Will The Lender Accept An Amount LOWER Than The First?

Okay, what are your thoughts on this scenario... We just found out that after waiting 45 days - Countrywide DOES NOT own the loans on the home we are trying to purchase; they had sold the loans to USB. (Couldn't they have told us ALL that over a month ago? Ugh.)

Anyway, the Listing Agent spoke with the USB rep today and assured the Agent that they will work on this SS very quickly... they were annoyed that Countrywide waited so long to tell us all that they weren't the 'owners' since it has wasted some valuable time on this pre-foreclosure...

Anyhow - let me ask you this...

The house is listed at $809,000

We found out today from USB that the 1st is $849,000
(the owner financed 100% of the house)

I realize that the appraisal will be a key issue in this SS - but WILL the bank go BELOW what's owed on the 1st? The Listing Agent has it LISTED $40,000 below what the 1st loan is... The house would be a "deal" at anything lower than what the asking price is - but not so sure it's a 'deal' at $850,000... -Especially because it's in worse 'shape' than when the owner bought it at that price 3 years ago...

Please help! How is USB to work with? Have you seen a bank take a hit on the 1st loan too?

Thanks!

The bank will determine what they will accept based on the value determined by the Short Sale lender. They determine this by 1. drive by appraisal 2. interior appraisal. The amount currently owed or the current listing price is virtually meaningless in their decision making. If the offer is substantially lower 15%+ than their pre determined (drive by) value they are most likely going to request an interior inspection. My guess is that an interior has not been completed yet since they just took over the loan. If you can find out when/what that inspection came in at then I can give you a MUCH better idea if they will accept your offer. What was your offer?

[ Edited by jackbenimble on Date 01/17/2008 ]

Hi there,

Property Listed at $ 809,000

We offerred $ 755,000

(Apparently, the 1st loan is for $ 849,000)

What do you think???

Thanks again!

Banks go below what's owed all the time. Lately I've been getting them to go 50% or less, but I pick my targets carefully. Next time you talk to the bank, among your questions, casually ask "when was the last BPO you ordered on this property?" and when they tell you, ask "what did it come in at?" It's amazing how many banks will tell you the number. Then you know you can offer 80% (give or take) of that and it's a slam dunk deal. If they won't tell you, butter up the Loss Mit guy, and ask again. You have nothing to lose.

If the BPO is old or too high and you have reason to believe it didn't consider recent developments like vandals broke in or the plumbing froze solid (I'm working two right now with that problem!), then say, wit alarm, "did it consider that xxxx has recently occured? If I were you, I'd order a full interior BPO on this one. It's a lot worse inside than you think." Then make sure you control the BPO by having the only key to the house. Meet them there ready to show them what a dump it is. If it's been listed without offers, use that to your advantage too when you write your narrative. Good luck!

Just had an offer accepted for $28,000 last week, on a property sold last March for $84,900. Buyer made few if any payments. Expect mortgage was 80%-90% of that, but don't know. Appraised this week at $44,500 based on comps, $77k based on replacement value.

Just to give you an idea of how much below mortgage amount and even appraised value lenders will go right now. An equivalent offer on your deal would be $280,000- not that I am suggesting you go this low, just that it is not impossible that they would take that. However I expect the cost as a percentage of value for higher value properties is less when the lender has to hold them, so they may not discount as much. I don't deal in what for here are such high end properties- I'm not sure there is a house in mid-Michigan that is worth $750k, even the Olds Estate (which is essentially a castle) went for considerably less at the peak of the market...

Chris

CM, I think your lookn good on your offer. 95% chance they accept, as long as the listing agent doesn't screw it up by sending those other suppossed offers. I'm confused as to why the listing agent would even disclose theres other offers. Anyway, looks good. Try to get listing agent to get BPO as mentioned above. Lemme know

JM -

The Listing Agent said that he was required to submit ALL offers to the "owner" (which in this case is the Bank). My Realtor agreed... He said that although it 'sucks' - the Listing Agent is required to submit every offer to the "invested entity". He can't 'sit on an offer.'

Again, this is just what I've been "told."

*But* we do have a document (with signatures) stating that we get FIRST RIGHTS OF REFUSAL. It may not mean much - but at least we get first dibs on the Lender's counter (unless they just accept ours)...

*Fingers crossed*

By the way - may I add how LAME Countrywide is. The Listing Agent has spoken with them since Nov.30th trying to get an LM assigned - finally today we are told that they SOLD the loans to US Bank a year ago. Countrywide could have told us this 45 days ago! Geez! Now we are starting ALL OVER! *But* US Bank started working on the 'package' today and wants to speak with the Listing Agent again tomorrow morning. So at least we have ACTION! I don't think an appraisal has ever been done on the property - the Listing Agent told our Realtor that an appraisal will be the next step...

THE LISTING AGENT AND YOUR AGENT ARE ABSOLUTELY GIVING YOU INCORRECT INFORMATION. The bank is NOT the owner of the property. Your offer to buy the property has the homeowners name on the contract NOT the banks. Your first right of refusal means nothing in this case and you would have no recourse to force the banks hand. It's very important that the lender does not get a higher offer or your done.

[ Edited by jackbenimble on Date 01/17/2008 ]

Good and interesting point on the lender not owning the property, and so the listing agent is not obligated to send any offer to the bank.

The listing agent IS, however, legally obligated to send any offer to the homeowner. I would think it would be to the homeowner's advantage to obtain as much as possible for the lender, as they will likely get 1099'ed for the balance. But there is no reason why the homeowner would not want to share information on any competing offers with you, hoping you will offer better. The problem would seem to be a listing agent that thinks S/he is working for the lender rather than the homeowner, who is actually the client.

Establishing communication with the homeowner could be very useful if you can manage it, even if it is through your agent. The problem is that agents are trained to keep buyers and sellers apart, as personality conflicts can often sour a deal. Get your agent to obtain competing offers from the sellers- their agent cannot share this information but the seller can and should. The listing agent should be made to understand that it is in their client's best interest to provide this information to you, as it may result in a higher offer. They are legally obligated to act in their client's best interest.

The trick in all of this, of course, is to not appear too eager, or you may wind up being manipulated to pay more. Insist on seeing an actual offer, not just hearsay numbers. Understand that a higher purchase price is not necessarily a better offer. And hope that your agent is astute and honestly working in your best interest!

Chris

Once the homeowner signs the purchase agreement then they are committing to that purchase. It is not any different than any other transaction. If an offer comes in a week later and its higher then its a back up offer and goes to the lender only upon cancellation of the previous escrow.

Far as 1099's go, that is history for the next 3 yrs

check the contract. Not all are binding on the seller unless you sue.

In a short sale the homeowner accepts an offer subject to the lender's approval. If the homeowner mentions a higher offer to the lender, the lender is not going to approve your offer, and the homeowner will not be bound by it. They can then move on the higher offer.

I had forgotten about 1099's and the mortgage forgiveness act or whatever it is called. So the seller would get no benefit from a higher offer unless it was sufficient to pay off the loan. However, they may not realize this. Yet another reason to establish communication with them. If you can get sympathy from the seller, they could prevent their agent (who is, after all, working for them) from sending along any additional offers until yours is resolved.

Chris

Are you doing a true Short Sale--a formal, sometimes tedious investor process using photos, narrative, hardship letter, comps, repair estimates, etc.--or just a low offer? Sometimes Realtors think a "short sale" is just a low offer on a bank property. Low offers are a lot easier, but unless you are able to paint a compelling story, the bank need not seriously consider it.

Your offer seems quite generous, and I'd be surprised if the bank doesn't jump on it. Of course, given how slow they've been (this is typical, banks are swamped right now), "jump" is a relative term.

On that I certainly agree- a lender would be quite foolish not to jump on your offer in this market.

Chris

Of course they will go below the value of the first, that is why we call it a "short sale"

The shennanagins with CW and USB are because your agent doesnt seem to know what they are doing regarding a short sale-pretty common.

as far as pricing and offers, I personally would be offereing USB no higher than the 500K range-maybe lower.

[ Edited by ICGPROPERTIES on Date 01/21/2008 ]