benskins26 Posted January 30, 2011 Share Posted January 30, 2011 I've gotten some great advice from my fellow ESers over the years, and now need you more than ever! I'm trying to buy my first house, and it's a short sell. The property is in a historic area of downtown Raleigh, NC and was built in 1947. The neighborhood is old and borders some rough areas, but is the next "chique neighborhood" as the downtown continues to improve. Even the neighborhood just to the east by like 2 blocks, 5-10 years ago, homes could be had for 150k. Now they're all renovated and nice and the cheapest thing in ther is 350k. In other words, I think the house is going to appreciate considerably. But here's the conundrum- its a short sell, and our agent is the listing agent, and therefore can't really offer advice. We trust our agent- he knows the area very well, and in fact, once lived next door to the house in question, and is still friends with 2 owners ago. So he knows the house and market, and us, very well. In 2007 it was purchased for 230k. It was heavily renovated, and is in great shape (pending an inspection), other than it might need a new roof within the next couple years. The tax value is 190, and list price is 171,500. We looked at houses up to 200k, and nothing came close to this house. It's not even close. The realtor is in contact with the bank, the seller is out of the loop, and been gone for 6 months, though from all indications on the Internet, it's only been listed as short sell for 2 weeks. Someone tried to buy it at list price a while back, but financing fell through. So... My question is, is there something wrong? Should red flags be going off? Usually if something is too good to be true,it is. If it really is a good move, what do we offer? The bank has approved the sale at the current price, so if we put in an offer at that price and the bank gets it first, we have a good shot at it. But given that it needs a new roof, and we don't want to pay closing costs, should we build that into the contract? Also, anyone in the Raleigh area, the house is in the woodcrest/Lyons park area. Anyone know the area? Any advice would be GREATLY appreciated! I don't have anyone else to turn too. Link to comment Share on other sites More sharing options...
Burgold Posted January 30, 2011 Share Posted January 30, 2011 First, I'll admit that I don't really know what I'm talking about, but the roof is a relatively big deal. Has anyone gone into the attic? If the roof is starting to decay you should have someone check for rot, mildew and other stuff... replacing a roof can be pretty expensive, but so can getting rid of molds that have really worked their way in and make the house unhealthy. I'd check on those kinds of things and make sure I knew how much it would cost to address them. If the roof is in visible disrepair or is seriously wearing... that could explain thousands in the difference of the price. I had to get the roof changed on my townhouse and it was pretty expensive... and it was only a townhouse. I'm sure you've checked out the rest, but if you haven't... especially on an older house check it. Including the plumbing, wiring, water, etc. Best of luck and congrats on possibly getting your first house. That's a big deal! Link to comment Share on other sites More sharing options...
LD0506 Posted January 30, 2011 Share Posted January 30, 2011 While I do not know the area, we just finalized a short sale on our home last summer and all I will say is- be prepared to have it drag out far longer than you expected. Get an independent inspection from a reputable inspector and go with him, check out every conceivable part of it, and don't set your heart on it being some grand investment in the future. That's kinda what what got a lot of people in the trouble they are now. Link to comment Share on other sites More sharing options...
benskins26 Posted January 30, 2011 Author Share Posted January 30, 2011 Burgold- good point, that will definitely be in the contract. I think it's more of just a few shingles that need to be replaced, and a general update to current standards. The realtor explained it to us- his roofing guy estimated it at 4900 worst case scenario. But definitely, that language will be there, that we can retract an offer if need be. And LD, how long did it take you? The realtor estimated 60 days to close. Was that what your experience was like? Did you find that the short sell was a good deal? We can afford more, so financing isn't an issue too much, but I'd like to get a good deal Link to comment Share on other sites More sharing options...
chipwhich Posted January 30, 2011 Share Posted January 30, 2011 Brenskins, the only thing wrong is people aren't always in a position to wait it out. I know people who waited 4-6 months with no response from the bank. And the bank might just sell it as is. If you aren't in a hurry, there is nothing negative about a short sale....but you may never get it. Make an offer that affords you the ability to buy a new roof. Good Luck. Link to comment Share on other sites More sharing options...
TheDoyler23 Posted January 30, 2011 Share Posted January 30, 2011 I bought a short sale last year. I waited from April until July for a response from the bank after the seller "approved" the contract and settled in August. The house had been empty for more than a year with the seller moving overseas and having a friend "take care" of the house. The house was in better shape in April than August. The gutters hadn't been cleaned out and some of the downspouts had fallen off, causing leaks in the basement. The day we did the final walk through, it was during a MORNING thunderstorm, with no power, and a small lake in the basement. Take it or leave it. After buying it, it took several weeks just to dehumidify the place. Some advice: Everything home improvement and moving related will cost at least 25% more than you think. Especially if you need to but the moving supplies and home maintenance stuff. Get a home inspection, and consider getting separate Pest, Foundation, HVAC and Chimney inspections. Some will even do it for free or a nominal fee. Document everything. Understand that you cannot be in control all the time, and a good realtor can be a great advocate for you when it comes to dealing with the bank. My wife's Italian family was obsessed with us buying title insurance. I still don't know what it does/did, but oh well. Apparently it's a good thing in this ear of bank implosion. Consider opening a escrow account to pay your property taxes with your mortgage. The process will consume your life. Have fun! Link to comment Share on other sites More sharing options...
benskins26 Posted January 30, 2011 Author Share Posted January 30, 2011 Great advice. Even after all that, do you feel it was a good move? Did you get a good deal? Link to comment Share on other sites More sharing options...
Burgold Posted January 30, 2011 Share Posted January 30, 2011 It all depends. Is this to be a home or an investment. If you plan on living there for 10 years most of the stuff we are talking about can be dealt with and the price sounds in line with other homes in the neighborhood and may even represent a discount. If you plan to live there for a year, upgrade it, and sell it for profit... then you have to be much more conscious of the costs and stuff that's hiding... and there's always something hiding in a 60 year old house. Link to comment Share on other sites More sharing options...
benskins26 Posted January 30, 2011 Author Share Posted January 30, 2011 It'll be a primary residence. But only as a starter home- like 5 years. So it's both. I could buy a newer house with more amenities in the burbs, and it would probably be a "safer" purchase, but it won't ever make any money- it'll be worth merely what I build up from payments until ready for a bigger house. And those areas have no character. Just cookie cutter homes surrounded by Chili's, which becomes the highlight of the weekend. Not that there's anything wrong with that, but I'm just not ready to be "suburbanized" Link to comment Share on other sites More sharing options...
LD0506 Posted January 30, 2011 Share Posted January 30, 2011 And LD, how long did it take you? The realtor estimated 60 days to close. Was that what your experience was like? Did you find that the short sell was a good deal? We can afford more, so financing isn't an issue too much, but I'd like to get a good deal We first saw the house Sept '09, put in an initial offer in Oct. and finally closed July '10, and TBH I have seen many people that went through much worse. Overall? The experience doesn't look as bad in retrospect as it did in the midst of it. The previous owner was flaky as a croissant which made it worse but in the end it was worth it. We got the house for less than we offered at the start and even though it sat empty for a while and needs work to really make it ours, I'd do it again in a heartbeat. We are in a great location in a very old-fashioned "neighborly" neighborhood w/ incredibly pleasant friendly people around us, really important things that weren't expressly a part of the deal but that enhance it greatly. We bought to live here, not as an investment. ---------- Post added January-30th-2011 at 11:06 AM ---------- You say it is an older home, "heavily renovated" but that has serious roof problems. I think I might be concerned about how much weather/water damage there may be that isn't part of the roof, interior walls or framing, walls damaged by leaking that got covered up in a cosmetic reno, mold, etc., etc. Due diligence man, you're making a major commitment here so it behooves you to make sure ahead of time. Link to comment Share on other sites More sharing options...
Birdlives Posted January 30, 2011 Share Posted January 30, 2011 I'm an appraiser in the local DC area so I know nothing about your area as far as pricing. I would certainly consult another realtor about value in that area however. Even if its a friend, it's generally not great advice to trust only the listing agent's opinion. Short sales are generally close to market value sales, however, there is some reduction in price because things rarely go quickly and the bank will drag it's feet in approving the sale. This turns a lot of buyers off to the process and is a huge problem in the market overall. Most short sales in this are will take about six months before going forward. If the house is vacant, it's best to know who is taking care of the property as much can go wrong, and if the caretaker isn't invested, they could fail to solve small problems that become big ones. Poster aboves situation is rare, but certainly possible. Getting a home inspection is key. Remember, just because you put down a deposit, doesn't mean you can't pull out later. Almost any reason can be found to cancel a contract. Again though, it's best to make up your mind well before the final walk through. I bought a short sale in this area last year. The process took 6 months from contract to settlement. Fortunately, the house was occupied, so the owners were taking care of the place. Don't forget, because it's a short sale, you can continue to look at homes and even make offers. Short sale contracts allow the buyer to walk if they find something else. When we bought last year, we had contracts on two different short sales at the same time. It became a race to see which would get approved first. When one went forward, we pulled out of the other with no penalties. Things to find out. 1. Ask the listing agent if the list price is bank approved. Did they have a say in what the property was listed for? Many agents will not consult the bank prior to listing a property which can cause delays in approval. 2. Get your own estimate on the roof. Worst case scenarios tend to fluctuate. 3. Visit the neighborhood often, and at different times. See what it's really like. Check out the neighbors, etc. You dont want to be next to someone that will cause issues. As far as offers, again, I'm not versed in that market and these things tend to be different everywhere, but I would suggest if you don't want to pay any closing, you offer the list, with full seller subsidy. If the bank is involved they'll see that kind of offer as favorable as it's not dissimilar to making an offer 10-15K below list. Link to comment Share on other sites More sharing options...
chipwhich Posted January 30, 2011 Share Posted January 30, 2011 It'll be a primary residence. But only as a starter home- like 5 years. So it's both. I could buy a newer house with more amenities in the burbs, and it would probably be a "safer" purchase, but it won't ever make any money- it'll be worth merely what I build up from payments until ready for a bigger house. And those areas have no character. Just cookie cutter homes surrounded by Chili's, which becomes the highlight of the weekend. Not that there's anything wrong with that, but I'm just not ready to be "suburbanized" Well don't assume this purchase will make money in 5 years either. Over the next 5 years interest rates will rise, lending will still be tight, and the housing market will probably remain somewhat stagnant. Buy it because it's a place you want to live and large enough to not grow out of too quickly. Don't buy it because your assuming it's got a tremendous upside. If it did, other people would be making offers. Link to comment Share on other sites More sharing options...
TheDoyler23 Posted January 30, 2011 Share Posted January 30, 2011 Great advice. Even after all that, do you feel it was a good move? Did you get a good deal? We did get a pretty good deal and I would've bought it again. This house has a 25' X 25' addition with 11 windows, 6 skylights, a dry bar and an island that is just awesome for having people over. The Superbowl party is at my house this year! We got the bank to pay much of the closing costs because we had a lot of cash to put down. (That 50 grand in the checking acct was a beautiful thing!) We paid 215 on a 250 K listing and at time of purchase, it appraised for 261k. Other houses that aren't nearly as nice have been selling for more that what we paid. The wait also allowed us to save more money. Right after buying, we also spent a solid week cleaning everything. My mother was a saint and paid to have the landscaping that was untouched for several years ripped back. We also fixed and routed the downspouts properly. Not a drop of water in the basement! Since I have almost no home improvement skills, I'm using it as an opportunity to learn how to be handy. We're going to redo the basement this year, change some bathroom tile, move around some duct work, redo the landscaping and replace the AC unit. It should be interesting. This isn't my forever house, but definitely bigger than a starter type of place. There were definitely days where it didn't seem worth it, like when I got poison ivy all over my arms and legs and had to go to the damn doctor, but it's been a fun and interesting experience. Oh, and old wallpaper is so friggin difficult to remove! Link to comment Share on other sites More sharing options...
THEREALTOR1 Posted January 31, 2011 Share Posted January 31, 2011 Alot of great advice in this thread, not much more to add. The only advice I would offer to you is to point out that you're about to enter into negotiations with a financial institution, not an individual entity. While reviewing your offer, they will continue to market the property and attempt to solicit additional offers. They will more than likely make no effort to assign your offer "higher priority" simply because it may be received prior to other offers that they may receive, and in the end, they will ultimately accept the "offer" that contains the least amount of contingencies and, if applicable, is of the greatest value to them. I would run this scenario by my agent if I were you, just to be certain. If you were to submit an offer, would he be obligated to continue to market the property, and if applicable, submit additonal offers to the bank from other prospective buyers (eithers his buyers or from another agent), until ultimately the bank makes a final decision? If this is the case, I would take this into consideration when making my offer (taking into account that any potential prospective buyer who makes an offer after you is potentially going to make an effort to "outbid" your offer). I've seen it happen many times, and have even had clients lose out on REO's/shortsales, because of this exact scenario (simply being first in line in making an offer to the bank and eventually being outbid by other buyers who came into the process well after our offer had previously been submitted). Link to comment Share on other sites More sharing options...
benskins26 Posted January 31, 2011 Author Share Posted January 31, 2011 Realtor- great advice indeed. And you're correct, until the offer is approved, the listing agent has to present any offer to the selling bank. However, he is not allowed to tell us, or any other prospective buyer what the current highest bid is. So no one can knowingly outbid us based off what our offer is, and we subsequently, won't feel pressured to raise our offer just because another was put in. But, he's also going to change the listing to "under contract". And we put in the offer today. Full list price, which was already approved by the selling bank, minus closing costs (estimated at 1500), and minus 6000 for roof repair (based on worst case scenario by 2 roofer estimates), to be held in escrow until the day of closing, with the leftover from the repairs paid in cash to us(not sure our bank will approve this part, but we'll go for it, and remove it if we have too). I feel pretty good about it. And so does the dual-agent. Link to comment Share on other sites More sharing options...
daveakl Posted January 31, 2011 Share Posted January 31, 2011 Realtor- great advice indeed. And you're correct, until the offer is approved, the listing agent has to present any offer to the selling bank. However, he is not allowed to tell us, or any other prospective buyer what the current highest bid is. So no one can knowingly outbid us based off what our offer is, and we subsequently, won't feel pressured to raise our offer just because another was put in. But, he's also going to change the listing to "under contract".And we put in the offer today. Full list price, which was already approved by the selling bank, minus closing costs (estimated at 1500), and minus 6000 for roof repair (based on worst case scenario by 2 roofer estimates), to be held in escrow until the day of closing, with the leftover from the repairs paid in cash to us(not sure our bank will approve this part, but we'll go for it, and remove it if we have too). I feel pretty good about it. And so does the dual-agent. It is not under contract until the bank has accepted your offer. Link to comment Share on other sites More sharing options...
benskins26 Posted January 31, 2011 Author Share Posted January 31, 2011 It is not under contract until the bank has accepted your offer. My understanding (and I may be wrong), is that the house is under contract "with contingency" once the buyer (me) and the seller (not the selling bank), sign off on it. The seller is desperate to avoid foreclosure, so according to my agent they'll sign first thing, because it makes no difference to them in a short sale. Then we play the long waiting game with the sellers bank. But because both buyer and seller have signed the contract, it is under contract, but "with contingency" of waiting on selling bank approval. Link to comment Share on other sites More sharing options...
chipwhich Posted January 31, 2011 Share Posted January 31, 2011 My understanding (and I may be wrong), is that the house is under contract "with contingency" once the buyer (me) and the seller (not the selling bank), sign off on it. Well it's not under contract until the bank accepts your offer. The buyer really doesn't have too much say at this point. The bank holds the cards, unless the buyer wants to come up with the cash to make his mortgage current. Link to comment Share on other sites More sharing options...
TheDoyler23 Posted January 31, 2011 Share Posted January 31, 2011 My understanding (and I may be wrong), is that the house is under contract "with contingency" once the buyer (me) and the seller (not the selling bank), sign off on it. The seller is desperate to avoid foreclosure, so according to my agent they'll sign first thing, because it makes no difference to them in a short sale. Then we play the long waiting game with the sellers bank. But because both buyer and seller have signed the contract, it is under contract, but "with contingency" of waiting on selling bank approval. Sometimes they have a "Kick Out" clause, where the seller can still accept better offers. Does the listing have, "Contingent with Kick Out" on it? Link to comment Share on other sites More sharing options...
benskins26 Posted January 31, 2011 Author Share Posted January 31, 2011 Sometimes they have a "Kick Out" clause, where the seller can still accept better offers. Does the listing have, "Contingent with Kick Out" on it? No. Once the bank approves (if) our offer, all other offers are secondary. And I checked the realtors website regarding MLS, and it's called under contract with contingency from the time both buyer and seller sign until bank approves, then the status is changed to "pending" Link to comment Share on other sites More sharing options...
chipwhich Posted January 31, 2011 Share Posted January 31, 2011 No. Once the bank approves (if) our offer, all other offers are secondary. And I checked the realtors website regarding MLS, and it's called under contract with contingency from the time both buyer and seller sign until bank approves, then the status is changed to "pending" Actually the bank calls all of the shots. I am just trying to help you understand. The bank can choose to simply foreclose on the house or accept another offer. The MLS legalities and requirements to mark a property as under contract are separate from a house under short sale. Your agent is required to mark it under MLS as under contract based upon the rules of being a realtor. This however holds no contractual obligation with the bank in a short sale purchase. In the end, there are probably good odds that you will get the property. But the home owner can sign an offer for $1 or $200,000 dollars and force the "under contract" on MLS. It doesn't make it a legal contract, as it isn't his choice to sell at his determined selling price. Link to comment Share on other sites More sharing options...
benskins26 Posted January 31, 2011 Author Share Posted January 31, 2011 Actually the bank calls all of the shots. I am just trying to help you understand. The bank can choose to simply foreclose on the house or accept another offer. The MLS legalities and requirements to mark a property as under contract are separate from a house under short sale. Your agent is required to mark it under MLS as under contract based upon the rules of being a realtor. This however holds no contractual obligation with the bank in a short sale purchase. In the end, there are probably good odds that you will get the property. But the home owner can sign an offer for $1 or $200,000 dollars and force the "under contract" on MLS. It doesn't make it a legal contract, as it isn't his choice to sell at his determined selling price. Oh right- yeah, we're saying the same things. I know the bank is in control, especially since we're offering list minus roofing costs and closing. I just meant that the "under contract" designation works in our favor because it might discourage potential other offers. I know it would for me. Just increases my chances. And obviously, if the bank forecloses, we walk. Though I don't see what the benefit of that is to them if they already have an offer from us at the price they approved for sale, minus 2 stipulations totalling 7500. I know they'll have to reevaluate, but it's not as if I lowballed. I offered a reasonable price, I'm just not gonna absorb the costs of a new roof. If we can't work that part out, we walk Link to comment Share on other sites More sharing options...
chipwhich Posted January 31, 2011 Share Posted January 31, 2011 Oh right- yeah, we're saying the same things. I know the bank is in control, especially since we're offering list minus roofing costs and closing. I just meant that the "under contract" designation works in our favor because it might discourage potential other offers. I know it would for me. Just increases my chances. And obviously, if the bank forecloses, we walk. Though I don't see what the benefit of that is to them if they already have an offer from us at the price they approved for sale, minus 2 stipulations totalling 7500. I know they'll have to reevaluate, but it's not as if I lowballed. I offered a reasonable price, I'm just not gonna absorb the costs of a new roof. If we can't work that part out, we walk Don't get me wrong, I think you will end up with the house. Just don't be discouraged if you don't have an answer in a month or 3. The banks have a pile of short sales to process. Honestly I don't understand why they aren't moving quicker. The banks end up carrying this bad debt in a short sale, meaning they are losing money every month. Getting the bad debt off the books and the tax write off I would think would incentivize them to move faster. Link to comment Share on other sites More sharing options...
benskins26 Posted January 31, 2011 Author Share Posted January 31, 2011 Don't get me wrong, I think you will end up with the house. Just don't be discouraged if you don't have an answer in a month or 3. The banks have a pile of short sales to process. Honestly I don't understand why they aren't moving quicker. The banks end up carrying this bad debt in a short sale, meaning they are losing money every month. Getting the bad debt off the books and the tax write off I would think would incentivize them to move faster. I think and hope so too. Though I'm prepared for the long wait. The major sticking point is gonna be this roof. But we're willing to wait- it actually benefits us, as we can save more money, and we're still stuck in our townhouse lease. But thanks for all the advice everyone! I'll bump this as it becomes relevant! There's a lot of info about short sales, but not a lot of personal experiences like y'all have shared. Link to comment Share on other sites More sharing options...
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