I received an email about buying multiple Las Vegas “Short Sale” homes.
He writes: “I have some questions about “Short Sales”
“1. I actually see a big difference in price ($/sq ft) between “short sale” homes and non-short sale homes… I am just curious … You told me 95% of the short sale homes become foreclosed? What happens after the foreclosure? Does the bank try to sell the home for a higher price than the short sale price? Do the Banks usually succeed in selling higher?”
“2. Can I place offers on a couple of short sale homes at the same time? If one of my offers is then accepted great. But what if more than one of my offers are accepted at the same time? What will happen then?”
The Short Sale asking price has nothing to do with what the bank will accept in 8 to 12 weeks after you submit your offer.
See “The problem with “Short Sales” here in Las Vegas!”
Also See: “Las Vegas homes for sale asking price games!”
The above articles explain that the Seller could care less if they even ask $10 to purchase their home as they are getting nothing to sell it. The Sellers bank is interested in not only getting the most money they can from you (the Buyer) but also extracting additional money from the Seller in order to release them from the home loan.
I recently had a Buyer who offered full price CASH on a short sale based on the Sellers Banks appraisal. The Sellers Bank would not accept the deal unless the Seller paid them an additional $30,000 cash! Since the Seller didn’t have the cash the deal fell apart and I had to help my Buyer find another home to purchase.
This previous Short Sale home is now foreclosed and the Sellers Bank will not receive as much as my Buyer was willing to pay. The market has gone down in price for this home. The Sellers Bank has had the cost of foreclosure and the cost of tax, insurance and other liens on the property.
I know this does not make sense to you. But look at it from the Banks perspective. The Bank must try to make as much money from the Seller/Borrower as possible on the loan. If they think the Seller/Borrower has some money or access to some money then they want it.
There are a number of other Seller/Borrower conditions that will cause the bank to reject even a full price offer. One is if the Seller/Borrower is making payments while they are trying to Short Sale their home. The incentive for the Seller/Borrower is that they help to protect their credit. For the Sellers/Bank there is no reason to accept a Short Sale on a fully preforming loan!
The above examples are why the asking price and your offer price has nothing to do with weather the Bank will accept your offer. They will not sell the home for less than the Appraisal they order on the home! So offering $50,000 on a home with an asking price of $70,000 means nothing if the appraisal value of the home comes back at $100,000 and a Sellers/Borrowers loan amount of $200,000. After 8 to 12 weeks of waiting you will get a counter offer for $100,000 and if the Bank thinks they can get more out of the Seller they will condition the approval on the Seller coming up with cash as well.
The Bank has three separate divisions that handle mortgages:
1) The collection division- this division attempts to get the most out of the Borrower any way they can.
2) The foreclosure division- this group handles the legal processes to take the home back when collection is unsuccessful.
3) The REO (real estate owned) division- this group handles the properties that are taken back by setting values, eviction, sometimes making repairs, listing them with agents, evaluating offers and selling the properties.
Each of the divisions have their own set of rules to operate under and are not in communication with the other divisions. So the Collection and foreclosure Division do not talk with the REO division to see if they should accept the Short Sale offer as it may net the Bank more money. I know this is stupid on the Banks part but that is the way they operate.
Short Sales are handled by the collection division and are therefore under the basic premise of “Borrowers are lying flakes and the Banks job is to get as much as you can any way it can.”
This is why only 5% of Short Sales listed actually Sell. Most will become R.E.O.’s.
As to weather you can make offers on several properties at a time. You can make offer on as many properties as you wish. You must put down an earnest money in each case being deposited into an Escrow Company on acceptance of your offer. If YOU fail to preform on the contract your money is forfeited to the Seller. So if you don’t buy and the Seller fully preforms, you are out your $2,000 to $5,000. A contract requires that each party preforms with provisions for damages if a party fails to preform.
Thanks for asking!
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