San Diego Housing Bubble News and Analysis

The con is you piss the owner off. With them losing the place already, everything is about timing. I have read previous posts about negotiating directly with the bank if you can find out who that is before others do, you would have the advantage. It will all depend on how good a salesman you are. Good luck to you.

If it goes back to the bank you will likely be facing a bidding war as an REO property. It seems like all the REO's coming on the market get intentionally underpriced to create competition. If you can get to the owners and have them agree to a short sale you stand a better chance of getting it and at a better price. Alot will depend upon the lender(s) involved, loan amounts, recourse loans or not.

The plus of them doing a short sale is you can probably get them another 3 to 6 months of free rent in their home.

Send me a private message with the address and I can give you more specific advice if you want it.

xbox there is definitely no harm in sending them an unsolicited request to purchase. I know people who have literally knocked on doors. I left a note for someone in scripps a year ago when I was looking. Many times the sellers are actually trying to do a loan mod either by themselves or using an attorney. If there is a NOD on it then yes any realtor can help you find the basic information. If you really want to arm yourself with alot more, go downtown and pull up all the records at the county recorders. There may be other liens, IRS and otherwise that will be useful for you to know about.

Personally I have never heard of a homeowner and a buyer working out a short sale with the lender in a FSBO type of manner. It may indeed be possible, you never know unless you try it. The first hurdle though is approaching the homeowner to see if they will entertain the idea.

Denial runs in many directions and many homeowners in deep trouble with lenders tend to deny the situation. Even when valid unsolicited offers come along they blow them off with some delusional attitude like they will be able to keep the home and everything will be alright.

What about a property already owned by the bank (bought at auction months ago) yet the owners or tenants are still in the house living free? Is it possible to get them out and the house via speaking to the bank about it?

Thanks for the replies so far...

sdrealtor, I not too worried about a bidding war on this REO property. This is in a nice coastal area, and things aren't nearly that hot here. Now if the bank were to low ball the price, yes it would get a bidding war, but the few REO's that have occurred in the over a mil range nearby have not been low priced and in several cases the banks had to lower their asking price before getting to pending.

My hunch is that this owner is just doing what they can to ride the system for as much free rent as possible. I think they've already had a loan mod and redefaulted on that. As mentioned, the auction is scheduled for next month. My worry is that if I go to the owners and encourage them to short sale to me, they might just use this as a ploy to drag out their free rent situation. Then four or five months from now they cause the short sale to fall through, and viola, they've ridden the system for another four or five months. (Although I'm a bit surprised that they haven't even tried to short sell it already)

Also, if we do a short sale and they don't move out, what are my options? Do I then have to take them through the eviction process? What if they trash the place while I'm trying to evict them? If I'm leery of the current owners, wouldn't it be better to let it go to the bank and let the bank evict them? In a short sale, do you not go to escrow until the current owners are out and you've done a final walk through?

Thanks again for the responses

XBoxBoy

All of that could be arranged but as SD R said the key will be the selelrs willingness to go forward. If I knew more about th eproperty, lenders, loan etc I could give you some info to use with them if you wanted. I have seen it done before.

xbox -

I am a bit curious about the question if you do a short sale and they don't move out what are your options...

In any transaction, short or not short, if the sellers have not vacated by the agreed upon date of occupancy for the new owner then yes you go through a standard eviction process, (notice to quit and unlawful detainer)... If they trash the place while you are in the process then you will need to try to sue for damages at a later date.

Again, I would not make this an exception case, short sale or no short sale your question about an uncooperative seller who retains occupancy after title has transferred to your name is independent of the type of sale.

As with any short sales you do not START ESCROW until the bank has received the paperwork and accepted the short sale offer. This will take anywhere from a few weeks to many months. The SELLER LIVES THERE while this occurs. If the bank does approve the sale THEN escrow opens, you send escrow your deposit, and you START your due diligence. When escrow opened your escrow period started. Loosely speaking 30 days after escrow opened it should close assuming everything went to plan including your financing. At the close of escrow after the county records the sale you get the home. The final walk through occurs within 5 days of close of escrow and is used to essentially verify the home is not trashed. Again if it is trashed it becomes complex but not unsolvable. Honestly though, I believe the hard part is getting a deal done and you are putting the cart well ahead of the horse.

I think that's the answer I was wondering about. In a short sale, do you have a typical escrow, where you don't close until the previous owners are out. And if the previous owners refuse to leave can you refuse to close. (I know that in any type of sale, there can be an agreement with the previous sellers that they won't vacate until some time after the sale. But personally I wouldn't agree to that with someone who I feel has been doing all they can to get free rent.)

And I do understand that the hard part would be just getting a deal done, but that's the part I already know, so I don't have questions about that.

Thanks again,

XBoxBoy

Exactly, I would just make their vacating the property prior to COE part of the contract if you think it would be a problem. I've never had sellers holdover on short sales for what it is worth.

The real chalenge is twofold. Will the sellers go for it? Equally important, will the lender go for it which is what I offerd to help you with.

I think you should stay away from short sales. They are just too messy and slow for any perceptible benefit in this market. If you focus on REOs, you can do much better. In fact, I suggest, focus ONLY on REOs (and not even regular sales). If everyone just bought REOs, the short sale mess will resolve itself fast. Banks will be encouraged to convert more of the defaults into REOs and put it on market faster. Prices will also find their natural equilibrium levels much faster.