Short Sale Gone BAD!

I need some help, I made an offer on a property that was listed for 179,000( I plan to live in the house for a few years, but it is ultimately and investment) and the house is in the foreclosure process. The market value of the home is around 175k and my offer was 165,000 and 2000 in closing to be paid by the seller. I think the balance owed on the loan is around 168k. I was notified by my relator that the offer was accepted with no counter offer (which makes me think I offered too much). My relator then calls today and says that the bank has come back and said that they can not pay closing cost however the offer of 165,000 was a good offer and should be approved. My relator sent back an email to the bank saying that we would now offer only 160,000 on the house if no closing cost are going to be paid. I truly don’t want to pay the additional 2k because the house does need carpet and paint and a few other minor updates which I was trying to compensate for with the 2k. Now to my questions. Do banks ever pay closing or am I just SOL on that one and secondly should I offer even lower on the house. I know this is a lot but I am really confused on this one.

This is a bank owned property? Then you aren’t doing a short sale, it is just a normal sale through an agent.

You should be able to get out of the deal if you want. And yes, some banks will pay closing costs (my deal, the bank offered 3% of the price in concessions).

My experience has always been that the sellers don’t have any money when they are in this situation so I never have them pay closing costs. So either you have to pay them or the lender. I personally like to keep everything as simple as possible and avoid anything that the lender might come back on. Which is why I just like to pay the closing costs and lower the purchase price to reflect that.

I guess I didn’t explain this one very well so let me try again. The property has not gone through the complete foreclosure process yet. The signed contract that I have is with the original owners of the home who have already vacated the property. It is not a bank owned property yet. When I recieved the signed contract I was under the assumption that the bank had ok’d the offer and we were all set, however it appears as though I assumed wrong. Today the bank contacted the relator handling the sale of the house and advised that they could not cover the closing cost but besides that she felt confident that the offer would be approved. Thanks for your responses I really appreciate it.


Heres my delema.

I put an offer on a ss for 142,900. on an asking price of 154,900. (this property is listed as ss already approved) they came back at 151,700 and I would have to pay all closing costs. (so aprox. comming to the table with $4500, escrow and closing) My closing is tomarrow, I have taken off work for 2 days, my realtor states the sale has not been approved as of yet. Here I sit, waiting on the movers, with no place to go tomarrow. Why is it that the buyer has to honor these contracts and the banks can take there sweet time. This is my second ss, and both have been nothing but pains in the a**.


It wouldn’t matter for me to make a comment on your deal since it would be in hindsight. However, I do have some information for you. Our company has some guidelines which have served us well. A few of them are as follows:

  1. Market Value is defined as a price which would move the property in 60 days or less.
  2. Wholesale is defined as 75% LTV.
  3. All investment properties much be purchased for at least 80% under Market Value.
  4. Investment properties which are in need of repair must be purchased for at least 75% under Market Value.
  5. Investment properties over $700K must be purchased for at least 65% under Market Value.
  6. A bank selling short a property must be negotiated down to at least 70% under Market Value.

We follow these guidelines to ensure that even if we make a bad deal (sometimes we do), we have some room to recover. That being the case, we would have offered a maximum of $143K for the foreclosure property your working. Of course, that isn’t helpful for me to say after the fact.

One last note. Banks who are selling short a property already know the minimum price they want to sell the property, and they will always (in our experience) counter with a higher price than your bid at least once. Our strategy is to only counter in increments of $1000.00. If they don’t adjust closer to our number then we don’t want the property.

I’m honestly not trying to call you out or anything, but I think the following corrections might be in order:

I think you should mean 75% ARV (after repaired value) minus the cost of repairs or something along those lines instead of 75% Loan To Value.

I think that instead of under on all of these, you mean of.

I also think that this should have something to do with the cost of repairs.

Again, not trying to contradict you, it’s your company - I’m just clarifying.

Thank you to everyone who has responded to my questions! I truly appreciate the feedback. I think my first mistake was getting to emotionally attached to the house because I will be living in it for a few years, and it pretty much had everything I wanted in a house. From everything I’ve read I knew I should have offered lower on the house I guess I just thought there was no way that the bank would go for it. My realtor advised that he was informed by the listing realtor that I am the third person to offer on this house and the bank has found some way to ruin the deal each time. Can anyone think of any reason that they would intentionally sabatoge the sale of the house? It has been on the market for 160+ days.


I understand the need for clarification, I did word ‘under market value’ incorrectly. I did mean ‘of market value’. Thank you for catching that.

The rest is as it stands though. I did mean LTV on those items. We don’t work deals based on ARV since our hard money lenders who don’t require points up front only care about current value. Obviously, for houses with repairs, the cost to repair is important. However, we only rehab houses in which most of the repair is superficial. Therefore, 75% LTV works for us. In fact, 15% of the current value just happens to be our costs for most of our rehabs.