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Reality Check #2: Stubborn Lender Aims for Full Price

By
Real Estate Agent with Home Expo Gallery, LLC (Keller Williams)

During the first week of November, I received a call from a lender with whom I had been trying to do a short sale on a property in Gwinnett County, GA.  I shared certain interesting facts with the lender about the subdivision.

1. The subdivision, as originally planned, would have 45 houses.  Only 24 had been completed.
2. The last 3 builders in that subdivision filed for bankruptcy.
3. Three brand new houses were for sale as foreclosures between 50,000 and 70,000 lower than their original price because the builder gave up and they still have not sold.

I had given them an offer from a buyer who was willing and able to purchase the property.  But this lender called me and told me that he wanted to counter the buyer's offer with a full price counter - much higher than any of the foreclosures already available in that same neighborhood.  I reminded them that I had already sent the information I shared with you above, and told them that the counter would not be accepted - the deal was not going to happen.

The person from the bank told me that they were doing this counter in order to raise the offer to the highest possible.  I reminded them that I am a Short Sale Specialist with almost three years of short sales under my belt, and this was the best and highest offer they would ever possibly get in this current market.

In the end, the person told me that was their strategy, and to just tell him what the buyer decided.  Just as I predicted to the lender, the buyer terminated the contract and went and bought one of the foreclosed new construction properties in the same subdivision for $100,000 less than the lender had countered.

Lenders: Just how much more do you need to lose in order to recognize a good offer when you get one?  Take it, and don't let that motivated, willing, and able buyer walk away.

This house is still on the market, and I hope that if I get another offer, the lender will have more sense, be more realistic, and stop throwing away money.

Do you have other horror stories of lenders, buyers, or sellers that needed a reality check?  Leave a comment here and tell us the story.

Comments (6)

Matt Stigliano
Kimberly Howell Properties (210) 646-HOME - San Antonio, TX

Adriana - The fact that they just pushed in order to get the highest possible offer and told you that was their intent gave you a ton of leverage anyway.  Of course, its obvious that's what they were doing, but by revealing their thinking, they gave away what little negotiating power they might have had.  That home will probably sell for less than your offer in the end, as the days drag on and that home stays a liability for them.

Dec 13, 2008 02:00 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

That happens. The Lender on a cash offer countered $15K higher. I argued, they suggested I send them the data I used in arguing, then sent me the response from the appraiser, who did initial appraisal for them. He insisted on his appraised value, and he wrote to the lender that though my number were factual, they represented the low end, and there were also higher prices.

Correct, but when I come to buy a condo in the complex with hundreds of identical unit, would I be looking for more expensive or less expenwsive? Did not get us anywhere.

The buyer was happy that he could get out, as he could already do a better deal than that. A month later the numbers are like this. The 1 bdr unit the lender refused to sell for $52K in cash and wanted $67K. There is a similar unit with asking of $49K, now under contract, then there is a 2 bdr/2 bath waterfront for $65K, and just yesterday a 3 bdr direct waterfront popped up at $60K. Now this one-bdr unit you can't sell for $52K.

I would love to stick this into the appraiser's face.

Sale lost.

Dec 13, 2008 02:02 AM
Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~ yesmyrealtor@gmail.com

So many lenders are getting burned.  They would rather lose the sale than sell the house right away

Dec 13, 2008 02:10 AM
Gordon Sloan
Group1 Real Estate, selling houses in Salt Lake City Utah - Salt Lake City, UT
Salt Lake Homes For Sale, Salt Lake Real Estate

Adriana... We all have these war stories now !

Imagine what it will be like when banks are allowed to Broker Real Estate for the public?

The arrogance astounds me.

Anyone that can't make money charging from 9% to 29% interest on money they pay 3% for shouldn't be in charge of either a home buyer or sellers future.

It's going to get worse.

Dec 13, 2008 02:30 AM
Adriana West
Home Expo Gallery, LLC (Keller Williams) - Roswell, GA

Matt:

Thanks for your reply.  Of course I knew that they were just negotiating, but the buyer didn't, nor did their agent.  They took it as arrogance, which it was even if it was just a negotiation strategy.  And you're right about the house eventually selling for less.  I track my short sales after foreclosure.  Typically they list for less than my last offer submitted plus the foreclosure costs to the lender.  And they sell for even less than that, months after it would have closed with my offer.  It is incredible to me that they are willing to throw away that money.

Jon:

Appraisers can be a real pain in this process.  I had a short sale nearly fall through because of a bad appraiser.  I salvaged it in the end by challenging the appraisal with real data and pointing out flaws in their methodology - which I knew from having taken classes in appraisals.  He had used properties IN ANOTHER CITY as comparables.  Information is the great leveler in this battle.

I always give the lenders all the marketing data on the property and area comparables.  As I don't work with investors much, I usually get great offers - more like 85-90% of the loan instead of the investor's average of 60%.  The tools I have for showing the sales and inventory in the area are top notch.  My Lenders rarely challenge the market value data I give them, they reject based on the difference between their projected net and the loan amount.  They have an automatic number they're supposed to reach, a percentage of the loan, and if I'm over that, it works.  If I'm under, it's a battle.

Adriana

Dec 13, 2008 02:34 AM
Adriana West
Home Expo Gallery, LLC (Keller Williams) - Roswell, GA

Russ:

Right and wrong.  There are lenders who have gotten the message and understand when a Short Sale is in their best interest.  There are those, like this one, who still don't have a clue.  The reality is that it IS in their best interest to make the sale and the quicker the better (as long as the offer is a reasonable one).  That is the reality check they need.

 

Corie:

I believe that's already happening in Florida, isn't it?  But I think blaming them for the spread is misguided.  If it were not for the difference between the interest rate they charge, and the one they are charged in return, why would they invest and make the loan?  There needs to be a profit margin for them.  And we can't be greedy (nor the buyer, nor the seller) just because of the perceived greediness of the lender.  Now those that jack up the rates into the double-digits are frequently gouging, certainly.  They deserve whatever they get.

And the reason they aren't making money at 9-29% is because no one's paying it.  When the loans get up that high, the defaults spring up.  Yes, that's stupidity on their part because they trigger the defaults by going up that high, but that's another story.

Dec 13, 2008 02:41 AM