I have been under contract to purchase a foreclosure for approximately 100 days. Pursuant to the purchase and sale agreement, the seller is now in default because it has not closed within the specified term.
The property will not be a "grand slam," and I have significant capital set aside for the project. I passed up on multiple deals waiting to close on the subject. Moreover, the seller's agent has not be responsive to my inquiries. I am uncertain when the deal will close. There is roof damage to the subject, and the longer the subject sits the worse condition it will be in once the acquisition is complete.
I am now able to void the contract. And I am not afraid to walk away from the deal.
I believe my voiding the contract is highly unfavorable to seller because it will have to reauction the property. Moreover, winter is quickly approaching leading me to think bidders will not be as aggressive in acquiring the property as I was, which means a lower sale price for seller.
I am thinking to ask seller to reduce the sale price, as the property is incurring damage during this closing period. Based on the above circumstances, I believe I have sufficient leverage to convince seller to reduce the sale price. After all, the property condition is deteriorating and they are likely highly motivated to sell to me rather than reauctioning and possibly losing money.
There's no leverage. They likely have some title issue, and may have to reforclose anyway. They don't think like we do. It's just another file for someone to manage. Perhaps if you research the foreclosure, you'll find where they missed something in the foreclosure. You could be waiting a long time for nothing.
@Wayne Brooks Thanks for the response. I had previously researched the property and understand that there is a mortgagor and two mortgagees (a primary and a junior lien holder) associated with the subject. Is it likely that in such a seemingly simple arrangement some interest has been omitted?
Is it always the case that someone in my position would have no leverage to request a reduction in price? For instance, suppose I bid substantially more than any other bidder or was the only bidder on the property. Would the bank not be motivated to keep me under contract? Furthermore, the purchase and sale agreement provides that seller will pay all costs associated with the transaction if it does not close on time and it must return the earnest money deposit. Therefore, seller will have to pay for all fees incurred thus far (from the title company) and to re-auction the property, which seems to me would be concerning to seller. The mortgage was insured by the federal government, so maybe that is why the bank isn't so concerned with the sale price.
And if the bank isn't concerned with price, why wouldn't it reduce the price per my request anyway (I imagine there must be an auction/sale procedure required by the mortgage insurer, so maybe the bank doesn't have that discretion)?
Well usually when they can't get to closing in 3 mo.s, it's a title issue. You can always ask, but I've given up trying to interject logic into predicting their actions. MI only covers them for the top 20% (less the borrower down payment) so they'll likely still have a significant "uninsured" loss. Yes, FHA or VA will dictate procedures.
@Sam Leon Thanks for the thought. Your reasoning makes sense. With the voluminous quantity of files out there, these administrative inefficiencies must add up for the banks. Interesting that they appear to not be overly concerned.
Earlier this year I bought a property from Fannie Mae.
Property listed at 199K, I didn't see the listing but flagged it so I can keep track of it. It then dropped to 189, 179, 169...when it was 169K I went to see the property, and put in a cash offer at 145K. It was rejected. Actually not rejected, they didn't even acknowledge it. Then a price reduction to 159K, I put in an offer again at 145K, with a detailed estimate of the rehab cost and city violation lien mitigation etc...this time they rejected it. A month later it reduced to 144K, and the listing agent didn't even bother to call me to let me know, but I put in an offer at 132K, again rejected. Another month went by, no news, no price reduction. I put in a new offer at 123K and this time they accepted. No clue why, I don't know. Why didn't they take my offer at 145K or 132K?
Money...who needs it anyway? Times must be good for GSEs and real estate agents.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing