Ellicott City Realtor Catonsville Realtor

When you're looking to purchase a home as a primary residence, unless you have time to wait, my opinion is that no, a short sale is not necessarily the best buy.

Case in point:  I'm working with a Buyer on a short sale, and we are now 11 months into the process with no end in sight.  Here's a brief outline of what's happened to so far:

April 2009 - We submit our offer to the Bank.

June 2009 - Two months later, the Bank responds with a counter offer.  We reply with our own counter offer.

July 2009 - The Bank finally responds to our counter offer with an acceptance.  The Bank begins the title process - surprise!  The Bank finds a title problem from a previous foreclosure.  It takes 4 months to resolve this problem.

November 2009 - With the title issue cleared up, the Bank now needs all new agreements and financial information from the Seller because they have misplaced the originals.

December 2009 - The Asset Manager for this property quits the Bank.  We are bounced around and our phone calls are not returned for three months.

March 2010 - 11 months later - With a new Asset Manager handling the property, we are informed that the Bank is no longer willing to accept our original offer.  We must resubmit the offer, and if it is accepted, the Bank is not willing to waive the deficiencies to the Seller.

So....for the past 11 months, my Buyer and Seller have done nothing but waste a lot of time.  So are Short Sales the ‘Best Buy' - what do you think?

If you're looking for a home in Howard County, Baltimore County or Carroll County and have questions about foreclosures, short sales, or anything else, please don't hesitate to contact me.

I'm leaving my opinion out of this, but take a minute to watch this video and draw your own conclusions.  It's definitely worth watching:

http://www.thinkbigworksmall.com/mypage/archive/1/32275

Let me know what YOU think.

I myself am buying a home right now.  I am buying a house that is a Short Sale, and I'm buying to try to stop a foreclosure.  A Short Sale happens when the owner of a home can no longer afford to keep the home, and cannot sell the home for what it is worth.  Theoretically, the Lender/Bank will accept less than the total amount due if the Owner qualifies.

Part of this process in getting a Short Sale approved by the Bank entails the Owner showing that they can no longer afford to keep the house.  The Bank gathers financial information on the Owner - income, credit, retirement accounts, checking accounts, savings accounts....wherever the Owner may have money.

Then the Bank orders a BPO - a Broker Price Opinion.  This tells the Bank what the property is currently worth.  These are typically done by experienced, local Realtors.

The offer that I made on this property was $125,000.  The BPO came in at $120,000.  You would think that the Bank would be happy to accept this offer, right?  Wrong...

The next step in the process is that the Bank sends out an appraiser to do an official appraisal.  The Bank does not disclose what the appraised amount is, but they come back saying they want $185,000 for the property, or $65,000 more than the BPO.

When I ask about the comparable sales used for the appraisal, the Bank gave me sales for houses with addresses on the same street, but 20 miles away.  I had to convince the Bank that the appraiser did the appraisal on the wrong property and mind you, he did not go inside.

Remember....I was purchasing this property to stop a foreclosure.  The Bank ordered a new appraisal for the correct property and came back with the same counter offer of $185,000, which is outrageous.  The house likely needs $50,000 of work.

I just found out today that the home is going up for auction tomorrow.  We put this deal under contract last July.  Since then, a lot of time has passed, and I think the Bank just wants this deal off their desk. The Bank is not returning any phone calls.  And tomorrow, at 2:30 pm, the Seller is probably going to lose his house, not to the highest bidder either.  He's going to lose it right back to the Bank, because based on the deposit amount that the Bank wants for the auction, their bottom line is $185,000 and they are sticking to it.

So after all of this, the Bank is going to then have to take the property back, only because, in my opinion, they don't have the time to do what is right.  What would be right is for the Bank to get a proper appraisal done by an appraiser who actually goes inside the house.

Now, the Bank must evict the Tenant, clean up the home, and hire contractors and a Realtor to get it sold.  Additional costs = additional losses.

What could have been done differently?

Lately I've been showing a lot of foreclosures.  I would say about 90% of them need work.  And when I say they need work, I mean they need kitchens replaced, basements gutted and finished, and a lot more.  These are properties that have been left in total disrepair, or have been destroyed by previous homeowners.

There are a lot of foreclosures coming on the market in our area.  And there are Buyers interested in purchasing them.  The problem is that it is nearly impossible for the average Buyer to purchase one of these properties.

For example, right now I have a Buyer that is interested in making an offer on a foreclosure property.  The comps show that the home is listed at current market price.  However, in submitting an offer, how can any Buyer make an offer at market value, full list price, for a home that might need $20,00 - $30,000 of work?

I know the bank is going to come back, not even with a counter offer, declining our offer.  They will state that they have an appraisal and comps to support their price.

The problem with banks and bank owned property is that they just don't give any merit to the fact that people have to put several thousand dollars into one of these houses just to make it liveable.  This is particularly the case with short sales.

Further compounding the problem, lenders don't offer the necessary programs to make these types of purchases realistic.

It has always been difficult for appraisers to make "condition adjustments" on appraisals.  In my opinion, if banks are going to try to get the full appraised value, they need to be willing to give or lend Buyers the money for necessary repairs.

It sounds crazy, but what Buyer can come up with a down payment, closing costs, and then still have the money to make major repairs?

How would you solve the Foreclosure Conundrum?

Lately I have been helping a family purchase a home.  Their current home is already sold, and we found the perfect house for them - it's in a great neighborhood that they want to be in, and it has a large in law suite.  Just before we wrote our offer, the Listing Agent told me the home could go into foreclosure.  When I asked what that meant, she said the Sellers were just a payment behind.

After receiving our offer, the Listing Agent called me to tell me that the Sellers couldn't come up with a counter offer, because they didn't know how much they owed, and they needed a little more time.  I asked the Listing Agent if she didn't have all of the necessary information, why list the home in the first place?  She replied that when she listed the home, it still had plenty of equity.  The home had been on the market for 66 days.  Now, she wasn't sure that the Sellers could afford to take less than the asking price (which was $40,000 to $50,000 over market).

Because my clients loved this home, we decided to wait one week for a response.  In that time, the Listing Agent was supposed to find out how much the Sellers owed in order to come up with a counter offer.  However, the Listing Agent called back to say that the Sellers owe more than the asking price and that their attorney has advised them against a short sale.  If the Sellers are behind on their payments, and they owe more than their home is worth, they are looking at two options:  short sale, and foreclosure.

When I last spoke with the Listing Agent, I asked her when had she been at the home?  She said that she had just been there a couple of weeks ago.  It was interesting to find out that she was unaware that the Sellers were not living in the home, and that it had apparently been vacant for some time.

Our MLS service requires that an agent disclose in the listing if a home is in foreclosure, pre-foreclosure, or is a short sale.  Clearly, the Sellers may have been less than honest with the Listing Agent, but a competent and experienced agent would likely have picked up on the other clues that the Seller was not being truthful.

This situation has me wondering a few things:  Why would an attorney advise a client to go into foreclosure instead of working out a short sale?  How is it possible that there was "plenty of equity" at the time of listing and now the Sellers owe more than the asking price?  Were the Sellers lying to the Listing Agent?  And if they were, how did the agent not see the writing on the wall?