So i finally got CW to respond and give me a counter offer… Here are some specifics of the deal im doing…
1st is for 170K
2nd is for 180K
Both first and second are through CW.
House went through sheriffs sale, so the 2nd is dead… I put in an offer for 80K… They came back with 170K…
Funny thing is their own appraisal (via their private appraiser) came in at 170K… They are kind of doing a double take on it thus far as they dont believe how much they lost on this prop and say that its already and unusually large sum…
I talked with the negotiator and she said that they already lost 200K on the deal as is and that any offer was going to go through another appraisal as they feel they lost too much and that for them to consider my offer i should be at least in the 150K range…
What should i offer now? Thoughts? Whats the best way to play this?
Once a property goes through foreclosure what was owed, or rather, what was lost is neither here nor there. What matters at this point is what the property is worth. They could have lost a million bucks on the property, but if that’s what the loss is compared to the FMV of the property then shame on them for letting it happen to begin with.
This is one of the biggest problems between the default management company/dpt and the lenders…the lenders are looking at all of the numbers involved with the loan and lose site of the facts. The facts are that the market place doesn’t care what a banks losses are. It only cares about what the value is today.
If the property has already gone to sale then it is no longer a short sale but rather part of REO. If this is true, CW is not going to let the property go for $80k that’s worth somewhere around $170k- they’ll let it sit there until they get an offer more in line what the property value. In all circumstances, the negotiator or asset manager is trying to get as close to fair market value is possible.
If you don’t like the value they’re coming back with have your own appraisal done and then they can have them internally analyzed for more accurate value.
The redemption period doesn’t change things. The property still goes through the same steps as if there is no redemption period. Once the property is in the DMC system it goes into what they call the ‘pre-marketing’ stage of which the time frame is generally 30 days. Very few right of redemption time frames exceed 30 days, but there are some that do.
If the homeowner does claim their RR rights the bank will take the money and give the property back. But the banks are counting on less than .01 percent of the homeowners to actually come up with the full amount due to claim their redemption. I personally have never seen anyone who has actually claimed their right to redeem after the foreclosure sale.
Thanks FN! But, still any percentages that work kind of as a guideline? I had heard from plenty of folks that usually they will let it go for 70% of appraised value… Is that a good guideline to consider? Or is it 70% of previous loans on it?
At that rate my max offer would be no more than 119K… Does that sound about right? Also, i will highlight that all the appliances in the house need to be replaced, etc…
70% is possible. There are many factors they take into account when they do deductions. Generally speaking 80% is something they will accept without putting too much analyzation into it. But anything less than 80% they will need to analyze and justify the reduction. The higher the reduction the more they need to justify it. Depending on who the bank is I would say 70% is number I would shoot for as your highest and best. Start off with a lower number and reach your 70% number at the first or second counter to the bank.
There are other factors they will take into account also. Such as how you are paying them. Cash offers are always looked at first and are most desirable because of the speed of which we can close. Another prime point is the money we are putting toward closing costs. This will be considered as well.
Also, another interesting point with regard to percentages… I went to a REDC foreclosure auction (mainly CW homes) and almost 98% of the auctioned homes went for 40% of list price… If they are willing to let them go for 40% of previous value, why the hell not just short sell for 70%?
Im talking homes that were “previously” valued at 200K, went for ~50K…
It sounds like the market in that particular area was hit pretty hard if there has been that much of a decrease in property value. Or, the condition of the properties has become that bad from neglect and abandonment.
Of the properties that sold for 40%, who bought them? An investor/other party or the bank?
It was a mix of public and investors… The market is phoenix… ~230 homes sold today and another 200 or so tommorow, and as stated, the average overall price (for today) was 65k; including lowend/highend. Houses that had “previous” values of 680K went for 280K and houses that had values of 128-160K went for 25-40K; then some flukes that went for a little higher above 110-120 (~50% of listed previous value)…
What im not sure of, is where these listed “previous” values come from? Do they pull them out of thin air? I will be researching this more…
Karim, this is something I don’t understand either. Just like the last REDC that was in town -the homes were sold at 55% or so - most in poor condition but what is perplexing is why they wouldn’t accept 55% 4 months ago as a short sale. That would have been 70% or so at that time. I’m sure there are many factors to that point. Phoenix is such a poorly declining market right now and will be for some time. This is very important to point out to the lender. I bring in as many comps, actives, solds, pendings etc - whatever I can show to substantiated an offer. What I have found is putting an offer in with a company name, llc, corp name etc - turns them off. They want “real” tangible offers coming from the general public, not investors. They know what investors (or most) are doing with flips, trusts etc when they see an investor in the deal, forget it. It has to be burnt to the ground for them to consider. I had one that took 8 months to complete. A complete mess, mold, gutted, termites - and they did not want to settle. You just have to keep fighting and point out the sheer facts; the market stinks. We won in the end :beer
As mentioned above the house appraisal they did said the value was 170K… So now CW is telling me they wont budge from the 170K offer… I have to say that the house was appraised for 350-380K in 2005… Its a 5 bedroom 3K square foot house… I originally went in with 80K, they countered with 170K… I countered with 119K (which is 70% of the 170K valued price)… What do you guys think i should do? Should i stick to my guns? Or should i up my offer a bit?
The negotiator said they she would submit my offer but said it would get rejected anyway… Is this another one of their negotiating tactics? I know if it was me, that is what i would say/do…
I guess im just curious if any of you guys got the same shpiel and persevered at your offer price?
Bumpty bump! An update the negotaitor said that my offer would need to be in the 150K range for it to be considered… I am thinking i will submit my offer for 150K and see what happens, that is around the 45% of previous value which is what the market seems to be doing…
Also, she seems to be getting fed up with me She said that if my offer didnt come up that she would just close my file…
If you just walked into that neighborhood, and didn’t know the history of the house, what calculations would you run to come to your highest and best offer?
fix and flip?
buy and lease?
buy and sell with owner financing?
Run those numbers. That is the MAX you can pay for that house.
My max numbers usually wind up around 50-65% of after repaired value for a rehab, and I shoot for a minimum 20% equity position and a minimum of $250/ month positive cashflow after ALL expenses and reserves for a 15 year life cycle and a 15 year note.
Notice, that nowhere in my calculations is there any consideration for what the bank has in the property or how much of a discount off the original price I got.
Yeah, i understand… Honestly, the house is nice… Its a 5 bedroom house in a nice area of town… Most of its problems are cosmetic, not structural… At 150K, that would be about 15K more than the house sold for 13 years ago with the exclusion of all the improvements the previous homeowner put into it of changing the roof, hardwood floors, new windows (~7 years old), marble flooring, etc…
But, usually in a shortsale the 1st mortgage simply wants to get its money out, correct? Regardless of value? If its price covers the value of the house, they will just want what they are owed? OR do they get greedy and want to make money on the deal as well? to do that they would have to own the house…
Karim your too concerned with the banks interest. Forget about what a home value was two years ago, that has no bearing on its present value. You can only use it to analyze the Subject’s current market conditions - declining, stable, or appreciating. The present condition and its effect on the property value is whats important.
Here’s an example - a home is in foreclosure FMV is $300K, the bank is owed $100k on the mortgage. Now do you think the bank would be willing to accept a $100k offer? Of course not. It has nothing to do with greed on the bank side, they’re simply analyzing the deal with an exit strategy to maximize their return or minimize their loss. This is a business!!!
You need to simply analyze the deal, figure out your exit strategy and the best possible offer you could make to achieve the maximum ROI. If the bank will not accept an offer that is profitable to you, then move on to the next deal.
I have to agree with your post but you lost me with your example.
FMV @ 300k, Bank payoff @ 100k, Bank gets 100k plus whatever other expenses were incurred.
Correct me if I’m wrong but isn’t the whole point of doing a short sale from our perspective is to create equity/profit where there is none?
Karim, I'm going through some short sales myself and the question really is "What is my exit strategy?"
Are you going to buy and hold? Will rental income cover expenses and yield a positive cash flow? Are you going to lease option the house?
Run the #s and keep emotion out of it. Dealing with thes loss mit reps can be very :banghead
Stay focused on your objective.
Ultimately if the deal doesn’t work for you you’re gonna have to walk away.