannie will want at least 90-92% of a BPO. This information was the catalyst for my uneasiness with the strategy and this thread. Unless the BPO was under 200k, it's obvious to me that the bank is going to reject it.

However, with a comparable active listing now at 209k, I don't what to do. They had very little activity when it was listed at 225k.
Samson_is_Furry May 9, 2011 at 4:34am

Jeff, what I have learned is that Fannie will want at least 90-92% of a BPO. This information was the catalyst for my uneasiness with the strategy and this thread. Unless the BPO was under 200k, it's obvious to me that the bank is going to reject it.

However, with a comparable active listing now at 209k, I don't know what to do. They had very little activity when it was listed at 225k.
Jeff Payne May 9, 2011 at 4:32am

Mike, your neighbors agent most likely does not want to see you do a short sale because it will affect the neighbors sale if it is not a short sale, or it could affect it.

I talk to agents all the time that say this same thing but I pay no mind to them, sometimes I do say "You are right, this business sucks, might be time for us to ge out" In reality, I am on track to sell 150 homes this year :)

My thought is that you have to start somewhere on your price and it is always easier to go down on price than it is to go up. You have to paint a picture to the lender/investor that you tried to sell for as much as possible and show them what it took to get an offer. Anyone can price a home for $50,000 under market and get offers, those offers would not come from me though because I would advise my buyers that this listing agent may not know what they are doing based on their pricing..... just my opinion

Mike said:

I think my neighborhood is dead! I've been in touch with one of my neighbor's listing agents and receive this update today:

Mike~

Not counting the one that is $209k (which is being sold by a relocation company that bought the owner out...it's a little tired looking from laying vacant for so long but wouldn't cost that much to bring back to life), there are six townhouses for sale. It pains me to report that there has been very little activity on my listing (I can't even remember last time there was a showing) and after speaking with other agents who have listings in the neighborhood, they have also had very little activity. I'm going to try and plan a neighborhood open house to hopefully being in some buyers...

I would have to say that now would not be the best time to put your home on the market unless you're in a position to list it considerably lower than the others (then your neighbors might not like you). I'll send you a list of everything currently available in a separate email.

Please let me know if you have any questions.

Happy Monday,
Samson_is_Furry May 9, 2011 at 4:28am

Hi Harry, the company that I worked for when I qualified for this loan went bankrupt and closed in 2006. I've scraped by with the help of my parents ever since. I tried to sell the home in 2008 at FMV and eventually took the listing down when I dropped the price to my loan balance and still did not get showings. I applied for HAMP in 2009 and was denied because my deficit was too big. My parents agreed to help me through 2010 while I went back to school to get a more marketable degree. I graduated last Saturday. I have an entry level job lined up that will require me to relocate out of the country. It's a great opportunity for me, but I will make less than 20k USD per year. It's sufficient in the third world, but obviously not enough to cover my $1900/month mortgage payment.

My desire to avoid a 90 day late is simply an effort to mitigate the damage to my credit. I realize that a short sale is going to do some damage. If there are ways to lessen that damage, I simply want to understand what they are.

Everyone on this board has been more than helpful and I really do appreciate the wisdom and experience that I have found here.
Jeff Payne May 9, 2011 at 4:23am

Harry, I agree with you, the lenders here are working the same as they do with you in California for sure. Very unlikely that the lender is going to sell this short sale for a HUGE discount, if any, off of what they believe to be market value.

Harry Clay said:
Mike:

You never did say whether your property is indeed in active default, with a limited timeframe in which to sell, or if you merely want (or need) to escape a house that has suffered an as yet undetermined drop in equity.

There is a difference when negotiating with most lenders.

You also stated that one of your biggest concerns is that you not show more than 3 months late on your credit history. That doesn't sound like you're proving substantial hardship, another major lender requirement, in most circumstances.

You also admitted that the 3 most recent sold comps were quite possibly in the range of $215K, with the possibility that values are still declining, somewhat.

You pointed out that the nearest active comp / listing just moved down to $209K.

So you & your new team think that starting out with a listing price 16% below the nearest competition is "reasonable"?

It sounds to me like you're fishing for a fast & convenient Short Sale at an REO / Foreclsoure price...which is a contradiction.

If your strategy works...more power to you, & I wish you the best of luck.

But this scenario would never fly with the way lenders work with us out here in one of the hardest hit areas of the entire country.

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