Buying a short sale for personal residence

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Buying a short sale for personal residence

Dan Ross
Spokane, WA · Member since 2008 · 14 posts · 0 votes

My wife and I just submitted an offer on a house here in Spokane that is being offered as a short sale. This would be our first home. The homeowners have a medical hardship and the bank, Ocwen, owns the first and second mortgages. They feel Ocwen has been very fair to them up to this point.

The house is in decent shape except that it is dated and needs new paint, carpet, appliances and roof. We made an offer that is 22% below list price and Zillow. We feel this could be a good deal for everybody involved. Our agent and I put together a list of updates/improvements that need to be made in order to get it up to date. In addtion we have several good comps in the area we sent in with the offer.

We would probably live in the house for at least 5 years until we are in a position to build.

I am looking for any tips or advice on our situation.

-Has anybody here dealt with Ocwen? How did it go? How long did it take to hear back from them?

-Is there anything we can do to help speed up the process?

Any advice would be greatly appreciated.

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Dave P.
Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
18y

We heard today from the selling agent that her contact at indymac said we would have an answer on Sept 22. If tey can assign a date why don't they just give us our answer now? What are they waiting on? Is it your experience that indymac usually counters on their short sale offers?

They can assign a date because they have regularly scheduled meetings where they review the files with the investor (the guys that physically own the loans). At these meetings, the investor will review their position and options, and make a decision on what to do.

These meetings are regularly scheduled. They can't give you an answer now, because they don't know what the ultimate decision maker will say.

I would feel confident that Indymac will at least counter your offer. However, ask the agent if the appraisal or BPO has been conducted yet.

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  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    18y

    If you have an agent, then you should work out the true fair market value of the home in its present condition, more commonly referred to as the as-is price.

    With 2 mortgages the 2nd usually gets reduced heavily. However when with the same lender that isn't always the case.

    You need to offer what you want to buy the property for, regardless of what is owed on the property or what it is listed at. You need to offer what you feel it is worth in its present condition.

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  • Mitch Freed
    Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
    18y

    I have a short sale going on right now with OCWEN. I am in Portland so not too far away from you. Overall they aren't too easy to work with.

    What part of the short sale process are you in? Has the package been put together yet and sent off to ocwen?

    I submitted an offer last week and received a rejection without a counter this week. They are requesting that the debt be fully satisfied. This home has a roof that needs total replacement and interior repairs calculated at 40,000 at least. The full amount due is 220K and there is nobody in their right mind that would pay that much. OCWEN stated to me that they would take the home in REO and make the repairs themselves and then sell it....whatever.

    The key with OCWEN is the BPO. That is all they care about. That will make or break your short sale. Get a low BPO and you win. You won't know what it is...but you will get a pretty good idea when they tell you that your offer and their idea of the market value aren't in the same ballpark...at leat that is what they told me.

    My solution, challenge the BPO. I found out that when they did their BPO, their agent never went inside the home. I requested an interior inspection and they are complying. It can only help my case.

    My contact at OCWEN..Natalie @ 561.682.8885. This may or may not help...she may not have the file. But since it is west coast, then she may. She is in Florida FYI.

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  • Dan Ross
    OP
    Spokane, WA · Member since 2008 · 14 posts · 0 votes
    18y

    mitch,

    Thanks for responding. We sent the offer in on Wednesday the 12th. On Monday the 17th they ordered the Hud 1 statement from the title company. Hopefully that is a good sign.

    I don't have any idea who did the BPO or what it came out at. My agent and the sellers/listing agent are in the same office. Possibly the selling agent did the BPO? Would that be typical?

    Today the selling agent told my agent that when she called Ocwen to find out the status of the offer, the phone number went to an answering machine that said Ocwen no longer talks to real estate agents? Any info on that?

    Thanks for the contact number for Natalie.

    By the way, the sellers owe about 200,000. The comps/listed house prices we put together show the home should be selling for about 165,000. This house needs paint in/out, roof, general updating inside. We offered 160,000 with the sellers paying 3% closing costs. The buying and selling agents agreed to 2% each.

    Are you an agent? Would it be appropriate for me, as the buyer, to call Ocwen directly?

    Thanks for any help,

    Dan

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  • Mitch Freed
    Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
    18y

    Hi Dan,

    The agent who does the BPO for the bank will not be involved with the transaction. It would be a conflict of interest if the buyers or sellers agent did the BPO for the bank. You won't know when the BPO is done..because they way it happens is no different than the banks agent calling the sellers agent and requesting to see the home (they won't mention anything about a BPO...it may have happened already..it may not have.

    I would recommend getting authorization to speak to Ocwen regarding the transaction. You will need written authorization from the seller that states that you can speak to their lender regarding the short sale. Otherwise Ocwen won't talk to you.

    That isn't surprising that the agent got that voicemail...Ocwen is going to through you curveballs like that. Be prepared to play 20 questions when/if you get through to them and get a loss mitigator on the phone. They are going to ask you all sorts of irrelevant questions to throw you off.

    Also be aware that the first and 2nd will probably be in different departments and that these two departments may not communicate with each other. You may get passed back and forth between them...a little game the lenders like to play. One will tell you that you need to get approval from the other...and so on.

    I am not an agent, just an investor. The next time I talk to Natalie I will ask her about that voicemail...she may even tell me of another number that you can call that may point you in the right direction.

    I just realized that you have the sellers paying 3% of the closing costs...remember that the seller's aren't paying their mortgage because they have no money, and can't net anything in closing. The bank may wonder where the seller is getting funds to pay closing costs. In a short sale, when the bank is taking a discount, technically they are the ones paying the closing costs and commissions. You offered 160k, but the bank won't net 160k, they will net 160k minus commissions and closing costs.

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  • Dan Ross
    OP
    Spokane, WA · Member since 2008 · 14 posts · 0 votes
    18y

    Mitch,

    When I said the sellers, I should have said the sellers bank (Ocwen).

    My agent called me tonight and said the selling agent did talk to Ocwen on Friday and they said that they are going to make a special exception for this family and try to do a short sale because of their circumstances. Ocwen actually just talked to the homeowners and offered to reduce their payments to $1,000/month. The family was grateful but said they just cant afford that either. They are going to move in with family and they need out.

    I just found out that after we had our offer approved by the selling family and now under review by Ocwen, they just dropped the listing price by $5,000 and the selling agent/family are going to try and get Ocwen to reduce it another $10,000 this next week. Is it legal for them or the bank to drop the price when I have submitted an offer that was accepted by the family and is currently under review from the bank? It doesnt seem fair to me.

    Thanks for any help and Happy Easter!

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  • Mitch Freed
    Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
    18y

    Dan,

    Happy Easter to you as well!

    Unfortunately its not really a question of legality. The listing agent could have already dropped the price if they really wanted to...all they have to do is advertise that all offers are subject to 3rd party approval. In a short sale situation, Ocwen will want to see as many offers as possible...they won't let the listing be changed to pending even though the seller has signed off on your offer. Ocwen would like you to think that they are calling the shots by "allowing" the seller to drop the asking price...but in reality they never needed their approval.

    I would take this as a good sign that Ocwen is willing to deal. I am guessing that when you made the 160K offer, the list price was around 205 or 210K correct? Ocwen has now given their approval to drop that to 200 or so...which gives you a little insight on what the BPO came in at. This could be Ocwen's way of countering your offer.

    You mentioned that the home needs a new roof...consider having a roofing contractor look at it and have them write up a bid to completely re-do the roof. Also consider getting the home inspection now. I typically don't spend the money on the home inspection until the bank approves of the short sale...but, if the home needs repairs then the inspection can be your best friend when negotiating with the bank. Plus, if you are already ok with the repairs then it really doesn't matter to you what the inspector finds...in fact, you will want the inspector to find a lot that would deter anybody else from buying the home. Send the inspection report and the contractors report to the bank. Even better, make sure the listing agent gets a copy, they will have to disclose it to anybody else interested in the home.

    Overall, just be patient. Too many short sales never close because the potential buyers get tired of waiting.

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  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    18y

    Mitch is on the money with his parting comments. I see to many people get frustrated early on. Remember the lenders are corporations. When was the last time a corporation acted fast? They have to send evertying into a committee for approval, etc.

    On the same token, know what you need to get the deal at, and don't get emotional on it. Stand your ground, be willing to lose the deal if necessary.

    I had an offer flat out rejected about 7 months ago. The seller told me I was a crook, called me names, etc. Would you believe that last week he called me back and said he woudl sell it for exactly what I offered him and this time with seller financing? Of course I said, great but now the property has gone down in value in the falling market, so you will have to lower the rate of the financing and take a larger % back.

    Looks like he is going to accept.

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  • Dan Ross
    OP
    Spokane, WA · Member since 2008 · 14 posts · 0 votes
    18y

    A few things have happened on our deal since last time I posted. The bank didn't like our offer and countered/dropped the price to 185,000. We made a counter offer to their counter offer. We came up a bit, 167,000, but more importantly put together a list of professional estimates for the roof, paint-in & out, carpet, appliances, etc. We also have several good comps that show we are offering close to market value. When you add in all the things that need to be done to get it back to normal selling conditions, we may be offering a bit too much. They have dropped their selling price by 15,000 (185,000) and still aren't getting any interested prospects.

    The bank ordered a CMA to see where they are at. Hopefully that will show we aren't trying to screw them, just get a fair deal. We are supposedly going to get an answer back today from the bank today (they told us the same thing last week about last friday!).

    I think if they reject our offer, we will probably let them drop the price, sit on it for another week or two then re-submit the same offer we submitted a few weeks ago. I just don't see how they have a chance of getting over 170,000 for the house here, considering the current market and the overall condition of the house and property. Worst case, we wait too long, it forcloses, screws the homeowner who has serious health problems, loses the bank money, and keeps us out of a house that would work well for our family. We then continue looking and find a better deal later this summer or fall when things are worse than they are now. I guess that is a risk we are willing to take!

    Any suggestions? Do you think it would help if we offered to obtain a loan through them instead of our broker?

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  • Brian Kurtz
    Real Estate Consultant · Southgate, MI · Member since 2008 · 12 posts · 0 votes
    18y

    Unfortunately, I think that the worst may happen in this case.

    There is a very strong concensus between investors that OCWEN is not flexible because they are not that concerned about selling the homes.

    All the "but if they take the home back they have attorney costs, holding costs, perservation costs, grass cutting costs...etc" don't apply with Ocwen because they are only a servicer for 97% of their transactions. Outside investors actually put up the money and have their money on the line.

    This being said, Ocwen as a servicer gets more fees it he house goes back in foreclosure than if they do a short sale.

    As a servicer, if a short sale goes down they lose the servicing account and get no other fee income.

    If they take it to foreclosure they'll eventually lose it when it gets sold REO but before then...they charge fees for all the steps between now and the day it's sold after being taken back.

    Ocwen gets PAID if they take the home back. They do NOT get paid if they do a short sale.

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  • Amy Gerrish
    Real Estate Agent · Phoenix Metro · Member since 2008 · 5 posts · 0 votes
    18y

    Bank Negotiator,

    Do you know if Chase the same way?? A short sale that I'm working on as an agent, got all the way up the ladder, into loss mitigation and know the rudeness and communication break downs are getting worse. I'm afraid the other agents buyer is gonna walk. Chase is doing nothing but calling me a liar and saying that I am refusing to cooperate.

    0Reply
  • Dan Ross
    OP
    Spokane, WA · Member since 2008 · 14 posts · 0 votes
    18y

    The bank seems motivated to sell the house, I guess it just depends on how motivated they really are.

    My only complaint about the bank is it seems like it takes a long time for them to do anything...I guess that is just par for the course.

    Does anybody think that my offering to secure a loan through them might interest them?

    0Reply
  • Hasani James
    Member since 2008 · 3 posts · 0 votes
    18y

    I have been notified that Ocwen doesn't do Short Sales anymore!! They have tons of REOs that they manage.

    0Reply
  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    Any words of wisdom about short sales with Indymac? Anyone have any inside information?

    0Reply
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    18y

    I am working two with Indymac right now. Surprisingly, they are going well.

    Why do you ask?

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  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    I recently made an offer on a short sale home with indymac bank and am new to this so was wondering how the process would proceed. The offer was submitted 2 weeks ago and we have heard nothing!!!!

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  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    18y

    Sarah,

    The next step in the process is for the bank to order either a full appraisal or a broker price opinion. Basically, they are attempting to determine if they are getting taken advantage of, or not.

    After that, they will send the file to a negotiator to determine if a deal can be made.

    I have resolved these files within weeks, but I also have a file that is almost 6 months old.

    Hope this helps.

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  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    How long have they been taking recently? Do you have any contacts that may be of help? Thanks so much for your posting answers to my many questions :)!!!

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  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    one more question will we know when they order the appraisal?

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  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    18y

    Sara,

    It varies from lender to lender, but two weeks for the appraisal is normal.

    You will only know when the appraisal is ordered if they need to contact you for access to the property.

    If not, they will just do it without notifying you. They try to keep the appraiser away from the buyer so that he is "unbiased".

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  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    David,

    We heard today from the selling agent that her contact at indymac said we would have an answer on Sept 22. If tey can assign a date why don't they just give us our answer now? What are they waiting on? Is it your experience that indymac usually counters on their short sale offers?

    0Reply
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    18y

    We heard today from the selling agent that her contact at indymac said we would have an answer on Sept 22. If tey can assign a date why don't they just give us our answer now? What are they waiting on? Is it your experience that indymac usually counters on their short sale offers?

    They can assign a date because they have regularly scheduled meetings where they review the files with the investor (the guys that physically own the loans). At these meetings, the investor will review their position and options, and make a decision on what to do.

    These meetings are regularly scheduled. They can't give you an answer now, because they don't know what the ultimate decision maker will say.

    I would feel confident that Indymac will at least counter your offer. However, ask the agent if the appraisal or BPO has been conducted yet.

    1Reply
  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    The appraisal is being done this week! After looking at comps with my realtor our price pIoint is right on target if not over a bit. If the appraisal comes back below our offer how will that work?

    0Reply
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    18y

    Are you buying this as a personal residence or as an investment property?

    The lender will look at he appraisal to make sure that they are not being taken advantage of. If you are paying right around the appraised value, then they should be ecstatic.

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  • Sara Jans
    Homeowner · Fresno, CA · Member since 2008 · 15 posts · 0 votes
    18y

    we are purchasing as a personal residence.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    18y

    The practical answer to your question is that if the appraisal is less than the agreed-to price, the lender will lend based on the appraisal. So, if you have, for example, agreed to a 10% down payment and a $200K price, and the appraised value is $180K, the lender will only lend you $162K instead of the $180K you were expecting. You'll have to come up with the additional $18K yourself if you want to proceed.

    However, what its really telling you is that you're paying too much. You need to either renegotiation, or get out of the contract based on your financing contingency.

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