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How is legal in a short sale for the bank to ask a different price than the owner??

I have bid on a short sale and the home owner accepted.  Now the bank says no, no, no...we want $20,000 more than that!  How is that legal? On top of that, my offer to the home-owner was full price that they were asking.
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March 19 2011 - Portland
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You are a victim of false advertising. Unfortunately today agents price short sale listings at prices that are not approved. The price they price it at also drags home prices further down and they do not care whether they sell the home or not. They just want to price it low enough to get some buyers to call and maybe they can then sell them homes that are really for sale!
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February 01 2012
I agree with Malina on this one.

If the "full offer" was accepted buy the Seller, but is less than what the seller owes to the bank on the property, the bank would be taking a loss, not necessarily the Seller. It's that simple. Therefore it's the bank that would have to agree to the short sale as well.
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February 01 2012
Profile picture for N.ashla
Can the buyer counter-offer the bank asking?
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January 19 2012
It is common to become frustrated in attempting to understand the short sell process.

What you need to know about short sales is that in order for a seller to be able to qualify as a "short sale seller" they need to be on the verge of foreclosure (they must have missed payments and tried loan modification with the lender).

These sellers owe the lender MORE than the asking price that they have offered to buyers  After all, the seller is losing the home either way (zero profit if it forecloses and zero profit if it goes "short sell") so they really do not have any stake in what the buyer pays.

However, the lender has much at stake.  He has the ultimate word on what he will accept as a loss. In order for the lender to agree to take less than what is owed to him he does an extensive search on the seller and his inability to pay off the loan.  He also has the home appraised for fair market value so that he knows the "fair market price" of this property.  From this information he makes the decision whether he wants to take a loss (and if so, how much of a loss).
This is the lender's "right". 

If the buyer's offer is much lower than the appraisal he most likely will let it proceed to foreclosure where he is likely to get higher offers.

Hope this helped!




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March 27 2011
Sorry you are not having a straight-forward buying experience. 

As others have said, the seller isn't really selling. The current owner probably owes more on the house than it's worth, so they simply want to be gone without further ado. 

The problem is that the bank wants as much money as they can get, while trying to avoid the hassle of a foreclosure. 

When you buy a house, you sign a Deed of Trust, which gives your lender the right to do whatever they need to do to protect the loan (aka mortgage) they gave to the buyer. 

Perfectly legal, just not nice.
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March 27 2011
Short sales are a difficult process to understand for many reasons..pricing can be the most confusing.   The listed price is a arbitrary price set by the agent and it may or may not be realitic in regards to what the bank will require to approve the sale.  The list price should be based on recent comparable sales, as that is generally the price the banks will ultimately approve for the final sale price but, unfortunately that is not always the case.  The bank will do a formal appraisal of the property prior to responding to a short sale offer and the bank bases the counter offer on the market value of the home.  Generally, if the offer is more then $5K lower than the appraised price they will counter the offer with a figure that falls in their approved value range.   Ask your agent for recent sales of similar homes so you can better understand values in your area.
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March 22 2011
When the property is listed in the MLS it should be noted that it requires a third party approval, that party being the bank.  They are the ones that have the final say, unless the owner is going to come up with the difference in the payout of the mortage, and if that were the case it would not be a short sale.  It is a timely process, and sorry your agent did not educate you on said process...hang in there, there are ALOT of good deals out there but they require patience...
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March 19 2011
The owner in short sales is really just the "screening process" for the bank in my opinion. The bank is the one taking the loss, and it should be up to them as to how much they are willing to lose. The owners should be trying to get as high of an offer as they can to send to the bank in order to prevent a waste of time and rejections/counters such as these. In your case I am sorry to see this situation... the agent should have known to price the home higher instead of just getting any offer in ASAP. I do understand your frustration, and it wasn't really fair to you.
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March 19 2011
My web site may help you?
www.HelpWithDistressedHomes.com
or go to http://hosted.cdpe.com/101677/Short-Sales-Explained.aspx
Best reghards, John
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March 19 2011
Because the bank isn't selling to a buyer, they are collecting a debt from a seller.
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March 19 2011
Hi there,

I can appreciate your frustration with the short sale process but it isn't illegal for the bank to ask for more money as a condition of approving the short sale. 

It is the bank, not the owner, who is calling the shots for the most part in a short sale.  They are the one who is being asked to accept something less than what they are owed.  I'm not trying to defend the banks but that's the reality!

Typically in a short sale after an offer is submitted to the bank for approval the bank will order what's called a BPO (broker's price opinion) which is basically an informal appraisal completed by a separate Realtor.  The bank will then compare the offer they've received to that BPO to see how close
they are in value.

If the offer price is deemed to be too low compared to the BPO then the bank will instruct the owner/listing agent to counter with a price they'll give an approval on.

There are many frustrations with short sales and that is definitely one of them! 

Good luck!

Steve

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March 19 2011
Profile picture for B Mike West
Simple, The owner is trying to get out from under their financial obligation with the lender and need only an offer that the lender will accept.  They have no skin in the game.  They just want out.

When the agents talk to the lender, they are usually talking to a loan servicer who is following the investors instructions.  The investor (an insurance company, mutual fund, union trust fund or some such entity) holds the paper on the property and makes the final decision.  It is the investor's money and they decide how much of a hit they are willing to take.  They usually have an appraisal on the property and stick fairly close to that appraisal in their decisions.  Any buyer coming in with an offer that is $ 20,000 dollars below the appraisal amount is not taken too seriously.  Pay up or move on so the next buyer who comes along pays the required price.  There is no emotion involved, just greenbacks.

Note that the appraiser is not always right and if the "toxic asset" remains of the market with no acceptable offers long enough they will reconsider their position and reduce the price.  If you are confident that your price is what you want to stick with, wait them out.  If they are right someone will pay them what they want.  If they are wrong, in 90 to 120 days you may be able to get them to accept your offer.

Good luck in your efforts.
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March 19 2011
They can because the bank is the one agreeing to deed off for less the full balance owed. The seller's may have set the price and agreed to your offer but it is contingent upon 3rd party approval... the bank, perfectly legal. You can either agree to a price increase or the seller's come up with the difference to move forward if not, no sale.

Best of luck! 
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March 19 2011
It's legal because the bank is the one agreeing to take the short on what they are owed. They are under no obligation to agree to the short that the seller was hoping to get. The asking price is meaningless in a short sale.  If you have a buyer agent you need to have them sit down and explain how short sales work. The fact that you believe listing price means anything tells me that you need education on short sales.

If your buyer agent can't explain it to you, sit down with their broker and ask them to.
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March 19 2011
Well.. the bank is not really approving your offer... Instead they are approving a lower payoff than what is owed to them by the current owner...

In order for the current owner to sell the property to you free and clear of liens, the current lender has to agree to remove their lien... they need to be paid off to remove their lien... if they are accepting less money than what is owed to them, they have the right to approve or not approve their payoff... which in turn means approving the short sale transaction...  this is legal and otherwise common...

Best of luck!
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March 19 2011
 
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