I was recently asked the same question by two of my clients here in Statesville NC, that concerned short sales and foreclosures and I thought I would share with you the answer as it may be helpful during your home search.
QUESTION: Why do lenders counter an offer higher than the current list price on distressed Properties in Statesville NC?
ANSWER: My first response would be “Who knows why lenders do what they do!” but the true answer would be this: On a short sale, the lender is agreeing to accept less for a property than what is currently owed on it to prevent the home from going through the entire foreclosure process and avoiding some cost for the lender. The list price is set by the Listing agent to attract buyers and get an offer to send to the bank. Most lenders do not “pre-approve” the sale upfront and have no idea what the current list price is until you send them an offer. Once an offer is received, it is sent to the loss mitigation department along with the listing agreement, seller financial documents and hardship letter, recent comps and many other things for the lender to review.
The loss mitigation department then contacts a local agent to do a Broker Price Opinion of value and once that is completed the entire file is sent to a bank negotiator. The negotiator then makes a decision based on the information they have as to whether they will accept an offer or counter the offer. They will review the estimate HUD Settlement Statement that has been sent to them and make a decision based on the “net to the lender”. Often times, they will counter much higher than the current list price because they are not willing to take a large loss. I have seen more times than not, this usually comes back to bite them in the butt because the buyers back out due to the delays. The house then sits on the market for a extended amount of time and it eventually forecloses anyway. I have seen many times, the house come on the market after foreclosure for an amount less than the offer they received during the short sale period. I say…..Serves them right for being so difficult! What is important to know is that a Short Sale transaction is very difficult and lengthy- so be prepared.
Occasionally on foreclosed homes, the lender will counter higher than the list price that THEY set just to try and get a higher amount but this tactic does not happen often and when it does, the lender usually looses the buyer. I will say that closing a foreclosure is much easier and faster than a short sale. If you have other questions you would like to have answered, feel free to send me an email and I will post it here for you or on my blog.