Wednesday, September 2, 2009

A Short Sale Saga

Some may recall, that during our house hunt, we pursued a short sale, twice. Here is a brief timeline and recap of the latest developments on it:

A flipper bought the home for $550,000 in March of 2007. At the time, she thought she was getting a great deal. With a first ($440,000 with National City and second lien for $55,000 with Countrywide). House was put up for sale in October of 2007 listed at $579,000 (then dropped to $550,000). She had worked out a deal with them to lower her payments while she tried to sell the house.

February 2008 - We submitted a written offer and negotiated with a seller on a short sale. Unfortunately, the bank would not approve the sale at our offer price (approximately 20% below asking). The seller did receive bank approval at 14% below their list price, and they immediately re listed the home (before we even responded that we wouldn't increase our offer price). We feel like we were played so that they could bring an offer to the bank and get a "bank approved" figure.
August 2008 - We resubmitted for the Short Sale that we tried for in February in the hopes that the bank would be more willing to negotiate now that 6 months have passed. We even paid $300 for an appraisal. The bank would not negotiate. We believe the home is now going into foreclosure.

According to Melissa Data and the Sacramento Bee Homes Sales Database, the home sold in June 2009 for $359,100. I was confused since it was way below what the first lien was.

I then checked the El Dorado County Assessors office, and the new owner is National City Bank (the first lien holder). The home hasn't shown up on the MLS yet. It was already in serious disrepair by the time we made our second offer (which was less than our first).

Side note: One part of this saga that really confused me was how an appraisal could come out at asking price....even though a home had been on the market for over 6 months at that price. A home is worth what someone will pay for it. If no one is willing to pay that price, then in my mind, it is not priced right. (Conversely, recent stories of homes not appraising for asking, even though there are 3 legitimate offers over asking....means a home is worth more than asking).

Having seen the home come through on both Melissa Data and Sac Bee, made me somewhat suspect of their data. It was my understanding their data did not include sales back to the bank. Thus any statistics (median price etc.) that are derived from these sources, will not be an accurate reflection of the market. Initially I thought perhaps the house was bought at auction, but the assessors office confirmed that the bank now owns the house.

I will be very curious to see how much the house actually sells for. I am guessing between 375k-425k depending on the shape its in (our last offer in August was $425,000 if memory serves me right).

Bank should have taken our first offer (pretty sure was more than what they were owed at the time). Obviously they had our best interest at heart ;) even though it didn't feel that way at the time.


Max said...

I'll be posting a similar story soon, with a different outcome. ;) I have to say I've been suspicious of these so-called "sales data" for some time. Supposedly, DQ and others run a cross check against foreclosure databases to eliminate bank repos from the county reported sales, but it's impossible to know for sure. After running my FIT sites for the last couple of years, it's been clear to me that the county data contains a mix.

At this point, I doubt the MSM statistics are fooling anyone. The market is now completely beholden to the banks, which now hold a vast majority of the active inventory.

On a side note, has anyone heard anything about tax lien sales yet? There are a few stories trickling out about banks refusing to foreclose because they want to avoid the property tax liability. I figure cash-strapped counties will be looking to take possession of these delinquent properties very soon.

Buying Time said...

Not sure, but I think the DQ statistics the Bee purblishes, and their database of home "sales", are different.

Max looking forward to hearing your story...and hope the outcome you are referring to means a nice place for you to raise a mini Max.

PeonInChief said...

Does anyone know whether tax liens are subordinate to first mortgages? I know that many condo associations don't foreclose on properties because the first lienholder is paid off first and the condo association wouldn't get anything.

RV6Flyer said...

Peon, everything is subordinate to the government.

husmanen said...

Max. I have not seen many counties going after delinquent properties, this might be due to the five year period they have to wait from the initial delinquency date. Here is a nice site from Nevada City explaining:

husmanen said...

Funny, I have a similar short sale story in EDH but was discouraged to bid by the seller's agent.

The house came out in late 2008 as a short sale, no one living in it, so I checked it out. It fit about 80% of our criteria. One loan by CITI for $616k, short sale price below that and my bid, after some analysis (rental parity, etc) was 25% lower than the SS price. Called my agent to discuss the house and a potential bid.

I was told by my agent that the seller’s agent laughed at my bid price and said they have ‘someone’ that is bidding about 2% lower today, if they wanted they could sell it NOW. After hearing that I said okay, this house will be bought by that ‘someone’, but I kept it in the back of my mind.

House never sold, started to go into disarray and it was finally foreclosed on. It recently came out on the market for 2.5% more than my potential bid last year. So far it is not gone PS and I will wait and see what happens. Not going to put a bid in on it, as we seem to have moved on in our expectations.

But it will be a nice comp setter.

Nicholas said...

A fantastic read….very literate and informative. Many thanks

short sale expert

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