Bank/Realtor jerking me around on short sale!

Foreclosures, Short Sales, Tax Foreclosures
1

I have having a problem with the bank/realitor. Here is the sad story.

In 2006, a nice brick 2 family was sold to an investor for $138,000. This was WAY too much given the $1250/mo total rent. The investor used a $109,000 first and $28,000 2nd to swing the deal.

Fast forward to June 2008 and the property is in foreclosure, the Sherrif’s sale is 1 month away and the property has sat on the MLS at $109,900 for months with no action.

3 weeks before the Sherriff’s sale, the MLS price drops to $99,900 so I jump in with a $87,500 CASH offer. Three weeks go by with no reply. Then the day before the Sherriff’s sail, the listing agent says the banks wants a higher offer from me, but would not say what they need. So I bump my offer up $750 to $88,250. The next day, minutes before the Sherriff’s sale, I get word my offer was accepted, and by the end of the day I have a signed contract for the property.

I spent a good bit of time in the past week getting the title/insurance/inspections moving along for a closing next week. Well, today I get word that the bank never really agreed to the short sale and they now want $93,000 which is 90% of the recent $103,000 appraised price. They bank says they need to get at least 90% of the appraised value. My agent is VERY pissed at the listing agent for this whole depacle.

Anyway, I told them in no uncertain terms that $88,250 is my highest offer and indeed it is a very generous offer given that it is CASH. I am waiting to hear back. My agent think the bank is just trying to squeeze some more cash out of me. I can’t believe they would torpedo this CASH deal for only $5,000

I am just thankful I found out about his crap before I paid $400 for an inspection.

I read in this forum that 70-80% of appraised value is more typical these days.

Any thoughs from the experts???

2

What ever happened with the “signed contract by the end of the day”?

Don’t lose your sleep over this - but the deal is not biding until you get the signed contract. Good thing that you did not spend a lot of money on this “promise”.

And a suggestion - you don’t get anything by demonstrating your frustration to the other agent or to the bank. Simply tell them that you are sorry they want more money. You understand that they want to get the most they can. In their place you would be trying to get the most money you could… However the $88,250 is your final and firm offer. Take it or leave it. Keep your cool. They will realize they are dealing with a professional and they may think twice about trying to jerk you around again… Just my 2 cents.

Good luck! Let us know how it ends!

3

I had a signed contract in my hand at the end of the day. it was signed by the seller and the listing agent. However my agent thinks the listing agent made a mistake in thinking that the bank would go for $88,250.

Anyway, investment property is not an emotional purchase. It is a math problem. I would have to spend at least $15,000 getting this property up to snuff and I want to start out with an equity position.

Why $15,000 in rehab expenses? Simple, right now there is only a single furnace in the property and the owner, pays for the heat. The furnace is old and the size of a small SUV. I budgeted $12,500 to have that huge furnace yanked and two smaller modern furnaces installed and piped to the tenant’s gas meter.

It is a buyer’s market and if the bank doesn’t want a reasonable cash deal, I am sure there are others who do. If the bank doesn’t come around, they will have to wait 30 days for another sheriff’s sale, then another 30 for a redemption period, then relist the property. At what price? It sat idle at $99,900, but now it will be vacant. Throw in insurance and the risk of theft and vandalism… they would be crazy to hold out.

I am thinking of lowering my offer!!! :smile

4

Now I am confused… What do you mean by having a contract signed by the listing agent? Since when listing agents have to sign the contract? Are you referring to a contract to purchase real estate?

And when I referred to having the documents signed, I was also thinking about the lender’s short sale approval “in writing”. I am not that familiar with short sales, but if you need approval from the lender to close a short sale, than you need to get that in writing. If you don’t you shouldn’t consider that you have the deal…

And one last point - if you have a signed contract by the seller and it is a valid contract, the seller has to sell for the price/conditions estipulated in the contract and he will need to come up the difference to pay the lender of. I know that this is not going to happen, but you could probably sue the seller for specific performance… :O) Again, this is not going to help you get the deal… Just thought about sharing this perspective.

Good luck!

5

And one last point - if you have a signed contract by the seller and it is a valid contract, the seller has to sell for the price/conditions estipulated in the contract and he will need to come up the difference to pay the lender of. I know that this is not going to happen, but you could probably sue the seller for specific performance… :O) Again, this is not going to help you get the deal… Just thought about sharing this perspective.

Good luck!
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If the listing agent did the job right there should have been something written to the effect “Contingent on lenders approval”. This moves the responsibilty of acceptance to the lender. The seller can agree to anything but there is a legal lien (a mortgage) on the property and the seller can’t convey title until this lien is paid off.

What you have illustrated is why 95% of all short sales never end in a completed transaction.

6

My contract did indeed say “…Subject to lender approval…”. However, after some negotions with the lender, the listing agent then said “You are good to go”.

I assumed this to mean that the final offer was accepted verbally by the lender and that a written confirmation was forthcoming. Obviously this was not the case because the lender then came back asking for 90% of apprasial.

The nugget I learned here is not to spend any money, (on inspections for example), until you get written confirmation from the lender.

The property is still listed on the MLS as “under contract”, maybe they will let me know something, maybe not. I am moving on to scout out other properties.

Gary

7

Let it go into foreclosure if they dont want your price. Stay firm. I also think you should offer less. how is going to cashflow ?? 88k + 12k rehab =100k and only $1250 rent

I think what hapened was the listing agent thought it would be accepted.

from my understanding short sales go through the owner of the property who cant afford the payments, a listing agent if their is one and finally the bank who have the property assinged to 1 of their asset managers. so the final say so comes from the asset manager.

If i was you would be happy they didnt accept. If you think its a good investment then re-offer it in a month for a little less. if it goes through foreclosure then i bet you’ll get it for even less. the longer they hold it the more it costs them.

8

One reason the bank might be balking is because on this deal they would have to pay the real estate commissions. On an $88k sale, that could be about $5k. So better for me if it goes back to auction. Then I go there and put in a bid of $80k.

9

Take your chances at the auction–best of luck