Dear Investor: Your Servicer is Losing Your Money

 

An open letter to investors regarding foreclosure versus short sale.

Dear Investor:

We are writing this letter to let you know what is happening to the short sale on the property for which you are an investor. We do not believe you are aware of the short sale negotiations because the foreclosure sale date you have set has a lower opening bid than the amount of our valid offer. There is no possible way you can be aware, because as a smart businessperson, you would surely want to sell the property for the highest possible amount so that you can retain more profit on the sale of the home. We also believe that you would rather do a short sale than a foreclosure because of the high costs associated with the foreclosure which you will bear, as well as the negative impact it will have on property values in that area to include other properties for which you also are the investor. You also would not want to chance the home not selling at foreclosure auction when we have a valid offer because that would mean you have to maintain the property for several months and higher another agent to find other offers, when you could have had the property sold already.

So that you understand in full, here are some examples of homes that went to foreclosure when we had a valid offer to purchase the property:

Example #1: Citimortgage asked for a minimum net profit of $188k on a property. We had a valid offer with a net of $130k. The negotiator insisted that the investor would not accept a single dime less than $188k and they said the investor refused to wait for a value challenge on that. The opening bid for foreclosure was $129,985.10. The property sold for $130,500. What happened to the $188k minimum net that the investor would not take a dime less than?

Example #2: Wells said that the investor required a minimum purchase price of $475k. We had an offer at $325k and sent in a value challenge, complete with comps and CMA proving that property was actually worth less than $325k. Wells said investor would not budge below $475k. We listed the property at $475k for one full month – all the buyers walked and we had no requests for showings. We informed Wells of this, and they said the investor refused to take anything less than a $475k purchase price. The opening bid at foreclosure auction was $341,280. The home did not sell at auction; it reverted back to the beneficiary…exactly as we told Wells what would happen.

Example #3: PNC says that the investor won’t close the short sale for less than $158k purchase price. We have valid offer of $145k. PNC also says that they won’t postpone the sale date (despite it being the very first sale date for the property) because investor needs approved short sale first. The investor placed an opening bid of $108,441.90 for the foreclosure auction. We have notified the investor of the negotiations and asked them to look into why they would set an opening bid for $50k less than what the lender says they will accept…and why they would sell a home for over $36k less than our current offer. Hopefully the investor will come to their senses in time now that they have been made aware of the negotiations.

Therefore, given the examples above and the severely negative impact that foreclosures have on you, we can come to no other conclusion than you cannot possibly be aware of the short sale negotiations that financially impact you when you decide to sell a property at foreclosure auction.

Sincerely,

Concerned Real Estate Agent

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Contributor, designer & admin for JohnHart Gazette.

About JohnHart Real Estate

Contributor, designer & admin for JohnHart Gazette.

3 comments

Concerned Real Estate Agent:
I think that you need to look into a couple other factors to understand the banks actions i.e. mortgage insurance and how a deficiency judgement can be enforced in your state. You will likely have a better chance at getting a bargain on a home that was purchased as an investor property.
Your studied agent,
Arthur
P.S. The investors are not crazy, they are just getting bailed out by FHLMC and FNMA who removed the ceiling on how much bad mortgage debt they will forgive/buy back.

I have been studying this “irrational behavior” since early 2008. I have to conclude that until the banks are forced to disclose the investor’s name, and produce the original “blue penned” promisory note to the homeowner in default, thereby giving the parties an opportunity to negotiate directly with each other and cutting out the servicer, all we can do is guess why. I have two guesses: [1] the investor has already been paid off with a credit default swap, AIG insurance, or mortgage insurance and they could care less–let the servicer get the forecloser money as profit. [2] the investor is paid off as above but the loan was sliced and diced so many times that no one can find the promisory note! In this scenario, it’s alot safer to foreclose and the new buyer starts with a clear title. Can you imagine if the servicer short sells the home and a couple years later, someone shows up with the original note? Just my two cents worth!

Hi Brian,I have enjoyed waincthg your videos these past few weeks.I did buy Nathan’s course to implement it in suburban Philadelphia.Are you availaable for consultation or cooperation in short sales that I locate?Ray Maimone

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