Investor · Montclair, NJ · Member since 2015 · 150 posts · 23 votes
We bid $166k cash on a Wells Fargo short sale property in January. Bank came back today with a counter of $175k (which includes $10k relocation for seller). We want the property but want to counter the smallest amount that would get this done. Short sale experts - all advice and suggestions are welcome! Thanks
@Shefali R. It's a tough situation with no easy answer. The most plausible way in getting the property in my opinion without letting the approval letter expire is to give consent to let them stay there for 3 months which has obvious risks. Without the sellers on board getting the deal done is going to be a nightmare or simply impossible. Rent backs are typically not okay when a property is short sold unless if a non profit purchases the property. You're basically allowing them more than adequate time to "relocate" from the home. Is there any wiggle room on when they will move? Can you negotiate them down to a month or 45 days?
If FMV is the 175k per banks valuation and it's going through HAFA I'd assume from the outside that 166k is a strong offer without knowing the NET to the investor. May be worth looking into pushing back as is once to see if it can be submitted for approval.
Whoever is processing the transaction needs to ask questions, but if there is no foreclosure sale date around the corner and this is the first counter generally if you push back and they still say it's too low they will simply counter back. They should ask if there is a minimum NET.
@Shefali R. Depending on all the factors that is what I'd do if I was buying the house. Who's the bank? I'm assuming it's a main stream name mortgage servicer with a private investor due to them participating in HAFA. Submitting comps, repair bids, etc can always be helpful in negotiations, but generally this is when you have a truly low offer compared to banks FMV or you want to contest the value.
I will ask listing agent (who is also dual agent) to 1. Push back 2. Ask what is minimum net number. Yes it is the first counter.
Is there any under information we can ask for credibly that could help us negotiate.
When the agent is playing both roles you need to verify that the agent is providing the right numbers. Of course they make more commission on the higher sales price. and that's times 2
@Brett Goldsmith You sound like you know what you're doing. Can you help me out with the below scenario? I keep hearing that NET is the most important to a bank, but I can't imagine how they could possibly net. It's also a strange scenario as the bank didn't initiate the short sale or foreclosure for that matter. The owner hasn't paid mortgage in about 5 years, after vacating the property. It's destroyed. Do you have any tips at how to go about this? I found the owner and we called the bank together to talk through our options. I'm now authorized on his account and have been the one communicating with Citi Bank. Any tips on how to get ahead of the curve here? And influence the path this takes? I am lost...
Scenario below:
I met someone who has abandoned his house and mortgage. I have no idea how this slipped through the cracks and didn't foreclose...but it didn't. I've been dealing with Citi Bank, telling them the owner wants to give me the house, as he wants nothing to do with it. He owes $41k in remaining principal due and a total of $89,908 for all the past interest, unpaid taxes, etc. due. The house is all but falling over. It's not work even $25k. The bank got me started on paperwork to move through the process as a short sale. I wish we could settle, but this is what they say must happen. They are getting a BPO and assigning the short sale to an agent. They want me to work with them to help the seller fill out his paperwork, etc. One of the forms is a "Uniform Borrower Assistance Form". To fill this out in my advantage, what should I select for the "I want to" line item? The options are: a. Keep the property (no, owner wants nothing to do w/ it),
b. Vacate the property (owner has already done this, it's been abandoned for 5 + years)
c. Sell the property (he wants to walk away. so what's the difference between vacate and sell?)
d. Undecided
Owner just wants to get his name unattached from this house and move on, and I am trying to make it as painless as possible for him. From a bank's perspective, what would be the best option here? Remember, he owes $41k principal, $89k total balance, and the property is worth less than $35k.
The deal is basically between me an the bank, but I am assisting the homeowner. It's not a scenario where he can even really short sell it for $$, as it is so far gone. Am I making any sense here?
@Rachel Trimble A short sale is when a property sells for less than the total payoff. What are you trying to accomplish? Are you planning on placing an offer under your name?
If you're looking to purchase this, you're not going about it the best way likely.
@Rachel Trimble You are missing an agent listing the property and having your offer submitted to the bank. Having a buyer processing a short sale can be a conflict of interest and they could deny you from purchasing the home. Right now the Bank likely is speaking to you as they feel you are an advocate or associate of the borrower on the note.
Ofcourse there is a twist - the current short sellers (current occupants) want to stay on and rent the place for 3 months due to medical issues and pay below market rent. would love everyones thoughts on how to approach this.
Be careful here. Your Homeowners now become tenants. Before deciding on renting to them you need to weigh any lead paint liability you may have with the house. I hope that is not an issue. Remember that just because they may not have small children, plenty of cases have been brought by friends, neighbors and relatives.
Yes our ideal situation is to say no and close on a vacant apartment. wondering what the possible negatives of this are - for eg, could they refuse to close and deal falls through, could they damage the place (it is in a good shape) before moving, etc. Also, they went through a short sale due to a serious medical issue so should that be a consideration. Note - they are getting a $10k relocation from the bank if they close.
@Shefali R. make sure you read the VERY strict tenant laws in NJ, if the property is in NJ, and make sure you have a good real estate lawyer writing your tenant agreement if you do decide to rent to them for three months.
Can you delay close until they move out? Having a former homeowner as a tenant in this situation (underwater, medical issues, below-market rent) seems like an unnecessary risk.
The $10k is relocation is from Wells Fargo that they are entitled to on closing. Is there a way for me to negotiate that they get that when they move out? Lmk thoughts.
To clarify, Their current proposal is that we close now but they continue to stay for 3 months and pay below market rent. Thanks!
I would check the short sale paperwork. check with the attorney as well to see if they are contractually obligated to vacate the property at closing due to the 10K. And as an investor I would not let them stay. they would have to vacate and I would not close until they vacated. but then again if you're in a great area in Montclair, 3 months is not too long of a wait as long as they pay rent, the arrangement is legal and they do leave in three months. If that's the case then the 10K would be held in escrow until they vacated. That's what I would get them to agree to.
@Ibrahim Hughes thanks - great point - will call my attorney today and check paperwork re HUD and explore escrow option. We prefer to close once they vacate and only concern is does deal fall apart because bank doesn't extend date of closing by 3 months. This is our first short sale so we don't know how banks think of such extensions.
All - I am finding the our conversation with the listing broker (dual agent) on this short sale v strange and want your thoughts on how to approach this situation.
1. As I had mentioned, the broker told us our deal has been approved by the bank. There is a short sale approval in writing that the seller has received from the bank. He says he has not seen it but only the sellers have received it. Sellers want to be able to stay on and rent for 3 months after closing
2. However, upon our request to see this approval and review it with our lawyer, the broker is saying the sellers wont send it unless we agree to rent them the unit for 3 months after closing
3. He also said via text message “It is a matter of whether you will agree to three months right now otherwise there is no point in your seeing the approval. If you can’t accommodate them, there is no deal”
Help please! I also just sent this info to our lawyer. Thanks.