In October I took my first short sale listing. I immediately got the proper authorizations from the owner to talk to the lender, Wells Fargo. Before I took the listing I talked to someone with Wells Fargo to see if they would accept a short sale. Their response was get an offer and submit a short sale package. I accepted the fact that this could just end up as a learning experience and not an actual sale and took the listing.
The owner had moved from S. Florida to N. Carolina and had a tenant in the townhouse. They had paid $260,000 for the townhouse in 2006 and owed $240,000. They couldn't sell the property so they rented it out but they had over $1000 a month in negative cash flow. I recommended they make a deal with the tenant for her to leave. They did and in about six weeks she was gone.
There were very few comparables but I estimated the market value at $210,000, which is where we listed the property. Of the five units for sale in the development three were foreclosures or pre-foreclosures. There was little to no action in the first two weeks so we dropped the price to $200,000. In mid-November we got an offer of $160,000. I submitted the short sale package to Wells Fargo and got no response for four weeks. I left messages once a week with my contact at Wells Fargo and finally at the four week mark she actually picked up the phone when I called. She said before they could go forward the property would have to be appraised.
A week later the appraisal was complete and I called Wells Fargo to follow up. At that time I was handed off to someone else who told me the property appraised for $210,000. How about that, I was right on target. Because it was an insured loan HUD guidelines dictated they would require no less then to walk away from the sale with 82% of the appraised value or $176,300. It was either accept the price or surrender the property. This meant the commission, back taxes, and closing costs, had to be added to that to get the sales price. I got a preliminary HUD worked up and the sales price came to about $192,000.
I went back to the buyers agent, by now its about a week before Christmas and explained the situation. Its $192,000, take it or leave it basically. She said she would talk to her buyers and get back to me.
No response and the buyers agent didn't return a couple of follow ups.
I put the listing back in active status at the price of $192,000 and remarked the short sale was approve by lender at that price. I got three or four showings but no takers. Then a few days ago, Jan 10th, The buyers agent calls me out of the blue and says her buyers have been trying to secure financing at the new price. She also asked if I would cut my commission along with her by 1/2 a point, to help them out. I figure why not, if it brings this deal back from the dead. Also the mortgage company for the buyer wanted to the appraisal to save a few bucks and I said I would see if Wells Fargo would release it.
Well, heres were I get screwed, and everyone else by the way. When I talk to my new contact at Wells Fargo He says the appraisal was $238,000 not the $210,000 figure he had given me almost a month prior. I was floored "how could that be", I asked. He didn't have a good answer just a clerical error, he deals with a lot of files, blah, blah, blah. I asked if I could see this appraisal and at first he was reluctant to give it to me. Then he said he would show me just the comps and would e-mail them in a few minutes.
By the next day I had seen no e-mails from him and left a message. I get a return call hours later and he said he must have the wrong e-mail and asked for it again. At 4:55pm on Friday I get the full appraisal to my surprise. This appraisal in my opinion is inflated. The nicest unit in the complex sold for $225,000 just a week before. It was in great shape with hard wood floors and a new kitchen. So how does mine that is all beat up by a renter get valued at $238,000? A few days after the appraisal was completed one of the foreclosures sold for $195,000. Not that this helps me much, but you see were prices are headed.
I'd like to believe that this was a case of clerical error, but I can't help but be suspicious. Now 82% of $238,000 is equal to $195,160 pay out to Wells Fargo. I have to raise the price to somewhere around $225,000 to net that figure. Which means this property has no chance of selling. I don't know why the bank would want the property back, which is what is going to happen. I felt I was fortunate someone wanted it at $192,000.
So it ends up where I thought it could as one of lifes lessons....
;)
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