Question:
I have a property we "sold" at auction in August that has $588,500 owed on the first and $227,000 on the second that has been in 'Short Sale Purgatory' going on 4-months.
We submitted a complete package to the lenders for a short sale and have been going back and forth since then over the value and they are just not ealing with reality.
They had a BPO done that came in at $950,000 in August and since that was so far off they (AMTRUST) ordered an appraisal in late September that came in at $640,000 and they are calling $640 FMV and dancing that they need 92% of FMV of full payoff. (WOW $310,000 Price differential)
We originally had a high bid of $375 plus Buyers Premium to make contract price $412,500 and they said that $500,000 would be acceptable.
I was able to get everyone up and took a 50% haircut on our fees to produce a topline contract of $500,000 with the sellers coming to the table with cash.
Then they said $500k net so we brought it up now the first wants a full payoff of $588,500 net because that is 92% of FMV in a market where nothing is selling.
Now there have only been two sales in this subdivision during 2008 $699,000 July 8th and $541,800 October 23rd.
Average Days on Market in the county is 158 and in the subdivision its 222
The house has been on the market for 2 1/2 years and our contract is the only one the property has seen, ever regardless of the method of marketing.
Property values have decreased 17% over the past 12 months according to realtor stats and true equity erosion is closer to 30% for the past 12-months.
271 active listings with 4 sales in September 2008 in Charles County, MD
We now have $518,000 top line ($20k payoff to second) with $482,400 net to the first. We can get the first net up to $500k with an additional seller contribution (buyer is stuck at $456k)
Is there a BPO or appraisal formula to show the property is within the 92% of FMV range or should we just walk away?
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato
I would have your seller or buyer order another appraisal to support your offer. If it does not work I would walk after that.
Nov 24, 2008 08:49 AM
The Auctionarium - Altadena, CA
CAI - AARE
Actually the seller has proffered another $38,000.00 today bringing the total seller contribution up to $100,000.00 to sell their house.
In my opinion based on over 3,000 real estate transactions in the past 20-years the house is worth the cash value on the table of $456,000.00 being paid by the buyer.
Short-sales tend to bring down property values at auction or traditional negotiated methods because of the protracted process for acceptance.
There is no set procedure or Industry Standards for a Loss Mitigation Specialist to accept a short sale on behalf of a lender.
No two deals are the same dealing with the same lender because there are no procedural standards.
If everybody would get on the same page or have a "formula" to use it would make life a whole lot easier.
So our Loss Mitigation Rep has agreed to submit the increased offer, with her recommendation for acceptance, as she has before but there is no guarantee they will accept this.
Can you imagine paying $100,000.00 to sell your house?
Nov 24, 2008 09:12 AM
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Billy, That sucks! Is there PMI involved? Maybe they are the ones holding out. Sometimes these lenders just have their hands tied. I walked on one earlier this year so my seller didn't have to sign a promissory of $50,000. 4 months later we sold the property for $10,000 and they didn't even ask the seller for a note. The lenders are squandering billions of dollars by not listening to the brokers in the field. This IS going to be regulated in the near future. I can see it coming.
Nov 24, 2008 09:44 AM
The Auctionarium - Altadena, CA
CAI - AARE
If there is PMI involved then the lender should accept the deal and make the insurance claim.
This is my sixth short sale and the past 5 have been turned down for being "too low"
The least a lender who has turned down the cash we fought to give them has lost was $75,000.00
Two have lost $100,000 to $150,000 and two have lost over $300,000 on each refused deal.
There is no way that short sales, which are a voluntary contractual decision to take a loss will be regulated, unless there is a trigger built in for the insurance to payout the deficiency.
Right now lenders are holding over 6-million foreclosed homes in their inventory, yet the NAR and news media state there is only a 10-month supply of homes available.
Nov 24, 2008 10:59 AM
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Billy, I tend to disagree on the regulation of short sales. These lenders are begging for government money right now and if the FED was smart they would make short sale regulations a prerequisite for getting a piece of the bailout. And for exactly the reason you outlined in your above comment. They are pissing money away and now it's our tax money not theirs.
Nov 25, 2008 07:51 AM
The Auctionarium - Altadena, CA
CAI - AARE
Bryant:
I hipe you are right and I am wrong on this.
Asking the FED to make the right move is not in their best interests.
Nov 26, 2008 01:32 AM
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate
There should be some regulation somewhere. As long as we have been doing short sales you would think the banks would get it by now but they don't.
Dec 15, 2008 04:35 AM
Coldwell Banker Residential Brokerage - Tucson, AZ
Previews Property Specialist
I would agree that you ask either for another appraisal, or have one done to support your contract price
Dec 19, 2008 07:15 AM
#FelixtheCoach - Costa Mesa, CA
Helping Agents Through Coaching
Billy, I do BPOs...there is a formula, and the agent who did the BPO or appraisal back in August made a big mess for you. If your seller and the buyer can hold on, hopefully they can get another BPO done. THEY WILL ONLY DO THIS AFTER the current BPO expires. BPOs are good for 90 days. So...it should almost be time to order another one. Just hope you don't get the same agent and try to meet the agent at the property. I know how they pull comps, if you get to this point, message me and I could help you find the comps they could use to support your value. EDIT: man...this was from last year...my apologies.
The comments you received are good, but they won't happen. Don't waste money in having your clients on an appraisal. They will not consider it because you ordered it. They will only consider the value if they order it.
Nov 07, 2009 11:29 AM
The Auctionarium - Altadena, CA
CAI - AARE
I agree about not ordering an apprisal or a BPO because the lenders will not honor it.
On this transaction I tried to give the buyers thier deposit back a number of times but they wanted to hang in there.
The Loss Mitigation agent at the bank actually lost a full price offer we submitted where the seller agreed to carry back a note for the balance on the first.
This closed in May 2009 making it the longest auction closing in my career of over 3,000 real estate transactions.
If any agents need help with auctions or short sales please contact me.
Dec 16, 2009 06:14 AM
Rainer
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Billy Burke
CAI - AARE
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