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My husband and I put a bid on a short sale condo in California. The bank will not pay for closing costs, which is fine the condo is below market rate. So we put a bid in for a good chunk more then they are asking, but the "owner" of the condo chose not to sign our bid, but a fellow veterns bid. Ours is higher and we have 20% down, while the other bid is lower and has to be 100% financed... our lender has told the other parties broker that we will take it too the bank if this is not resloved. Does anyone know about short sales in CA, I thought they would take the bid that would keep the bank from losing the most?
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Dara, I help people sell and purchase short sales in CA. Here's whats going on, the other buyer is offering money or offering to rent back the property to the seller if the seller goes with their purchase offer. Remember, the seller gets nothing from the sale of the home.
Going to the bank directly will not help for the following reasons:
1. The seller controls which purchase offers get submitted to the bank
2. You cannot talk to the bank regarding this loan without written authorization from the seller.
It looks like your agent or broker has no clue on how short sales work and how to buy them. Walk away from this one and here's how you buy a short sale cheaper than bank owned:
1. Find an condo that is a short sale and has no purchase offer submitted to the bank.
2. Look at the lowest 3 sold comps and in SoCal (maybe the same in your area) make your offer 10% below the lowest comp you can find. Ask for the seller to pay title, all of escrow, all closing cost such as termite, delinquent HOA, delinquent property taxes, any liens on the property, etc. Also ask that the seller pay for 3% of your closing cost, just use a number not a percentage. For example, if your offer is 400k, ask for 12k in closing cost.
3. Pay the seller 1-3k at close of escrow for a painting, old shoes or a piece of furniture if they use your purchase offer only. Your agent cannot approach the owner with this, just you. This also gives the seller money to move.
4. Have the short sale negotiator to control the lender's BPO by making sure the BPO gets the low 3 sold and low 3 active comps and uses them.
There's more, but these are the main points. I just hope the person who is conducting the short sale knows what they are doing. Also, termite and home warranty usually get shot down, but ask for them anyway.
Actually, thinking about this some more, I bet the buyer is allowing the seller to live there and giving them the option of purchasing the home back from the Vet since VA loans are assumable, which means that the owner (who at this point has bad credit) does not have to qualify for a loan and can just take over the Vet's loan. So this Vet has the home owner make the payments on the condo at a lower loan amount and probably makes a few thousand out of the deal. That's smart! (assuming that I am guessing right).
Anyway, good luck to you.
You have not gotten to the most important part. If the house is worth $200,000 and the loan is $350,000, the "short" amount is $150,000. On the very last day of the sale (to you), the seller is given a paper to sign saying that the bank will only allow the sale to close under the following condition: The bank will agree to "lose" $75,000 but the seller must sign an IOU for $75,000 payable over 20 years.
Not one seller in 100 agrees to sign this paper. The sellers want the bank to take the entire loss. The bank refuses. The sale is dead. You have wasted 90 days of your life waiting for a house you could never buy.
If you wait a few weeks, this house will be owned by the bank and the price will be much less than you offered. If you want this house today, the seller must tell you how much of an IOU she is willing to sign. If she says, Nothing.... you are on notice that there will be no short sale..