I am a new member of this forum and this is my first posting. My question is this: I am currently negotiating with a loss mit rep at Citimortgage on a short sale property in Charlotte, NC. Citimortgage did an “internal appraisal” and said the value of the house in current condition is $73K. The rep said that Citi will require 92% of this amount or roughly $67K plus closing costs. The estimated repairs to the home from a contractor are $17,000 (much of it is cosmetic). I have offered $62K plus closing. The current comps for the neighborhood appear to support a ARV of approximately $115,000. Does anyone know if Citimortgage can take less than 92%? Should I tell the rep that $62 plus closing is my final offer? I realize we are only $5K apart, which makes this difficult. I would be grateful for any response. Happy Holidays!!
Sure Citi can take less than 92%, that is likely an internal guideline based upon past experience and the decision of some committee. The market determines the value of a property not a loss mitigation employee. Citi’s goal is to optimize the return on the property, getting as much money as possible balanced by moving the property off their books as quickly as possible. Remind the rep that the $5k spread will quickly disappear as their holding costs mount every day they hold a non-earning asset.
What you want to do is get that appraisal down. Get some comps of foreclosures in the area & see if they are less than the $73K. Also, like 71tr said, you can estimate holding costs. Just interest, taxes, and insurance for the lender over the holding period could knock their "recovery value’ down in the 50’s. So your offer can look good.
Then again, if the contractor issued a “high” estimate, then the numbers might work @ 67K on a flip.
71tr and rgchamb: Thank you for your suggestions. Negotiations so far have been over the phone. Yesterday, the loss mit rep gave me her fax number to fax her the “final” offer, which (if we agree to), would be $67,160 plus closing. Instead, I am going to tell her that I believe the appraisal is high and share with her 2 comps (which we already have done) within 2 blocks that sold for $57K and $58K. Thanks again and have a great weekend!
Let us know the outcome. Positive or negative.
remember their “appraisal” is an internal estimate and likely not a true market appraisal.
Thanks for the feedback. All of my “offers” to date have been verbal and with the loss mitigation rep. I have gone from offering $51K to $67K and she’s not budging. However, armed with your feedback, I’m tempted to fax a formal letter to her and reducing my last verbal offer to $60K, stating the reasons you guys have pointed out and then leaving the ball in her court. If you think this is crazy, please let me know. Have a great weekend.
SaraJones, how did it go?
SaraJones: I don’t think what you’re doing is crazy. I had a SS that was appraised at $75K that needed at least 15K in repairs. This was in spite of a comparable showing fixed ups selling for $79K.
Do what you can to convince them via comps & estimates that the house should be appraised like the comps.
Here’s the latest…The loss mit contact at Citimortgage said Fannie Mae wants a new appraisal because the value of the home has dropped quite a bit over the past year. The original appraisal came in at $73K. Regardless of what the outcome of the new appraisal is, we are going to hold tight at our offer of $67K (which was what Citimortgage originally said was needed in order for the loss mit rep to submit). They postponed the foreclosure sale for 30 days while this gets worked out.
Thanks guys for your continued support and questions about the status!!
We are keeping our fingers crossed that this will work out in our favor.
Just curious – if the appraisal comes in substantially lower, is there a particular reason why you won’t drop your offer?
yeah I thought I was missing something. Why wouldn’t you lower your offer?
Ohhhh. Yes, I wasn’t clear. If the second appraisal comes in lower, we will definitely lower our offer. The loss mit rep acted surprised by FM’s request for a second appraisal but for all I know, it’s another tactic to try to get us to increase our offer since the rep said that she can’t submit the offer unless it’s 92% of the appraisal. But, even if it comes in higher, we aren’t going up! Thanks for the further inquiry!
I wish you the best. Please keep us posted on your progress!
Here’s the followup…Got a call from the loss mit rep who said she got approval from the investor (Fannie Mae) to approve the sale of the home with Citimortgage netting 67,160. I know from the homeowner that the 2nd appraisal they ordered was indeed done but the loss mit rep didn’t say a word about it. Therefore, I believe that it must have come in at or lower than the first. Oh well…this was the first one and it was successful in our eyes. Thanks for your support/suggestions.
That’s great! And if the numbers work for you do not be greedy and go for it. Though if you can make sure they pay for as much as possible.
I need some of your wisdom…We now have this house in Charlotte to the tune of $67,160. We aren’t getting any investor nibbles so want to market to the “everyday” homeowner. Since the house needs some work, would you suggest us selling for maybe $90K and holding $10K in escrow for them to make repairs? I’ve never tried this but someone suggested it. Is this common? Thanks to all who reply!
Yes putting money in escrow for repairs is common. You should get at least 3 free estimates from contracts which you can present to any interested buyers. Just keep in mind that you will most likely sell to a first time buyer who will not want to hassel with repairs. If they are ready to buy then they will also need to move in asap.