* * * * WHAT ARE THEY THINKING? * * * *

THE COMMENT IN THE AGENT'S REMARKS BELOW are an example of why many Short Sales will never sell.  I wonder if the listing agent has advised the seller of the likelihood that the home will not sell by Short Sale and will most likely go to foreclosure. 

REMARKS [Incuded in Agent and Public Remarks]

[LARGE NATIONAL BANK WHICH PURCHASED A LARGE NATIONAL MORTGAGE COMPANY] SHORT SALE will not allow Seller Contribution to Buyer!

The listing is for a small single family detached home in Frederick County, Maryland priced at about $225,000.  This is a price range popular with First Time Home Buyers. I know from experience that few home buyers in this price range have funds to close without closing help from the Seller.

What I cannot figure out is the rational for this condition.  If the lender will not approve Short Sale offers that include Seller Contribution to the Buyer, do they not know that this eliminates all but a very small percentage of Home Buyers in this price range?

In addition to the down payment, the buyer's closing costs in this county will be about 4% of the cost of the property.  On a $225,000 purchase, a home buyer will need about 7.5% of the purchase price to buy.  That's about $16,000 on a $225,000 property. 

BELOW ARE SOLD REPORTS SHOWING BUYER SUBSIDY FOR HOMES SOLD SINCE JULY 2008 IN THIS AREA.  Many of the homes sold below permitted the Seller Down Payment Assistant, which is no longer permitted. 

City     ListPrice    ClosePrice     Subsidy      DOMP
Emmitsburg $195,000 $150,000                $00 68
Emmitsburg $225,000 $230,000                $00 6
Emmitsburg $225,500 $225,000 $10,000 149
Frederick $189,900 $185,000 $4,611 19
Myersville $229,500 $215,000                $00 587
Thurmont $224,900 $245,900 $6,432 102
Thurmont $224,900 $220,500 $4,919 84
Woodsboro $210,000 $209,000 $5,000 570
         

HOMES SOLD IN SAME AREA SINCE JANUARY 1, 2009.   No Down Payment Assistance.

City      ListPrice      ClosePrice      Subsidy      DOMP
Emmitsburg $225,500 $225,000 $10,000 149
Myersville $199,900 $190,632 $00 76
Thurmont $224,900 $245,900 $6,432 102
Thurmont $224,900 $220,500 $4,919 84
         

FIVE OF EIGHT SOLD PROPERTIES INCLUDED SELLER SUBSIDIES TO THE BUYERS.  Does the bank not understand that closing help is just one component of a Contract of Sale???  Further, with a reasonable offer the bank may receive more and better priced offer if they include closing help for the buyer by widening the buying pool significantly. 

ONE MORE NAIL IN THE REAL ESTATE INDUSTRY COFFIN.  Goodness, even FHA/HUD which has tried it's level best to kill off as many low and moderate home buyers that they can by eliminating seller gift for down payment and raising the minimum down payment from 3% to 3.5% permits up to 6% closing cost contribution from the Seller to the Buyer.

                    mortgage mess

                            "Honey, what about his house, it's just right for our family?"

                            "I don't think so Dear.  It says that the bank won't approve any closing help."

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.

 
Post is included in group: The Ninety-ninth Percentile
Post is included in group: Realtors®
Post is included in group: Real Estate Trends
Post is included in group: Club Chaos

32 Comments on PROOF POSITIVE THAT BANKS DON'T REALLY WANT TO SELL SHORT SALES - OR DON'T KNOW HOW.

MAR
01
185,770 Points 1 Featured Post

Very good post today, thank you.  I'll be so happy to see the last of these short sales!  They are a pain in the butt and handled poorly most of the time by these lenders. Enough

Portsmouth NH Real Estate
10:35am • #1
4 Featured Posts
Lenn - RIGHT ON! I am sick of hearing about the great environment for first time home buyers. It is all but impossible for 1st timers to purchase unless they go into the portfolio of a local lender.
10:37am • #2
1 Featured Post

I have closed several short sales where the bank allowed closing costs to be paid.  Which banks are you finding don't allow costs?
10:41am • #3
256,294 Points 44 Featured Posts Outside Blog

I can't comprehend it.  This is a perfect scenario for an FHA or VA buyer:  Less than the mortgage limits, buyer only needs 3 1/2% (or zero down if VA) and they cannot ask for sellers (the bank owner) to contribute the maximum to closing costs?

Why the heck doesn't the bank/owner look at the bottom line of the offer instead and judge each offer on its merits?

I had heard something a while back that stated that if a mortgage that was FHA initially went into pre-foreclosure (short sale) then HUD would not accept an offer by a new buyer using an FHA loan and asking for more than 1% in sellers concessions.  I'm still trying to track an official HUD mortgagee letter on that one.
10:44am • #4
137,511 Points 4 Featured Posts Localism Sponsor

Why would you care about closing cost if you wanted to sell it?  You wouldn't.  You would care only about the net to you. 
10:47am • #5
156,767 Points 2 Featured Posts Outside Blog

Kris, FHA will accept as their NET, 88% of the appraised value on an FHA short sale.  So with the right offer, even asking for closing costs, the borrower could get in a home with 3.5% down.

It is the job of the listing agent to explain to the bank that they are only concerned about the net and nothing else.
10:47am • #6

Lenn, some lenders want to move inventory and are willing to work with buyers. It is a question also of likely having overworked loss mitigation departments. This department, in most every mortgage company and/or bank, most likely cannot get a free space on their desks nor in their emails due to the volume of requests.
10:49am • #7
236,683 Points 27 Featured Posts Localism Sponsor Outside Blog Hit Router

Lenn - I totally agree.  It does not make any sense.  The bank's net price will be the same or better if they did allow it. 

We are marketing one short sale in Philadelphia and have already lost one buyer since the buyer needed sellers assist which of course the bank will not allow.  It does not make much sense.  Maybe some of the bank reps will read this post !  ~  Chris
10:50am • #8
Outside Blog

For some banks it doesn't matter what the net is as long as they follow the guidelines the investors give them. It's crazy how they won't think outside the guidelines so they can net more.
10:53am • #9
577,289 Points 95 Featured Posts Localism Sponsor Outside Blog Hit Router

What bank?

Most of the ones I am dealing with will allow 3% but not 6%.
11:03am • #10
197,786 Points 12 Featured Posts Outside Blog

Wow - almost 600 days on the market. I am not sure how some banks can even function. I've had scenarios with closing costs paid by the banks. I don't remember the % though. I do know the price was very close to asking price.
11:29am • #11
166,789 Points 10 Featured Posts Localism Sponsor

Hi Lenn,  I agree, if they will not allow any seller concessions - that will eliminate many from the buyer pool.  I have not seen that agent comment yet.... good to know.
12:12pm • #12
217,706 Points 19 Featured Posts Outside Blog Hit Router

Lenn, The seller makes their decision and lives with it. In this case they're going to be living with it for a long time. I'm not impressed with the banking industry's knowledge of the practice of real estate. Heck, I'm no longer impressed with the banking industry's knowledge of banking. Rich
12:23pm • #13
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Rich.  You speak for about all of us.  This one just got my attention because it's so contrary to what it takes to sell in this market.  Common sense says look at the NET. 

Mary.  That's the first time I've seen it too.  I was doing a search today for a young couple that qualifies for USDA and the homes in the area of their search are elegible.  However, the seller would have to pay some closing.  Actually, I would write it anyway.  You never know what's going to happen until a seller gets a written offer.

Steve.  Some of these homes have been chasing the market down for ages. 

Missy.  Closing in Maryland is very expensive.  The state and counties consider real estate transfers a source of revenue.  Virginia is not as bad.

 
1:23pm • #14
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Pam.  As I've been saying for years, BANKS DON'T KNOW HOW TO SELL REAL ESTATE.

Christopher and Stephanie.  It appears that the bank in that listing is not the only one.

Eric.  I see some listings for short sales and foreclousures that offer closing help in the listings.  I have one now that has $10,000 approved.

Jeff.  So the property just sits on the market.  Of course, 88% would work.

Mark.  What you say is true, IF you knew how to sell real estate.

Kris.  Let me know when you see it.

 
1:30pm • #15
1 Featured Post

Lenn, it may be the asset manager working for the financial institution that doesn't get it. It may be the listing agent hasn't conveyed the issue properly. Or it could be at that price no seller paid closing costs. Thus raise the price and include the closing costs. Who knows, many things don't make sense.

I do agree, as a retail loan officer without seller paid closing cost very few first timers would be buyers.

Jay
1:49pm • #16
371,473 Points 34 Featured Posts Outside Blog

Hi Lenn... I'm with you!  Some banks get it, but many do not.  At the end of the day, the banks should be concerned with the NET PROCEEDS from the short sale, not the mathematics that get us to the closing table.  I am not suggesting selling properties for above market value so that there is another upside down owner in the short term... but short sales, by their nature, typically sell at a discount from market value, so if someone structures a deal that sells a short sale property at less of a discount from market value, but builds in a reasonable amount of closing costs it should not matter.  And denial of those deals that result in foreclosure cost all of us as agents and taxpayers money!
2:26pm • #17
1 Featured Post

Lenn, I just saw two listings this morning with very similar wording.  More insanity and subterfuge.  Go figure...
3:31pm • #18
228,088 Points 5 Featured Posts Localism Sponsor Outside Blog Hit Router

Lenn --- it is amazing what some agents will put in the remarks --- so crazy.  I agree with you re: the banks. The net is the net --- you wonder what king of folks in the banks are making the decisions.

 

Mama Liz's Signature
3:44pm • #19
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Jay.  That's the way it is around here. 

Steve.  It's hopeless.  They simply don't get it because they know absolutely nothing about selling real estate, the needs of buyers, etc.  They probably evaluate buyers for contracts the way they would for bank loans. 

Randy.  Eeeek.  It's spreading.

Liz.  I wouldn't let this stop me from showing and making an offer.  But, I would prepare my buyers for the worst case.  Which I do with short sales anyway.
3:54pm • #20
611,506 Points 244 Featured Posts Localism Sponsor Outside Blog

Lenn,I doubt that this has any thing at all to do with the bank. Heck I closed one in September that had 6% in closing costs AND 3% towards Nehemiah DPA!!
6:31pm • #21
276,630 Points 3 Featured Posts Localism Sponsor Outside Blog

Lenn, this is a pretty good argument for why banks souldn't be allowed into residential real estate...
7:18pm • #22
2 Featured Posts Outside Blog Hit Router

I have a pending offer on a short sale with Countrywide and they are refusing to pay 3% towards buyer's closing costs. Needless to say, we'll have to move on since the buyer needs it to close. Interesting side note is the home has been on the market for over 200 days; ours was the first offer despite several significant price reductions.
8:03pm • #23
MAR
02
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Connie.  THAT is typical of many transactions.  Proof positive that banks are totally out of touch with the real estate market, the economy and the real world.  So, the house will go to foreclosure.  Just another statistic. 

Brian.  Yep.  However, I bet they will continue to try.

Bryant.  That was September 2008.  Things are a lot different now.  Banks have a new P&P in thier handbook.  It's called "Squeeze the blood out of the turnip (agents and sellers)".

 

 
5:11am • #24
483,271 Points 41 Featured Posts Localism Sponsor Outside Blog Hit Router

I just sent off a 64 page fax to the lender on my current short sale listing.  Experience has taught me that even though the lender has had their hands on all of the documentation for a short sale for over a month and have confirmed by phone that it is all there that they will "lose" it.  They may not want to pay seller contribution now during the short sale process but they will when it goes to foreclosure.  It is still the best Catch-22 you will find in today's market.
1:11pm • #25
1 Featured Post

In so many ways, the lenders are shooting themselves in the foot! 

My friend is the listing agent for a home where the holder of the 1st TD has agreed to a net $, but they insist that the lender on the 2nd td get no more than $3,000 (on a $150K 2nd!).  The buyer is willing to pay a price that would cover the 1st TD's required net, plus closing costs, commissions and about $20K to the 2nd.  The 2nd won't allow the closing to happen unless they get the $20K, even though they will be wiped out by the foreclosure on the 1st.   If the 1st has to foreclose, they are looking at a much greater loss than their current net provides!

Doesn't anyone in the loss mitigation business understand basic economics? 
1:33pm • #26
164,779 Points 1 Featured Post Outside Blog

I'm working on a short sale with Citi Mortgage now.  The list price is only $99,900.  We have received 2 offers.  The last one asked for $1,000 in closing costs and was willing to pay the full price of $99,900.  It took the bank nearly 4 months to decline the offer. This time they said they will not pay any closing costs.  It is absolutely unbelievable.
1:55pm • #27
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Jan.  Which makes one wonder if the banks really want to sell anything.

Vicki.  Actually, the banks have certain tax advanges in foreclosure sales that thy don't have in short sales. 

Cindy.  Indeed.  What makes sense to us from a "bottom line" perspective may be completely different to the bank.

 
2:14pm • #28
1 Featured Post

That's the point that we're all missing....the banks aren't LOGICAL. We're in the field, in the market, on the front lines...they're behind a desk staring at 1,000 files and an excel spreadsheet.

Find out their rules, then learn how to work WITH them. No need to cry over spilled, er, lost in-equity.

Make a friend at the loss mit deparment and hammer away, you'll get more done that way then trying to pencil out their logic.

Tracy Royce

www.LiveFreeInvestmentGroup.com

602-957-7773

 
2:47pm • #29
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Tracy.  Agreed.  However, it helps to vent from time to time.  So much of what they do just doesn't make any sense.

 
4:51pm • #30
MAR
03
415,436 Points 3 Featured Posts Outside Blog

Lenn, Great post. I am amazed that banks do not understand seller assist.
6:30am • #31
837,652 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

Gita.  That's why we need experienced real estate agents to manage real estate sales.  Banks don't know what they're doing.

 
7:32am • #32

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