Foreclosure Market Secrets

Are the banks willing to negotiate?

Debby Poronto — Wed, 02 Sep 2009 15:27:00 GMT

I am often asked the question, "Are the banks willing to negotiate on price?" So many things come in to play, here. Some of them are:

1. Condition of the house

2. Location of the house

3. Are there other offers on the house

4. The listing price of the house

5. The type of financing, ie: FHA, Conventional, Cash, and if they have to help with concessions

6. How long the house has been on the market

7. The area comparable sales

I recently did some research for a client who asked the same question. I was able to get the sold information for her on some of the houses she had inquired about in the past. Here is a picture of the house, the listing price and sold price are next to the picture:

28141584 Listed at $229,900

Sold at $320,000

29032230 Listed for $269,900

Sold for $240,000 cash

29077526 Listed $272,700

Sold $ 257,500

29074503 Listed $235,000

Sold $270,000

Well, you can see that there is no way to predict what a property will sell for by these results. The advice I always give clients is the same: based on the market, you bid the highest amount you feel you are willing to pay, and if you lose the bid by $500, feel alright that you lost it because someone else overpaid.

Diary of a Short Sale-Independence home inspection

Debby Poronto — Mon, 13 Oct 2008 13:57:00 GMT

Since the last post, we now have verbal agreement from both banks (first and second lienholders) that they will agree to the short sale. The second lienholder is taking about $2,000 less than they originally agreed to, but would get nothing should the property go into foreclosure.

Over the weekend, we had our home inspection done. The home is in pretty good shape, and is structurally sound. We have until Thursday of this week to complete our inspections. Since the property has a well, a water sample was taken, and will be tested for bacteria and chemical contaminates. The county will perform the test for free, if you bring the sample to them. The home inspector can collect and deliver the sample, and usually charges an additional fee for this service. It is still less expensive than having an independent company come out to the home and collect the sample, and run the testing.

This property also has a septic system, which should also be inspected. At this time, the buyers are not inspecting the septic system. If the water is free of bacteria, most likely the system is functioning as it should. Some counties require the seller to complete a septic inspection and file it with the county before or during the sale of their property, although Oakland County, which is where this property is located, does not.

Our schedule for this week is:

Recieve the signed documents from both banks, and send them to the new mortgage company and loan officer

Finalize the home inspection

Perform the appraisal and FHA inspection

Diary of a Short Sale-Independence

Debby Poronto — Fri, 03 Oct 2008 11:43:00 GMT

This lovely home has been on the market since February, 2007, priced at $189,900. Currently, the price is $119,900.

We wrote our offer on 9/27/2008. On 9/29, it was submitted to the agent, who quickly submitted it to the seller and the bank. By 10/1, the buyer increased their offer and we simultaneously recieved a counter-offer from the bank, and it looks like we have an agreed upon purchase price. There are two lien holders, so both must agree. Currently, on 10/3, our offer is in for final approval. So far, we are about 3 weeks ahead of schedule, so let's keep our fingers crossed.

Diary of a Short Sale Part 2

Debby Poronto — Tue, 30 Sep 2008 13:51:00 GMT

On 9/24 our offer was re-submitted, along with another. Ours was the one they decided to work with, as I was told on 9/26, because it was the first one re-submitted, by a matter of minutes. I was told that the other offer was higher.

On 9/27, the bank counter-offered our offer, refusing to pay $500 of the requested $2000 towards closing costs, and refusing to pay the water bill that was attached to the property and adding on a Short-Sale fee of $200.

On 9/29, with no more money available to bring to the closing table, the buyer counteroffered the banks counteroffer (confusing, huh) by increasing the sales price another $1,200 but asking the bank to contribute that money towards his needs closing costs. The bank refused, stating that they would not change the sales price because it was already approved. Despite arguments made to the bank that they would have to seek another approval if they rejected our offer and went with another buyer, they refused to negotiate any further. It is my belief, and this is not substantiated, that the other higher offer that they recieved was more palatable to them, and they wanted to take that one, anyway.

So, one month later, my buyer still has no house, and we will go out looking again!

Next, look for the diary on the Independence Short Sale. That saga is just beginning...

Diary of a Short Sale

Debby Poronto — Mon, 29 Sep 2008 15:13:00 GMT

With Short Sales becoming a household term these days, I thought that logging a short sale's happenings and events might help others decide if they have the stomach for it.

I am working on 2 short sales right now, so I will call one of them "Madison" and the other "Independence".

Madison was originally listed on 4/17/2008 for $48,900, which is under the sold values for the neighborhood. My buyer and I saw the property on 8/27/2008, and wrote an offer on 8/31/2008. There was already an offer accepted, and ours, plus 3 other offers would be kept as "back-up" offers. This means that the bank was already working with another buyer's offer, and, no matter how high the other 3 offers were, they could not trump the one they were working with. On September 15th, I recieved a call from the agent letting me know that the bank counteroffered that other buyer's offer at $2,000 higher than his offer price, which was for a cash, guaranteed sale. The price that the bank countered with was $2,000 higher than the original list price of $48,900. (Even though that buyer met their asking price with their offer, they decided that they wanted $2000 more than the listed price) That buyer walked away from the negotiation table, and we were now in the running again. The property was re-listed at $54,900, and they were taking offers for a week.

Tune in later for the continuing saga...it's back to work I go!

Short Sale -- Part 2

Debby Poronto — Wed, 27 Aug 2008 18:21:00 GMT

A short sale is anything but short, at least in the amount of time it takes to purchase the home. When you decide to make an offer on a Short Sale home, be prepared to wait a long, long, long, long, long time. Here is the reason why:

Red Tape

There may be more than one loan on the property. Any company that the owner borrowed against the house for is call a lienholder. They could be a contractor, bank, or PMI company.

There may be unpaid back taxes, and they place a lien on the property.

There may be unpaid association dues, and they place a lien on the property.

All lienholders have to sign off on the property in order to sell it short of what is owed. Some lienholders may get nothing when the property is sold. You can see that they are not motivated to return any paperwork! The more lienholders that have their claim on the property, the less likely it is that everyone will reach an agreement.

The owner of the property must complete a " hardship package ". This can consist of a letter, stating why they can no longer make their payments, pay stubs, bank statements, investment statements, and anything else that the bank requires of them. This should be submitted prior to the time the house is offered for sale, but often it is not. Even if it is, the bank may not even take a look at it until they have a bonified offer. If the paperwork is not filled out correctly or documentation is missing, the file goes to the bottom of pile, and the negotiator or asset manager will get to it when they get to it. (They work on the easy files first)

A net out sheet is prepared, usually by the realtor or title company, and sent in. This can be done once the offer is recieved, and shouldn't take more than a few days to compile. It will, however, take a week for the bank to catch it up with the file!

A property appraisal must be completed, often not ordered and completed until an offer comes in. The appraisal process can take about 2 weeks.

Once the appraisal report is recieved, the file goes to a committee, and the offer price is evaluated against the appraised value. Usually the offer price must be within a certain percentage (determined by that lender's policy) of the appraised value. The bank will accept the offer or make a counteroffer at this point. Expect to wait at least one month from the date the offer is written to get to this point in the process. I am currently working on a house that is in week 10, and we have just gotten here. I once had a client tell me that they waited 5 months to then have their offer rejected by the bank.

Now it is the buyer's turn. Once everyone agrees on the price, the buyer can complete their home inspection, and the title committment ordered. The buyer's loan company will complete an appraisal (yes, another one--the buyers loan company will only accept appraisals performed by their approved list of appraisers), and the loan processor will prepare the package for the underwriter. All of this is accomplished in an average of 2 weeks time.

If the title is clear, the home inspection is acceptable, and the underwriter agrees to underwrite the loan, it can be scheduled to close. In a normal sale, this whole process takes about 3 to 4 weeks. With the sale that I described above, it will be about 12-14 weeks total time.

What is a short sale? -- Part 1

Debby Poronto — Wed, 27 Aug 2008 17:15:00 GMT

One of the most frequent questions asked is "What is a Short Sale?".

A Short Sale is where the owner who originally bought the home still legally owns the home. They may or may not be behind on their payments, and they may or may not be in the foreclosure process. Because of their financial distress, they have asked to bank to agree to accept less than the amount owed on the home.

For example, Bob Smith owes $150,000 on his mortgage. To sell his home, it will cost $15,000 in fees.

150,000

+15,000

$165,000 This is the total amount that Bob needs to sell his home.

Because Bob's house is worth only $130,000 in today's housing market, Bob has 3 options.

1) Find a cash buyer that is willing to pay $165,000 for Bob's house .

2) Get a loan or bring cash to the closing of his own home. He will need about $20,000 to all fees and taxes, plus the shortage of what he owes on the loan.

3) Ask the bank to accept a short sale.

A short sale is the most likely option, however even though the bank does not own the home, as in a Foreclosure, the bank must agree to the sale of the home, and can negotiate the purchase price with the buyer.

7 things you need when shopping for foreclosures

Debby Poronto — Mon, 25 Aug 2008 17:06:00 GMT

Some Foreclosures are in good shape, some not. Here is a list of items to have on hand when you are viewing properties, and ready to buy:

1. Current Pre-Approval letter (you can't write an offer without it)

2. Purchase agreement. The good ones go fast.

3. Flashlight (the electricity is usually off)

4. Antibacterial Wipes (it can get pretty messy)

5. Mask, for those moldy houses

6. Dress for the weather, the heat & air will not be running.

7. $5,000 to $10,000 cash reserves: all foreclosures will need some repair.

Waiting in Line

Debby Poronto — Fri, 15 Aug 2008 21:51:00 GMT

Gas prices are up, unemployment is up, and we are all waiting in line to buy this house! One would think that the houseing market is down, with so much news of a weak economy...but the fact is...it's a great time to buy a house in Michigan! House prices are unbelievably LOW, that there is literally a waiting line to view the good deals.

Sterling Heights home listed for sale at $137,500 sells at $160,000---There were 17 offers on this house---True Story!