There has been a lot of talk lately in the short sale world about Fannie Mae and Freddie Mac countering short Sale contract prices at outrageously high prices.
As a Short Sale Specialist in Orlando, Florida I too am seeing really high counters from the 2 largest investors. An example is a property I had valued at $85,000. I listed it at $105,000 to try and get as much as we could for the property because I know that the higher the price the easier the short sale.
- We negotiated an offer of $100,000 cash.
- The BPO came in at $110,000.
- The counter from Fannie Mae was $135,000!!
Why is this happening?
My opinion, based on conversations with several bank negotiators, is that Fannie and Freddie are now delegating more Short Sale Approvals to the servicers as part of the new FHFA Standard Short Sale Guidelines For Fannie Mae and Freddie Mac that were rolled out 1 November. BUT the deal has to come in within a certain parameter of loss to the investor. For example: "You can approve the short sales as long as our loss is not more than 50%"
So the ridiculous values are being based on a percentage of loss NOT the value of the property.
You may have seen a counter from the servicer like this:
Body: Please review counter. I HAVE COUNTERED TO THE LOWEST CONTRACT PRICE I CAN ACCEPT FROM THE BUYER IN ORDER TO APPROVE THIS SHORT SALE. Any contract price that is lower is subject to be reviewed by the investor, and/or immediate denial. Any decision by the investor will be considered final. A contribution from the seller has been requested, for -$12100. This amount is 10% (or promissory note for double the amount), of the investor’s expected loss based on this short sale offer. This amount can be accepted, or countered by the seller, based on their participation capability. However, a contribution may be required for short sale approval. With an appropriate contribution, the investor will waive the deficiency balance following closing of the short sale.
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It's pretty evident to me that this counter is based on an internal investor guideline and not the value of the property. So...the way to handle it is to:
Get some kind of a cash contribution from the seller even if it's $500.
Get the buyer up some on price even if it's $1,000. Just make sure the contract truly is market value.
- Reduce some expenses to increase the NET to the Investor.
Attach a value dispute to the counter offer.
If the file is escalated and the value dispute is denied then you should place the property back on the market at the higher price and look for another buyer. Reduce as necessary to find a buyer within 60-90 days. Then resubmit. You may get a completely different answer the next time around.
Don't let these counters throw you for a loop. Just keep pushing.
What say you?
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Anything to try and make it work, right ? But in situation of Fannie Mae it is ( in my opinion) nothing else but FRAUD. If you follow those properties ( let's say they do not sell and get listed as foreclosures), you will see that they will be listed as Home Path foreclosure with elevated price, but because there is no appraisal in those deals, they get sold. Everything is nice now, because buyers are there and are willing to pay, but how market is going to look next year....? We are going to be exactly where we were seven years ago. Do we have to bail out Fannie Mae again ?