Short Sale Process
The bank had asked me to have the seller sign a Purchase Agreement. So I took one out and filled in the info and added the price I wish to purchase the home for. Since this is a short sale I filled in the price I want the bank to settle with. Owed -66,000, my buy price 34,900, house has about 12,000 worth repairs.
I put the 34,900 price in the Purchase Agreement for the owner to sign. Well the seller called me and was outraged that I was getting the house so cheap and feels that something is wrong.
Of course she showed it to a realtor friend that told her it wasn't right. So now she is waiting to talk to the bank. So, was I not suppose to have her sign the agreement with the price listed on that I was hoping the bank would settle for?
She also went on to tell me that it's not right that I can purchase the house so cheap when they tried to get the bank to take less for the place so her son could stay living in it. I told her if the bank did that, everyone would be asking the banks to take a loss on every house.
So it looks like I just need to let her stew for while on this. Maybe when the bank sends her the foreclosure papers she will recall what she wanted to do. That was to save her credit and get out from under a house her and the son can't afford.
schallerp,
You need to stay in control of the situation. I know it is very hard to do, I have to catch myself sometimes. You have to explain to her that you are there to help her, but you cannot do it for free. Your compensation for helping her out of this situation is by making some money for the time you invested with her.
The bank will not allow her to short sale the house herself because she owes them money. For a person to short sale the home, they will have to prove that they can pay the bank the requested amount in full. Since she owes the bank money, she cannot short sale her own home. Also mention that there is a process involved when short selling a home, in which the bank may not even approve of the short sale.
Tell her you are there to help her. Explain to her that she has 3 options:
1. Let the bank take the home from her and kick them out. She will have foreclosure on her credit for the next 7 years and will make it very difficult for her to get into another house.
2. Sell it through her realtor friend. But she will face expenses that she will have to pay to sell her home, such as realtor commissions (6%), closing costs (3%), loan balance ($66K), late fees and attorney fees (3%), repair costs ($12K), etc. You can show it to her on paper:
FMV (Fair Market Value) = $80K
Balance Owed = $66K
Realtor costs = $80 x 3% = $4800
Closing costs = $80 x 3% = $2400
Repair costs = $12,000
Late fees/Atty. Fees = $80K x 3% = $2400
Math:
$80,000 (property value)
66,000 (owes bank)
4,800 (realtor fees)
2,400 (closing costs)
12,000 (repairs)
- 2,400 (late/atty. fees)
--------------
- 7,600 (amount seller owes at closing)
3. Sell it to you based on your price and terms. You will save her from foreclosure being on her credit and also from getting kicked out of her home. You can even offer to help her move by giving her some "U-Haul" money, but only after she has left the premises OR put a deposit down on an apartment for her.
From looking at her options, her best bet is to sell it to you. If she still refuses and doesn't want to sell it to you, then leave her your business card. Tell her that if she changes her mind to give you a call and walk out the door without looking back. Good luck.
Tanya
She called me this afternoon and said she had talked to the bank and that they told her that if she didn't feel comfortable signing the sales contract to just fax it to them along with the other paper work they sent her. I think it's just a psychological thing. Interesting that the bank sent her the paperwork for the short sale. I guess every bank is different.
Anyhow, the deal is still on and I expect to talk to the bank this coming week. This is definitely a learning experience.
Schallerp,
I wondered about that situation myself
Please keep posting your progress
Good Luck
At least you'll now know how to handle the next one
[ Edited by LynLinz on Date 06/29/2003 ][ Edited by LynLinz on Date 06/29/2003 ]
The seller called me on Saturday to tell me that she talked to the bank person and they told her to not worry about signing it if she felt uneasy with it. They told her to just fax it to them along with all of the other paperwork requested.
I just called the bank today and I was told that she did make a payment like the bank requested so as to keep this form the foreclosure group. So it looks like things are still in play.
Sometimes even educating a seller can be a mistake. Many sellers don't understand why someone like us can do something like this and they can't. Next time I will just have them sign a blank form if I can and then I will fill in the price or at the very least write in something like "negotiated amount with lender”.