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03-29-2012 09:21 AM
A new short sale listing is first listed on Redfin not as active but as pending. It was priced way below market. Agent represents both buyers and sellers. Backup offers are suggested to price ridiculously low. What's going on here? If I make a market price offer, would the bank ever see it? Or should I just take my offer to the bank directly?
- a lost buyer
03-29-2012 10:12 AM
Short sales are a bit unique, as is any transaction. Do you have a situation you can point to?
It sounds like if it showed up on Redfin and was immediately pending that the listing agent had a buyer already lined up for the home and is now just putting it on the MLS for comp purposes, and to potentially get backup offers. If you were to submit a backup offer it may make it through to the bank or it may not. Some banks have a system in place for uploading backup offers and some do not. You'll have a very difficult time trying to take an offer to the bank directly. The individual at the bank assigned to a particular short sale will work with the listing agent and the seller, but you most likely won't have much luck trying to navigate the endless layers of phone trees and departments within the bank trying to find out who to get the offer in front of.
There isn't a requirement for a listing agent to put a home on the MLS prior to accepting an offer. Just because a home is input into the MLS also doesn't mean it's available for anyone to purchase. In situations where a buyer is already lined up the transaction can be put into the MLS for comparable purposes and so that the agent can offer up a record that they procured that sale. Banks have a process in place for establishing market value for a property, so if the initial offer is drastically below market value the bank isn't likely to accept it.
I hope that helps and have a great day,
03-29-2012 10:43 AM
I've got one:
Paul, I agree with you that the bank should be doing their due diligence and comp out the place. However, what if the offer was rejected and the home continues to sit on the market at that price, but the L.A. fails to submit the higher backup offers. Can't the agent go back to the bank and say, we're not getting any taker and that the initial bid was the best they'll get? The bank doesn't have the authority to take away the listing and assign it to another agent, nor can they re-list the same home on the MLS at a higher price. At that point, the bank's only option would be to force a foreclosure, at which point the bank will lose more money. Is there another option for the bank at this point?
03-29-2012 11:25 AM
If it is a regular sale, of course the seller can choose who he sells to at what price. But this is a short sale, in which the bank takes hundreds of thousands of dollars in loss. Who is paying for this? Tax payers and bank customers. Even if I do not have an interest in a particular house, I am still a tax payer and a bank customer. I do not want to see the banks take more loss because of back door deals. You mentioned that the banks have a process in place for establishing market values for a property. I sure hope the process works. But the same naiveness is exactly what generated the real estate bubble and eventually brought the economy to its knees. I am sure some people made a few bucks in this process. The banks are trying to combat the irregular practices in short sale (http://www.freddiemac.com/news/blog/shelley_poland
03-29-2012 01:58 PM
Hi Flaaash & LostChasm,
You both make good points, the system is far from perfect.
Flaaash, yes, the agent could do that. It's fraud, but they could (and some probably have). A short sale is a voluntary proposition. The historical process is to foreclose and that's how the mortgage and title documents are drawn. Short sales aren't a requirement, they're an avenue for a homeowner to pursue should they not want to lose their home through foreclosure. In your scenario where is the home owner? They have the responsibility of hiring the listing agent and cooperating with the bank during the short sale. Many banks now have a pool of approved short sale listing agents that they will refer homeowners to should the homeowner speak with the bank about a short sale prior to engaging an agent. If the homeowner and the listing agent are in on the scheme you never really had a chance at purchasing the home anyway.
LostChasm, of course no one wants to see the banks take unnecessary loses while they're using tax payer money, but without getting too political, that could be said for much of government spending in general. The process isn't perfect, but it's getting better. Transparency will definitely help, you're right.
03-29-2012 04:06 PM
Thank you Paul for an Open and Honest answer. I've had difficulty scheduling tours of short sales due to either the Listing Agent not responding to calls or the seller decline to make the property available for showing. Honestly, I feel like my chances of being able to tour a short sale property is 50/50. Well, I guess that's life...
03-29-2012 04:26 PM
I'd say 50/50 is probably pretty close. Either they don't return phone calls, the time frame doesn't work with them or they've already accepted an offer but the listing agent has left it as active to try and get backup offers. They can be a frustrating endeavor, but you're not alone.
Best of luck in your search!
03-29-2012 05:11 PM
Flaaash, the story probably isn't finished yet, so keep an eye on the property. More than 50% of initial short sale "transactions" fall out of escrow when the bank comes back with a counter-offer closer to market value. Your best bet - if you think you'll like the property - which I don't think, you've even been inside of - is to submit a backup offer, closer to market value - based on research by you and your agent.
Frankly, though, there may be all kinds of problems with the property, that aren't apparent to your naked eye. Defferred maintenance, termite work, HOA fees, liens, there are a multitude of potential problems with many ( Most?) short sales that don't materialize until you're DEEP into escrow.
I just called a listing agent on a $700k short sale in South County - on the golf course, 4000 sq ft, market value probably closer to $900k, than $700k. It has been on the market for well over a year, steadily coming down, in price. She informed me - as was her duty at this point - since she's discovered numerous "issues" with all the times the property has been in a "transaction" - that there was approximately $42,000 worth of problems, that the BUYER would have to pay for - IF he wanted the property.
While that's an extreme case, the majority of short sales DO have some issues, that a buyer is going to have to swallow.
OR, the bank will eventually get tired, and simply foreclose on the property, fix it up, and put a nicer, relatively trouble free property, on the market as an REO, at a price probably just a bit below "market".
If I were you, I would either wait for the backup situation, or wait for the house to become a bank owned REO.
Bob Phillips - Realty ONE Group - South Orange County, CA
04-21-2012 02:31 PM
I bid on a pre-approved short sale back in Feb. 2012 and was told that we were 2nd in line.
We were putting 20% down and could also have paid cash, if necessary.
The house had gone pending twice before in the past 8 mo. at a lower price (310, 313 ) than the offer, so we priced 1/2 between that.
Found out today that the house closed much lower than our price.
Listed - 330k
We offered 321K - 20% dwn, Pre-approved financing.
Sold at 313K!
Our offer's closing date was April 30 and this closed on the 20th.
Seems to me the seller's RA ALSO wanted to be the buyer's RA. Seems to me only one offer was submitted to the bank?!
Who's to say the RA isnt working with a flipper or Rental Mngmt. Co. and since they are the "GATEKEEPERS" they can keep others at bay. I have seen this fraud happen before. The RE market requires transparency. I wonder what the owners would think if they knew about this? I don't know how some people sleep at night.
04-21-2012 03:15 PM
24keara said: "The house had gone pending twice before in the past 8 mo. at a lower price (310, 313 ) than the offer, so we priced 1/2 between that.
Found out today that the house closed much lower than our price. Listed - 330k, sold at 313K!"
We offered 321K - 20% dwn, Pre-approved financing.
There could be a multitude of things that you're not privy to, many of which may have cost the buyer - in cold hard cash, OVER AND ABOVE THE PURCHASE PRICE - so it may NOT be as simple as your timeline is trying to make it.
First of all, from MY viewpoint, I would conclude that buyer #2 never really went away, because it appeared to close at his price. Sure the listing agent might have put it back on the market as available, but if buyer 2 didn't agree to a cancellation, he could have remained in first position. ( A reason the listing agent told you, you were 2nd in line. There might have been other buyers who were also 2nd in line.)
Another scenario is that the bank counter-offered buyer #2 with a higher price - $330k, ( The reason the listing agent then changed the list price to that amount - a common tactic.) but buyer #2 chose not to cancel, or walk away, and stuck to his guns, at $313k, and the lender finally relented. ( In such a case, the lender may NEVER see any of the other offers.)
Here's the best advice I can give a buyer who is determined to try to buy a short sale.
Make offers on more than property. ( But for God's sake, do NOT open escrows with any of them - a short sale buyer should NOT open escrow when the seller "accepts" their offer, but instead, later - when the lender APPROVES your offer.)
I've had offer on as many as 4 different houses - all short sales - waiting to get a response from the bank. If you REALLY like one of the houses ( NOT a good idea with a short sale.) and others give you a response, decide at that moment, whether to switch to the one that's responded, OR back away from it, hoping for the one you like.
Bear this in mind. In 50% of the cases, that one you like might NEVER respond to you - in a manner you're hoping for. The lender might counter-offer with terms that you can't accept, or the house could get foreclosed, right out from under you.
If you have offers on a few possible short sales, keep an eye out for either an REO ( Bank owned property.) OR, even better, a well priced equity or standard sale. If the agent you're working with won't go along with such a strategy FIRE THEM, and find an agent who will.
If you keep ALL those options open, you should eventually find success. Good luck in your search.
Bob Phillips - Realty ONE Group - South Orange County, CA