Hello All. I could really use some help here. There's a FSBO house that I'm interested in buying as my primary residence. The home owner can't keep up with payments and has left me voicemail saying that the lender/bank is willing to do a short sale.
Thing is....the home owner has no real estate agent. I have no real estate agent either. Is this a bad idea or can we march on ahead ,as long as we have a real estate attorney reviewing all the paperwork?
I'm new to this. Any help will be most appreciated!
thanks, Dave
Hey Da Deep.
Looks like things are moving in the right direction. I'm curious to what your attorney says on Paying the seller something outside of closing. I'm running into the same thing on my SS.From what I've researched , you might be allowed to offer a small amount for moving expenses, furniture etc. In my SS, I 'm dealing with the relative and not the seller.We will be using rent credits or rent deduction since it is a multi family. Looking forward to hearing what you found out.
Da Deep, maybe you should hire local realtor experienced in short sale, who would be able to make the deal with the deal.
What do you think, David? Should increase chances.
I don't think Da Deep is wasting his time, because one thing is for sure, he is learning a lesson, and learning is not wasting time.
The home owner doesn't have a realtor and she has explicitly stated that she does not wish to deal with realtors. This brings up an interesting point: I have a realtor of my own but have not signed anything with her. I sometimes go to see FSBO homes myself without involving the realtor and she knows that. If I end up purchasing a home on my own, my realtor will probably be pissed but I'm not legally bound to involve her in the deal in any way, am I? Just checking.
I'm treating this as a project, and yes, I'll definitely learn a lot from it, which ever way it turns out in the end.
If I end up purchasing a home on my own, my realtor will probably be pissed but I'm not legally bound to involve her in the deal in any way, am I? Just checking.
No, you won't be obligated to anything.
Has the seller given you written authorization to speak to the bank on her behalf?
If so, you should get in touch with the bank and start assembling the docs you will need to pursue. My hat is off to you for your determination and willingness to learn.
You would not have to pay your Realtor anything unless you signed an Exclusive Buyer's Agency Agreement with him/her.
A short sale can be completed without a Realtor. David has already given you all the points necessary to start talks with the bank...the main thing you need right now is to get that authorization letter over to BOA so that they'll actually talk to you. One other piece of information that will be handy when you call BOA to discuss the loan is the last 4 digits of the seller's SSN. I've had servicers ask for that info more than once when dealing with short sales.
Thanks, I haven't signed anything with the realtor I work with, so I should be OK there. I just spoke with the home owner. I told her that if I paid her money "on the side", that may amount to fraud, and that her and I could both go to jail for it. She came back with, "Since I don't have a realtor, I could consider that money as commission, since I am representing my own house" She's desperate for money and I'm desperately trying to stay out of jail at this point :mrgreen:
She said she'll talk to her RE Attorney and get back to me later today. baby steps....
Da Deep, you're lucky not to be encumbered by a real estate agent as you attempt to get the shorting lender to agree to a short sale. You may, however, be confronted with a retail short sale approval by the shorting lender because you don't know what you're doing.
Don't feel bad...most real estate agents don't have a clue, either, when it comes to short sales.
There's an underground economy building in short sales, and you should be able to learn how to submit an offer all by yourself with a little online guidance. Google for "how to process a short sale" and take it from there.
If you have 3.5% for a down payment, you can obtain FHA financing; provided, however, that the property meets FHA's minimum standards for health and safety.
Don't give the homeowner one thin dime "outside of escrow." You and the homeowner must sign a statement under penalty of perjury that no side agreements were made as a result of the lender's approval of the transaction.
I'll be putting down 30-40%, have a credit score of 797 and I can close in 1 month or 6 months. This makes me an ideal buyer as far as the seller is concerned. More importantly, the seller doesn't have to wade through agents, scores of "potential" buyers when most aren't going to be as much of a perfect "fit" as I am.
As for offering the seller money "on the side", the seller has asked me to talk to her RE Attorney tomorrow. As per her attorney, it is perfectly legal for the seller to do a side deal with me for 30k as money paid towards house furnishings. She'll show that the house is being sold fully furnished. If I were the bank and I knew she's getting 30k for whatever she sold, I would go after that money, correct? So yes, I don't feel comfortable with this. Let's see what her lawyer hits me with tomorrow.
thanks, DaDeep
I suggest that you get your own attorney. I think, at face value, that is probably an acceptable way around it. I just wouldn't stretch the value for the furniture. It really needs to be worth it. She's allowed to sell her own stuff, but paying $30K for two broken lawn chairs and a poker table might be considered risky.
We are probably putting the cart way ahead of the horse though. There is a long way to go on this one.
PS - things like this don't matter to the bank:
This makes me an ideal buyer as far as the seller is concerned. More importantly, the seller doesn't have to wade through agents, scores of "potential" buyers when most aren't going to be as much of a perfect "fit" as I am.
You are right in a perfect world. However, the loan servicing industry is far from a perfect world. Picture a call center with dozens of callers answering the phones. They are hourly personnel that are armed with a script and a computer. Their sole job is to get a "complete" file and forward it on to the next level "negotiator" or "loss mitigator" or whatever. The person answering your call has no authority to make any decision other than forwarding your file or not.
I'm not trying to bum you out, I just think it's helpful to know what to expect.
PS - things like this don't matter to the bank:
This makes me an ideal buyer as far as the seller is concerned. More importantly, the seller doesn't have to wade through agents, scores of "potential" buyers when most aren't going to be as much of a perfect "fit" as I am.
You are right in a perfect world. However, the loan servicing industry is far from a perfect world. Picture a call center with dozens of callers answering the phones. They are hourly personnel that are armed with a script and a computer. Their sole job is to get a "complete" file and forward it on to the next level "negotiator" or "loss mitigator" or whatever. The person answering your call has no authority to make any decision other than forwarding your file or not.
I'm not trying to bum you out, I just think it's helpful to know what to expect.
Yes I'll definitely be getting an attorney if I see this going forward....no question about that for sure...
Oh, couple of things came up.
1. The lender is Countrywide, not BofA. Maybe she said BoA because they bought Countrywide. Anyway.
2. I'm quite sure she had PMI. There's no way she put more than 20% down when she bought the house. Can't Countrywide just collect from the insurance company instead of entertaining a short sale arrangement? Just wondering if the seller having PMI works in or against my favor.
thanks, D
I also do short sales from with and without agents.
My two cents: I agree with the advice of hiring an attorney. In my experience, the first advice your attorney should give you is to NOT DO A SHORT SALE. If you find an attorney that is willing to take on this without trying to convince you otherwise is someone you should stay clear of. Make sure the attorney has previous experience and is willing to provide successful sales examples.
HO: Make sure you take pictures of the interior (preferably a video) just before sign the purcchase agreement. Within the sales agree you will note the documented condition of the proerty and any deviations from this condition will void the sale.
Convince the homeowner to document his legal exploits in the hardship letter. This will help characterize the risk the lender has by going through the foreclosure with such a deviant. Tell the homeowner that the arrests are public record and by his disclosing his record will help the short sale process.
Offer: In my opinion, based the the 700K comparable, your proposed offer is way too high! Your credit is exceptional and with the lack of liquidity, dismal economy, and so on, the lender will likley not sell the property as an REO for less than a 20% discount to current market. I would offer no less than 40% discount to current market which is more like $ 400K. Start out low, the bank is likely going to counter and you cannot go back down should the real estate market continue to silde.
Also, my aggressive discount will work best in a declining market and where properties have high days on market.
When submitting your short sale package, be sure to point out all the negatives, including photos, crime in the area, vandalism on nearby vacant properties, etc. This has been very effective for my success.
Good Luck!
Hi Scott H., Thanks for taking the time to pen down your thoughts on the matter .I like your suggestion of videotaping the property before signing a contract. I'll definitely do that.
This area is "hot" despite the softening national RE market. In the 500-800 price range, there ARE no decent homes available for sale. I've been looking for 4 months now. I have to be careful not to put in an offer that's TOO low. Don't want the bank to throw out my application. I'll be hiring an attorney in the next few days.
thanks, DD
Good Luck... Yes, in good markets, it is much more difficult to get deep discounts. I currently have two FSBO's with Countrywide and they are easy to work with. Should take 60 days or so, but this could change depending on the investor. If you need anything else, I'll be glad to help.
Da Deep, you could agree to buy the homeowner's houseful of used furniture and then politely decline at the end. Tell her, "Why don't you try selling yer stuff on eBay?"
Her attorney sounds like a piece o' work.
UPDATE: Called four law offices in this area. Asked to speak with a lawyer who deals with residential real estate. All four attorneys I spoke with did not know what a short sale is. I'm not making this up. Eventually found two law offices in adjoining areas where I was able to speak with somebody who knew. They both advised me against making any side deals with the seller unless they were in full disclosure to the bank, which defeats the purpose from the seller's perspective anyway.
I am waiting to hear from the seller. If she still wants to go forward, we will. Otherwise this deal is dead.
UPDATE: Seller is stuck on "I want 30k and I don't care how you get it to me"
QUESTION: If the seller doesn't want to play, can I contact the lender and apprise them of the situation? Can I tell them a) I want to buy the house, b) my financial situation is excellent, c) the home owner is a derelict alcoholic who is trashing the house, d) she's asking me for 30k on the side....etc..???
Will the bank even listen to me or will they only want to talk to me once the property is REO?
By teh way, the home owner thinks her friends have advised her of a new law that will enable her to live in the house rent-free for another year before anything can happen. amazing.
Hi DD,
I'm fairly new to all this too, so keep that in mind reading my comments.
Judging from the lack of activity since the 17th, I guess you didn't pursue this particular deal. If that was the case, I agree. David's advise was invaluable.
Should you be interested in attempting this again, I have access to investor funds to facilitate a cash offer on short sales. I would negotiate the sort sale, but then sell it to you. You just need to be pre-approved with some lender. Just like Mark said, "it's all up to the bank to accept or deny the offer". Cash isn't required, but if the bank has a choice, they'll choose cash.
As I said, I'm new to this, so if anyone else in this thread, David, Mark, Scott, Caitlyn could check out my source (in my sig) and let me know what you think, I'd appreciate it.
Just like all the other advise you've received on this, I've heard that it's the nature of a short sale that the seller not make anything. It's a requirement. Even if you were to fully disclose the $30K side deal to the bank, I'm sure that would nullify the short sale offer. I would certainly wait until she changes her mind on that. If you give in, and it comes out you knew about this, you'd be libel for fraud.
What she's getting is out from under a note she can't support with less impact on her credit than a foreclosure.