Deborah,

A short sale is when a property has more liens against it than its value. For example, if the owners have $500k of loans with the house as collateral, and the market value (sales price) of the house is $450k, that would be a short sale.

No advice, but thought the definition would make things clearer.

I don't have any personal advice on "short sale", but I would try to wait for an answer, or keep calling them.....I would hate for you to go out househunting and find a new home and start the process again without settling the first home process.

Good Luck~~

If the seller has convinced the bank to do a short sale then of course the seller is willing to accepting the offer. They aren't the ones losing.

Can you talk to the bank? Aren't you really buying it from them?

Larger banks such as Wells Fargo tend to have a "loss mitigation" department or send it to another company that specializes in "loss mitigation." My advice is for the seller to call Wells Fargo and ask to speak with the loss mitigation department. Typically there is a very definite process that must be followed to the letter--i.e. a preapproval letter with the offer, etc. The process varies from lender to lender. The short sale process can/will take hours of phone time, etc.

By the way, are you 100% certain that the sellers submitted your offer? Larger corps. don't usually take a month to respond--7-10 days is typical. Small banks might take that long though.

For further info on some of the short sale "fun" you might experience go to this thread.

Hope it works for you.

Here is a link that might be useful: Part Deux thread

Thanks for the quick responses. Here is all the information that I have. Apparently in Columbus, OH it is typical for realtors to buy builder's models and lease/rent back to them during a certain showing period. The realtor/owner then offers the house for sale. For whatever reason, the realtor/owner now has to sell the house. My guess is that they are in pre forclosure.

I know they have sent our offer to Wells Fargo along with other paperwork required for a bank short sale. The paperwork is indeed with the loss mitigation department. My realtor has been calling the owner every two days or so to inquire about the progress and the bank just keeps telling the owner they are working on it. My realtor even asked for them to sign a release authorization letter so that she could talk to the specific person handling this matter but the realtor/owner is reluctant because that would expose my realtor to their personal financial situation.

So we wait and wait and wait. I know that the offer has been submitted, that much I am sure of, but this waiting is mind numbing.

The reason that we are going to look at more houses is to decide whether we are able to find another perfect house or whether we are going to build. I am getting anxious because if we have to build I would like to get that going as quickly as possible. My concern about waiting is that we may wind up waiting for months and what if the bank doesn't accept our offer or comes in with a # we are not happy with.

We suspect that we are about 7K off of what the realtor/owner already has as a mortgage on the house. Thus the bank is likely to lose about 7K. The amount offered is close to comps of other homes/models in the area.

Rrah, you are correct in the process that has to be followed and on our end, we have followed to the letter. The owner/realtors want out now, we want to buy now, the only hold up is the bank. Whoever decided to name this type of transaction a bank short sale obviously never went through a short sale!

I'm seriously contemplating asking our realtor if we, the sellers and the bank could possibly sit down and meet to discuss the sale. Is that ever done? Do you think it would be a good idea?

Again, any other ideas, comments, suggestions?

In PA when I put an offer on a house I put a time limit on the offer (i.e. 48 hrs). Does it work that way in NJ?

Have you considered telling them them that you are no longer interested? If you put in an offer close to the comps on a new development you aren't exactly asking for them to "give it away". Are there any other houses for sale in the development? Have you looked at them? Are there similar developments in the area you can look at?

One of the reason I'm comfortable for waiting for a house is that we are most likely going to move into a development. Most houses are similar enough so you don't have to worry about "falling in love" with one. Even if I lose a house in negotiation, I'm not that worried becasue there are several similar houses up for sale. I figure I can even wait a couple extra months if I'm looking for a particular model. With all this inventory it is almost like I can chose the options I want. LOL!!

Hi Deborah,

IF you are on a time constraint, or in a hurry, you may be better off moving on to a home that doesn't take a loss-mitigation department's committee to process & decide upon.

Short-sale turn-times are stretching longer and longer, currently, as banks are doing everything they can to prevent the overwhelming abundance of payment defaults from being forced to be booked as foreclosures. TECHNICALLY, in almost all states, once a loan is 90 days late the bank(s) can begin foreclosure proceedings... but in the current environment the banks are doing all they can NOT to have to follow through on that.

Foreclosures end up looking ugly on the corporate books, potentially causing a much greater loss of money from the bank's stock value dropping, than the loss of interest money the bank swallows during the extended default periods. In addition, with the spectre of further housing-price softening, the last thing the banks want is a swelling REO portfolio they cannot sell...

If it makes you feel any better, I have been under contract to buy a shortsale property from Countrywide and New Century... for 15 months now.... and I already know for sure there's no chance of mine closing through the holidays, so the soonest I might close could be 16-18 months from initial contract (and I wouldn't place bets on that either...)

Short-sale purchases are best for patient investors... not anyone with a need to acquire for their own residence.

Luck!
Dave Donhoff
Strategic Equity & Mortgage Planner

Dave,

Thank you sooo much!! This is exactly the type of information I have been looking for and what I was afraid I would hear. However, I'm wanted to be realistic and understand all of my options. I can't wait as long as you have to close on a home. I am on a relocation package and have until September of next year to get settled. Having said that, my existing house is on the market and I would like to get settled as soon as I can.

I needed a dose of reality to get me motivated to keep looking.

ChrisDoc, the house is in Columbus not NJ. We are relocating to OH. We did put a time limit on the offer and the bank chose to ignore it. The sellers have informed the bank that we are seriously close to walking away. It really is all about us hanging in there and right now it is not looking good at all. As Dave indicated, short sales are for the patient investor, not someone who needs to find a house. The reason we were trying to stick with it was the fact that it had all the bells and whistles that we are looking for without having to build. It was a close to perfection as you could get. Alas, it may ultimately not be the house for us.

Deborah

Dave,

Thanks for the great insight on the REO market. I'm sure everyone would love to buy a house from a bank at a huge discount in order for the bank to "get rid of it". Your insight shows me and others how challenging of a process that can be.

If a bank doesn't foreclose on someone who can't make their paymens what can the bank do? (Ask the guy's boss to give him a raise! LOL) Seriously, if someone can't afford their mortgage then what can the bank do besides foreclose?

Since it has been 15 months since you put your offer in on the house, I hope you have lowered it a few times on them. The market has definately changed in the last 15 mo.

15 months!?!?

I am the Part Deux poster in the link mentioned above. I had no idea that banks drag their heels like this. Honestly, I don't follow their logic. Do they think the person who is close to default is miraculously going to come into some money and pay them off? Or the buyer is going to wait around? (Apparently, some do...)

OP, the $7K you mentioned is, to me, a "nothing" number. If I were the bank, no matter the value of the property, I'd jump on that if I had agreed to the short sale to begin with. It will EASILY cost the bank more than that to take it over and sell it. In fact, if the debtor has not been paying, even the one month that has passed is costing them.

Someone mentioned that I should try to talk to the banker myself, after ensuring two-way permission is in place. This seems like good advice and perhaps something you might want to do. Bypass the realtor IMHO. Many times they do things you don't really want them to. I am currently dealing with this frustration with my realtor, in most ways a good guy, but unable to follow simple directions as to what to say and/or do.

It's YOUR money, your potential home and your life. To the extent possible, you should try to take control of what affects these things.

Hi ChrisDoc,

If a bank doesn't foreclose on someone who can't make their paymens what can the bank do? (Ask the guy's boss to give him a raise! LOL) Seriously, if someone can't afford their mortgage then what can the bank do besides foreclose?

NOTHING! The banks' ONLY recourse (after trying to workout payments with the owner) is to force an auction in order to liquidate to recover their funds.

Since it has been 15 months since you put your offer in on the house, I hope you have lowered it a few times on them. The market has definately changed in the last 15 mo.

You betcha! In addition, during the last year of waiting, a slowly dripping fawcet (never properly shut off when the abandoning occupants took their washer/dryers out) flooded the place, oh-so-slowly, wreaking havoc and creating the potential environment for mold! ("Cha-ching" is the sound of "potential mold" to a real estate investor negotiating a shortsale with a bank!!!)

Hi Herus,

I had no idea that banks drag their heels like this. Honestly, I don't follow their logic. Do they think the person who is close to default is miraculously going to come into some money and pay them off? Or the buyer is going to wait around? (Apparently, some do...)

Yes... in many cases the banks are indeed hoping that the owners WILL either come around, or the delays will reflect the home being sold at a higher market value. In other cases, the banks' delays are simply caused by a lack of trained staffing for the surge of file-flow.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

I forsee many short sale lessons for banks in '07!!

Everyone, thanks for all of your helpful suggestions and comments, it is really appreciated.

Herus, I read your thread and it sounds like a nightmare. My realtor has been great and is doing everything she can to make this happen. I'm going to suggest to her that we all try to get together and sit down with the bank. If the bank says no, then I will have to move on because I really can't wait much longer.

It truly is a shame because I feel like my situation is the "perfect storm" for the bank but clearly they value process over making a deal happen.

Deborah

"Short-sale turn-times are stretching longer and longer, currently, as banks are doing everything they can to prevent the overwhelming abundance of payment defaults from being forced to be booked as foreclosures. TECHNICALLY, in almost all states, once a loan is 90 days late the bank(s) can begin foreclosure proceedings... but in the current environment the banks are doing all they can NOT to have to follow through on that."

That's very telling info, Dave, and leads me to believe that the foreclosure rates being reported by the media don't reflect how bad the present housing market actually is. Eventually, the banks are going to have to face the music and foreclose on most of these properties, and that means we'll likely see a real jump in foreclosure rates in the upcoming months. That also doesn't bode well for financial institution stocks.

I hope my gloomy forecast proves wrong, but I can't see much in the present economic picture to counter it. Most economists are predicting a recession next year and credit indebtedness continues to rise.

But here is an interesting, latest article from the WSJ people:

Here is a link that might be useful: Is the Housing Bust over?

^^^

The headline on that article is misleading. In the article itself it shows the consensus forecast is lower prices in 2007, but at less of a drop in 2006. In other words, things are still getting worse, but they will get worse more slowly.

For people living in the real world and not economicsland, the worst is not over.

Agree. I felt the same way reading the article. From a macro POV it simply means that the curve is less steep/flattening out but is still a downward sloping curve.

As Benjamin Disraeli said: "There are three types of lies. Lies, Damned Lies, and Statistics".

They don't come out and say why they feel the way they do about the market. They sort of illude to some vague notion of inventory topping out. That is a pretty weak arguement this time of year when people pulling their houses off the market to relist in the spring. They also don't even mention the effect of subprime lending on the current market (I guess that is insignificant).

The end of the article discusses a "soft landing" w/ 20% price declines. I don't think they guy who bought a $500K house w/ an IO loan that is resetting in '07 will find that landing very soft (nor will the bank that lent him and many others like him the money).

So then banks will be less likely to make Interest Only loans. That will mean less people can afford houses. That will mean more inventory and larger price drops.

It was a snowball effect on the way up and it will be just as steep on the way back down.

Just wanted to let everyone know in case you haven't read the pets thread, that we walked away from the home with the bank short sale. We decided to go with a spec home that is just about finished.

We heard from the owners last week that the bank was gearing up for a committee meeting on our offer. They were too late. Thanks again for all the great advice given here.

Deborah

On the subject of short sales... the house we were thinking we would end up buying at foreclosure - the foreclosure sale didn't go through because the bank discovered there was a small senior lien ahead of it - so it had to call off foreclosure, thrusting the property back into the position where we could try a short sale. Our agent got in touch with the owners and we are working with them now and with loss/mitigation toward that end. We expect that we will settle on a mutually agreeable price.

In the meantime, we have the opportunity to move into the property during this process - which would be nice for us as we are living in very cramped quarters, among boxes and such. Any rent we pay would more than likely not be enough to cover the mortgage, it would save us a lot of money in storage and the high rent we pay now - we would have a lease - what pitfalls would you foresee?

Thanks.

MP

"We heard from the owners last week that the bank was gearing up for a committee meeting on our offer. They were too late. Thanks again for all the great advice given here."

I hope you have formally notified them in writing that your offer is withdrawn.

brickeyee: "I hope you have formally notified them in writing that your offer is withdrawn."

I would think that the point is moot now since the offer - - - and the post - - - occurred a year ago, lol!

A lot of folks seem unaware that an offer to purchase remains valid until rejected in writing (or by making a change to the offer making it a counter offer) or until it is withdrawn (either by including language with a deadline or formally withdrawing the offer).

I personally know one person who made offers on two properties a few days apart.
They ended up loosing some $$ when the first offer was accepted 3 days after the second offer.

Offers can - and should - be written with deadlines. That forces the seller to make a timely decision and protects the buyer from having more than one offer accepted.

brickeyee: "I hope you have formally notified them in writing that your offer is withdrawn."

BMM: I would think that the point is moot now since the offer - - - and the post - - - occurred a year ago, lol!

brickeyee: "A lot of folks seem unaware that an offer to purchase remains valid until rejected in writing (or by making a change to the offer making it a counter offer) or until it is withdrawn (either by including language with a deadline or formally withdrawing the offer)."

At first, I thought you just misread the date of the OP. Now, I'm not so sure. You aren't seriously suggesting that an offer to purchase made in December 2006 would still be valid in December 2007, are you?

"You aren't seriously suggesting that an offer to purchase made in December 2006 would still be valid in December 2007, are you?"

Why wouldn't it be? If the seller never accepted or rejected (that is, just didn't respond at all) and if the offer didn't have a deadline, what would cause the offer to not still be valid?

We formally withdrew the offer and yes it was in writing! LOL BTW, that house is still on the market a year later and at a much lower price than what we offered!!

mfbenson: "Why wouldn't it be? If the seller never accepted or rejected (that is, just didn't respond at all) and if the offer didn't have a deadline, what would cause the offer to not still be valid?"

It is a basic tenet of contract law that an offer submitted without time limit is only good for a "reasonable" length of time. Now, of course, that term is subjective and varies depending on the facts of the case. But there isn't a judge in the country who would rule that an offer not acted upon for more than a year would still be valid.