4 Reasons why you dont want to send the highest offer to the Bank

If you are a seller attempting a short sale with your lender there are a few reasons why it does not represent your best interest to send the highest possible offer to the Bank.

1.The lender is not your friend. This is a negotiation.

You never start the negotiations and expectations high, and then try and back them down later. You want to start the negotiations low and let them feel like they are doing their job and mitigating their loss to a perceived reasonable amount, based on the first offer you send in , and the banks BPO.

The bank is not going to give you more time, postponing a Trustee sale date because they think you tried to be nice and send the highest offer in. In fact the exact opposite thing will happen. They will think maybe because they saw a higher offer once they can get it again, even if they have to foreclose, re-list the property and get it themselves.

2. Time is of the essence! You want a 15 Day sales price approved, NOT A 90 day price.

If your  buyer defaults and you need to find a new buyer while facing a Trustee sale date you need to be able to have an approved price that is attractive enough that you can find a new buyer within 10 to 15 days. That buyer will need to have enough incentive to close on time.

3. Buyer Non-Performance.

If most of your offers are 30K or 40K less than your highest offer and you send the highest offer to the bank and that buyer doesn’t perform, you will have a very difficult time getting the bank to accept less than the previous offer you sent in. In the banks mind you got that offer once, you should be able to get it again, and time is not on your side when in foreclosure. It doesn’t look good for the loss mitigator either to have a higher offer initially and accept a lower offer later. Also, beware of retail buyers who have 15 offers on short sales. They go and make careless offers thinking that price will get them into a short sale in 30 days or less, this is simply not the case. Instead they set unreasonably high expectations for the lenders, end up not closing on any of the offers and make the situation for all 15 sellers much worse.

4. You have a higher risk of signing a Promissory Note when you send the highest offer.

Suppose you send the highest possible offer in to both the first and second mortgage. The first mortgage approves your offer and the second mortgage does as well but they want you to sign a note to promise to repay 10K over the next 2 years. Even though the offer you sent in was HIGHER than their BPO, they still want the promissory note because they say that it is in their written guidelines to require one. What do you do? The buyer doesn’t want to pay it because they already sent in the most they were willing to pay. Most of the time in this scenario you have no choice but to sign it. If you had sent in the offer for 20K less in the first place and the 2nd mortgage wanted a promissory note for 10K you could have easily asked the buyer to pay it and still sold them the property for 10K less that what they were willing to pay. There are dozens of similar variations of this situation involving HOA dues, 1st mortgages, tax liens, etc..

The bottom line is the more of a margin you have to fix promissory note problems when the approval payoff comes back the better. If the payoff comes back clean than you have no problem. If comes back with some issues than you are in a much better position to increase the price or negotiate someone else pay it instead of the seller. I have never seen it work in the reverse order.

5. I have added a reason 5. =) Declining Market Values!

Our Market is still decling and you need to start getting a price approved that will still be a wholesale-10 day price in 4 to 6 months or longer. Prices have dropped more than 10% in some areas in less than 6 months. Correcting the banks inflated opinion of value is more difficult than influencing that opinion appropriatily in the first plae.