We Tell it Like It Is

I have a listing out there right now that is a short sale. I won't give the details of the property and I'm being vague about the identity of the seller, as I don't want to publically embarrass my client. But, I would like to help buyers out there understand that oftentimes, sellers that are going into foreclosure aren't the irresponsible idiots that they are often made out to be. Here is one story that proves that many short sales are the result of unfortunate circumstances beyond someone's control:

The seller bought the home a few years ago as their first place. The home was in excellent condition and the seller kept it that way. However, my seller met the person of their dreams about 2 yrs later and got married. Their spouse owned a home as well, and they decided to live there since it better suited their needs as a married couple.  They could not afford 2 mortgage payments, so they figured they would rent out the other place and use that money to pay the mortgage since the real estate market was not favorable to sell.

Unfortunately, the seller found out that the loan they used when they purchased the home restricted them from being able to rent the property out. They didn't want to take a chance and get caught, as the repercussions would be severe.

They realized they had no choice but to try and sell the home. However, they found out the current value of the home was about $50,000 less than what they paid when they bought it. If they sold the home, they'd still have to come up with a great deal of money to pay off the rest of the mortgage and they simply did not have that kind of money hanging around.

They didn't know what to do and the home was sitting vacant. Soon, they were missing payments on the mortgage because they could not financially keep up with 2 mortgages plus utilities, etc on 2 homes.

We were called in to help. We contacted the bank to let them know our sellers were going to try and sell the home short of what they owe on it. We knew it would never sell in today's market at the amount the seller owed. Fortunately, unlike most banks, this particular bank was willing to talk w/us about it. They sent a professional out to the house to establish the current market value on the home. Once this was established, the bank told us that is the amount they would take and we listed the home for that amount. They told us that in the past, they've been known to take up to 5% off of the list price if the buyer would like to have closing costs covered.

Since we've had the home listed, we've had many phone calls from potential buyers and agents who would like to offer $10,000-$40,000 under asking price. They have a difficult time understanding why we tell them not to waste their time.

#1: The seller is at the mercy of the bank in a short sale situation. The bank must make the final decision about whether or not to accept the offer.

#2: The bank is not the sole holder of the mortgage. The bank is at the mercy of at least one other investor, the mortage insurance company, and possibly a junior lien holder. So, the bank cannot make the decision to accept an offer without checking w/these guys first. All of them have different opinions about what needs to be done.

Its not a simple black & white situation. This is the politics we must deal with. And, it cannot be resolved by making a call to the bank and telling the president to get their act together. And when someone says "you'd think the banks would just want to get these properties off their hands", the answer is "yes, they do. But, its a lot more complicated than that.". Yes, its stupid. Do we have any control over it? Unfortunately, we don't.