Profile picture for kodiak1

how low can we get for short sale price?

I want to build a new home, and found a knock-down property of suitable size and location.  I know that now isn't the best time to buy or to build new, but I can't stand living in the crappy rental where I am and I hate all the old houses which are the entire available inventory in the town I need to be in, which I need to live in that town due to the schools for my kids.  There's not many choices in the very small town where I want to buy, but finally there is this opportunity available.  It is an FSBO and the seller told me it will be a short-sale because he realizes what is owed on it is more than the market would support as a sales price right now.  Buyer's mortgages are with Washington Mutual and Wachovia, which we have heard rumored should be some of the easier banks at this moment in time to negotiate a short sale.  Seller is very motivated because he already bought a new home (after taking the equity out of this one) and he now lives out of state. The home has only been on the market for about 3 months, though.  My question is, how low do you think we could get the price insofar as successfully getting the bank to agree to the short sale?  What percentage off what they are owed?

  • October 24 2008 - US
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Answers (8)

Kodiak1,

 

Unfortunatly the short answer is it depends.  If you are working directly with the FSBO, you need to figure out what is actually owed as a starting point.  Also there is a serries of documents that must be filed with the mortgage holder - to get their approval to sell the property short. 

 

If you are looking to build; instead of buying this property short, tearing it down & building new.  Would it be possible to buy a vacant lot or parcell of land, and then build?

 

To answer your initial question of how low you can get the price off of what is owed goes back to it depends.  Usually a shot sale requires the paperwork to go through a serries of individuals before an agreement can be reached.  This means it takes longer than a traditional sale, and final decisions are not always final until you get to the closing table.  Short sale docs usually give the lending institutions a good deal of leaway in how they accept or get out of a contract.

  • October 24 2008
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By the way it is a good time to buy, prices are down. Not to say they couldn't go down further but rates are great and prices are low.

Like WW said it really depends, but you should definitely try to get the most out of them that you can. Go in low and renegotiate if you have too and be prepared to sit for a long time waiting for the bank to figure it all out. 90 days wouldn't be unusual.

Good luck.
  • October 24 2008
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Profile picture for 80smusicrox

Has the seller taken steps with his mortgage lenders to get a short sale approved regardless of having a buyer ready with an offer.  It would be beneficial to all parties that the seller first consult an attorney and even a CPA.  He should submit a hardship package to his lender(s) to see if they will even entertain a short sale and accept a loss.  Some banks will not as long as their mortgagee is still making payments on time...it's the distressed/defaulting mortgagee who will get the consideration.  Also, when there are two lenders involved it maybe more difficult to get short sale authorization.  But in this case, both loans have been/are being scooped up at discounts by bigger fish (Chase and Wells).

 

As far as how low will they go?  Hard to say...but it would help that the seller convince and persuade with compelling evidence (CMA, local sales statistics, property history, etc) that his property could not sell for more than $X (in the area of your offer) at this time.   There is a bottom line price which the bank(s) will accept and a bottom line price that will attract buyers...what is that price? That is the real question.

 

It's a long road ahead if the FSBO seller isn't in communication and doing the prlimary short sale steps yet with his lenders.  Got patience?  You'll need it.

 

   

  • October 24 2008
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Profile picture for 80smusicrox

prlimary = preliminary

 

I should also add that we recently purchased a short sale at 36% less than what the seller owed (seller owed $444,000 and we purchased for $285,000).  Also about 30% less than it's current appraisal.  And we were only dealing with one bank.  But the sellers in our case we're days away from facing foreclosure...we actually closed the deal within  10 days of the 2nd scheduled auction date (1st one was postponed).   

  • October 24 2008
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Profile picture for kodiak1

Well, in this case, it looks like it is the 2nd lender (which is Wachovia) that would take the entire hit, and that's what I see as a problem. I know the amounts owed.  The first lender will surely get 100% of what it's owed. The second lender, if we get a good price, will get only between 25-50% of what it is owed, so I don't know if they'll agree to that.  I can be patient and wait a few months, but I don't like the idea that the deal could fall through all the way until we hit the closing table -- because as soon as there would be a contract approved by the bank, I would want to start the process to get the house plans approved by the town.  Unfortunately, there is absolutely no plain lots available in town as an alternative; it's a tiny, very old town, fully developed, and the only way to build new in this town is to knock-down.  The seller is a sophisticated financial type knowledgeable about negotiating with lenders, so that probably is a big positive, though....although, I have no idea if they are already delinquent on payments or if they are up to date.

  • October 24 2008
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Profile picture for 80smusicrox

I wouldn't worry about the deal falling through at the closing table.  You'll only get to that closing table when you get written short-sale approval letters from the seller's lenders.  There likely be a determined closing date (decided by the lenders) and expect to have all your ducks in a row...because once the approve, they usually want to close the deal in lightning speed.  The waiting game is now...once you make an offer, seller accepts.....then it's wait, wait and more wait to hear back from the seller's lenders.  In our case, 37 days (and that's considered less than average)... bam, they approved the short sale and want to close in 18 days.

 

You may have good luck with Washington Mutual (now owned by Chase).  We dealt with Emc Mortgage which was originally owned by Bear Stearns, but since that fallout...Chase. 

 

I'll be rooting for ya!

  • October 24 2008
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Kodiak,

  All of the answers above were decent answers. But in regards to your not buying now, I am surprised no one mention the real thing to consider when buying. Which is How long are you going to own the home? If it is 4 to 5 years or more. It is hard to find a deal that is bad out there right now. Inventory is high and rates are good. So look for the perfect home. Granted each area is different so consult someone local for their opinion.

I am in Florida, and just close a short sale a few days ago.

Each lender is different, and I always suggest to my buyers, go to the lender with a solid offer. People are saying it is taking so long to close, because they are throwing things at the wall and seeing what sticks. That is causing other "REAL BUYERS" to wait in line behind wacky offers.

You might even seek out a short sale specialist or a short sale mediator.

I do this here in Florida, and consider myself a little more ahead of many because I am dual licensed (mortgage broker & Real Estate agent) and well versed in the lending side, so I believe I have a pretty good idea of what the lender will accept, will look at, and will trash and never respond to but that is just for Florida, certain lenders and based on research.

I suggest, you reply back and let us know what area you are looking to do this in, and maybe someone in your area can at least give you their 2 cents.

 

Brady Pevehouse

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  • October 25 2008
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I'm expecting to stay in the house around 10 years or so.  I'm looking to do this in northern New Jersey, Morris County area.

  • October 25 2008
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