Chico Short Sale and Foreclosure Madness

 by Mike Wiegert

The two really hot topics in the Chico real estate world today are “short sales” and foreclosure sales.  “Short sales” are pre-foreclosures.

Usually, the beleaguered homeowner still resides in his or her home and is several months in arrears in the mortgage payments.  Unable to see an exit strategy from this disastrous situation, the desperate homeowner lists his or her home well below what is currently owed to the bank. Both the homeowner and the agent hope that in the event of an offer, the bank will approve the offer by offering a discount of the amount owed by the mortgagee and also approve associated costs of the transaction.

This hope is sometimes just wishful thinking as banks do not approve all “short sale” offers that are sent to them.

In fact, nationwide, the frenzy to buy homes is at such a great profusion that banks and asset manager’s desks are literally clogged with offers, many of which are well below what the mortgage holder would be willing to accept as a payoff.  Buyers that are understandably frustrated by submitting offers with no response or faced with  an everlasting wait period  are really just victims of the unrefined system many banks use to handle the excessive numbers of offers they receive.  Many of these offers are frivolous attempts to buy real estate by investors seeking an unrealistically low  price.

A common problem with submitting a “short sale” offer is simply just the manner of how it is presented to the bank holding the mortgage.  Even fair market offers are difficult for the mortgage holder or asset manager to come to a decision on without the necessary tools to evaluate the offer and subsequent sale of the  property.  Many agents make the mistake of submitting the standard California Association of Realtors Purchase Agreement and nothing more.  Big mistake!  The banking powers that be have nothing to work with.  Important attachments to this offer begin with a hardship letter from the Seller explaining in plain language why they are unable to continue to make their payments and as a result feel forced to sell their home.  This letter in itself is not enough.  The desperate Seller must prove to the mortgagor that the content of the letter is true.  Financial statements, full tax returns, pay stubs, bank statements and any available creditor letters included with the letter will definitely influence a banker or asset manager struggling whether or not to approve your offer.  Additionally, the person handling your case may live in Baltimore, MD and have no idea what a 3 bedroom, 2 bath, 1,500 square foot house in Chico, CA is worth.  Minimally, a BPO (Broker’s Opinion of Value) if not a certified fee appraisal should be included in the package that accompanies your offer. The point is, you don’t see your attorney going into court without substantiating evidence to plead your case.

If you want a successful short sale, you need to also plead your case with any documentation you can provide that will support your argument in favor of a mortgage discount.

Much of what I’ve said here applies to foreclosure sales also.  Many lenders and the asset managers that represent mortgage holders just don’t care about the “time is of the essence” clause or expiration date in your offer.  In fact, many mortgage representatives purposely price foreclosed homes well below market value and wait for a flood of offers.    Banks know that if you have several would be homeowners waiting to get a response to their offers, this creates desire and there is a tendency for at least one of the more emotional buyers to raise their offer above what they may think the other buyers have offered.  Unfortunately for all, this really does happen a lot of the time.

My advice: In a “short sale” or foreclosure transaction, don’t play around.  Offer the most that you are willing to pay for the home.

If you don’t get a response in a reasonable amount of time, go on to another property and make a bona fide, realistic offer.  Otherwise you may find yourself competing over and over with little or no results.

Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
Tomato University Graduate Real Estate Tomato

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