Dealing with the Lenders - How much Negotiating can you do?

Foreclosures, Short Sales, Tax Foreclosures
1

I’m working on a file where my last offer netted the Lender (CM, who holds both the 1st and 2nd) right at $101.5K on a $110K offer.

Now the L/M assigned to the file currently states, “We have rejected your offer because it does not reflect fair market value”. I want to ask him, “Have YOU been inside the house? I have, it it’s going to take a LOT of work to even make it saleable”. Maybe the BPO agents (there were two) wanted to list it and keep it from going through as a short sale. I just don’t know, but if the BPO came in over $140K, I’d be amazed.

The negotiator closed with, “but we would accept an offer if it netted us $115,000”. I’ve reworked my numbers, and I think the absolute maximum I can offer is $120K, netting them about $105,725. I’m intending to make this my last offer, but will add that, upon acceptance, I’ll encourage the borrowers to not file a “delay of sale” (which stalls the sale for 6 months), to waive their right of redemption, to NOT file a BK because they will be getting a complete settlement on the debt.

Do I have a leg to stand on? Should I just give up and tell them that it looks like their house is going to sheriff’s sale? I have a retail offer cooking on this one, but there is absolutely no guarantee the B-C buyer will perform; we still have a property inspection to survive, and it’s an FHA offer. I have real doubts whether it will appraise FHA without requests for repairs.

Rather than offer them my absolute maximum, I’m tempted to offer $115K, but maybe I should quit pussy-footing around; just make highest offer and move on if they don’t accept it? I need a pair of brass balls at this point but I appear to be fresh out!

Any thoughts?

2

Hi,

This is obviously a short sale but you did not directly specify.

When you do comp’s for the home and define a value by reviewing the comparables what value are you finding?

Most banks and lenders will except about 15 to 20% below FMV for the property! Most will not except repairs against the discount as they feel if there excepting say 15% below value the buyer has 15% $xxxx value to make those repairs from.

They figure you would not even be interested in buying the house if it’s not livable and you could not just move right in and make repairs later.

I can not buy a short sale to remodel, when I do short sales I have to either make it a rental as is, sell it to another investor as a rental as is or sell it to an end buyer as is, but I have never found enough margin in what the bank will except to make any repairs or have very many choices on what to do with the property.

Why does $120k only net them $105,725 that’s almost 12 percent! Normally realtor gets 5% and the lenders closing cost is 2.5% maybe, so $120k minus 7.5% is a net to the bank of $111,000. Your closing cost’s do not equate in there net.

It is $124,350 to net bank or lender $115,023 roughly with 7.5% of expenses. Also you have the ability to ask the realtor to contribute 1% to help you help the seller, it’s not unheard of.

Ok, if your buying the property as A - B (Lender to You) how do you intend to buy the property since FHA requires 90 day seasoning?

Short sales are not a property to buy and make major repairs, you always want to buy properties with minor defered maintence and basically livable as is thus passing FHA guidelines.

The lender is not going to make repairs either it short sales or they foreclose on it, but in a short sale the bank does not own the property making it impracticle to make repairs and all they will approve is a loss on there note and deed.

If they said they want $115k net, you have to offer enough to let them make there net which tells me the property is worth $140k roughly.

$140k minus 20% = $112,000
$140k minus 15% = $119,000

Sounds like the lenders excepting right up the middle.

Good luck,

             GR
3

Yes, it’s a short sale.

[quote
what value are you finding?
[/quote]
Totally fixed up - maybe $160-180K. In present condition, about $135K.

[quote
Why does $120k only net them $105,725 that’s almost 12 percent!
[/quote]
Actually, I think I was showing 109.5K at the 120K price.

Otherwise, it’s the costs. Even if I raise my offer price to $122,800, which I’m seriously considering doing, their net is about $112K. The revised costs are made up of:

  1. Real Estate Broker’s Fees - $4298 - paying only 3.5% because I’m a licensed realtor
  2. Buyer’s Closing Costs - $3070
  3. Prorated Property Tax - $2021
  4. Abtracting, title opinion, settlement fee - $950
  5. Tax Transfer Stamps, courier fees, recording fees - $286
    Total Expense to Seller is ~= $10,625 , which is only 8.6%.

[quote
Normally realtor gets 5% and the lenders closing cost is 2.5% maybe, so $120k minus 7.5% is a net to the bank of $111,000. Your closing cost’s do not equate in their net.

It is $124,350 to net bank or lender $115,023 roughly with 7.5% of expenses. Also you have the ability to ask the realtor to contribute 1% to help you help the seller, it’s not unheard of.

Ok, if your buying the property as A - B (Lender to You) how do you intend to buy the property since FHA requires 90 day seasoning?
[/quote

The property is held in a title holding trust, and has been for over 90 days. I don’t think we’ll have seasoning issues with FHA.

[quote
Short sales are not a property to buy and make major repairs, you always want to buy properties with minor deferred maintence and basically liveable as is thus passing FHA guidelines.

The lender is not going to make repairs. Either it short sales or they foreclose on it. In a short sale the bank does not own the property making it impractical to make repairs. All they will approve is a loss on their note and deed.

If they said they want $115k net, you have to offer enough to let them make their net which tells me the property is worth $140k roughly.

$140k minus 20% = $112,000
$140k minus 15% = $119,000

Sounds like the lenders excepting right up the middle.
Good luck, GR
[/quote]
I’ve reviewing my numbers but the most I can come up to is~= $112,000, or so it seems. I may have to go back to my “C” buyer and ask for a bump on the sale price, but for what it’s tentatively sold for, there isn’t any more room to close the gap.

And I guess that unless the current borrowers will take a note for $3,000, this dog may not hunt. So close and yet so far. Any other ideas to help me close the gap? Probably going back to the buyer will be my last option, but that is where I’ll have to go.