Short Sales, 82% Rule and REO's

Hello to everyone reading this post, my question is about short sales, the 82% Rule and RE0’s. I have read that banks (specifically the loss mitigation department) intend recoup at least 82% of the appraised value of the distressed property. Is this 82% based on the current distressed condition of the property, or is this percentage based on the A.R.V. of the property. All responses are appreciated.

depending on lender.
Usually 82% of the BPO

FHA 82% of the BPO or 63% of the original loan which ever is highere
VA 92%
GMAC 92%


Thanks for the information Green Queen.

I think the lenders can do whatever they want to. Meaning that there are no set rules. Correct me if I am wrong but I think the lenders are insured up to 82% of the Brokers Price Opinion on FHA backed loans. I do not think this means that they will always discount to that amount but if I were a lender and had that option that’s the way I would go.
And yes any ‘discount’ given is based on the appraised value of the distressed property.

I thought the 82% was refering the senate bill 761 where they claim that it’s to protect the distressed home owner from foreclosure consultant and reconveyance company.

The bill states that any foreclosure consultant, reconveyance company or investment companies must hold the property 18 months
before they sell or give the home owner you bought the house from 82% of the profit if you don’t hold it 18 months their trying to stop us investors from getting ahead :‘( :’( :cry:

But it’s really to keep the investment companies from buying peoples houses. They say that they are trying to make sure investment companies don’t get the equity do to the home owner.

But if the home owner is distressed how are they suppose to get the equity if their credit is to poor to refi in the first place.

They just don’t want investors to make the money the banks hopes to make thru foreclosing then reselling for themselves.

Honestly the bank could care less for the distress home owner they want the same thing us investors want hence money.

But the difference is that the investor will buy the house and make sure they give the home owners something to walk away with to help save their credit from foreclosure.

The bank takes the house and in most cases it’s like the bank is laughing at those that don’t know how to use the option or interest only loans.

The real reason the senate and I mean both sides of the senate the Right and the not so smart no good news left pasted that bill is to protect there pat money that they get from the banks to pass bills that favor banks and lenders. 8) 8) 8)

Thanks for the information bovine and real money.

Is it true that a purchaser/investor must hold the property for 18 months before selling? If so, please point me to the article that states this. I have only been able to find the definitions for consultants and so on.

Real Money, are you in MD? Just curious as to what state has the 18 month rule. I recall MD was unfriendly for short sales/foreclosures for investors.

TruAxiom, the 18 month rule is an example of state government run-amuck. There is no 18 month rule in my state. Check your state laws. Ask a title company/attorney and they should be familiar with it if it exists in your state.

[rant] Why should the government be allowed to tell me when I can and cannot sell. In a capitalistic environment, it is dangerous for the gov’t to meddle in this fashion as it creates disequilibrium of market forces. For example, it is plausible that foreclosure rates go up in MD because the state gov’t makes it that difficult for investors to help homeowners find an early escape option. This causes banks to sit on more and more defaulted loans all the way thru the entire foreclosure process. This causes the OCC (the Feds) to require lenders keep more and more cash reserves on hand due to their rising rate of defaulted loans on the books. This causes the lenders to have less cash to do other loans and make money. Banks that don’t make money in a state tend to pull out of that state. Fewer lenders in the market means less efficient pricing of consumer products, which can create increased monopolistic pressures by the remaining banks. Monopolistic pressures lead to more gov’t over-site. I can see this lead to an ugly, ugly viscious cycle. [/rant]

Thanks for the great info, green queen. I assume you mean the lender wants to NET these numbers and not see it as your overall offer? If they want to net these numbers, the overall offer gets pushed up higher?

Like turborocket said just check your state real property laws sorry I didn’t mean to scare you if your state doesn’t have that lawYET but it might be in the works so check your rear view mirrors because they already pulled us over in Maryland >:( >:( >:(

You are 100% right I live in Maryland but I’m told that other states are looking at the bill closely and other states are enacting their own version of this bill. I know crazy but so true this is MARY–LAND but the Government isn’t Mary in Maryland :stuck_out_tongue: :stuck_out_tongue: :stuck_out_tongue:

You can say that again “government run amuck” ??? ??? ???

I think you are putting it pretty lightly saying their only running amuck they are in most cases causing bankruptcy that investors can easily help prevent if they let us buy these distressed properties and bailing out these distressed home owners. :‘( :’( :cry:

It so sad what their doing to the little guy who got talked in to using the wrong loan just so they can buy a house they know they really can afford. :-[ :-[ :-[

Below is the link with all the not so nice details

I hope this never happens to your states or you to will have to put the race car on the trailer until they give you the green light to race again.

Back to total rehabs and sell I go again permits, inspections and contractors are so time consuming 8) 8) 8)

I COMPLETELY agree. It’s ridiculous that an 18-mo rule is in place in ANY state not to mention that one has to know what to look/ask for in order to find out what is illegal in an individual’s state.

Thanks for the suggestion on asking the title company/attorney. I’ll make it happen on Mon. :slight_smile:

Thanks Real! Those links were exactly what I was looking for!