Looking at a short sale property in Miami, Florida.

Seller bought house for 375k in 2004, but refinanced the property when value was high, now owes over 500K to two lenders.

House has been on short sale for 18 months, two executed contracts during this time frame but deal fell apart for some reason - seller told me potential buyers were not able to get loans but I think there may be other reasons.

They have been living free in this house for 18 months now, and during this time have let the house rot, no maintenance whatsoever so many things are falling apart, roof leaks, landscape lights, entrance electric gates, sprinkler system, pool leak etc etc etc...but that's not terribly important I can take that into account in my pricing and will know more after inspection. Lots of stuff to do and fix up but we like the layout and the house has good bones.

The trick is to know what the bank will take. The house is now listed for 375K.

During a visit to the property I asked if the bank has done a BPO on the property during the previous contract execution and if so if he cares to share what that amount is. The seller pulled me aside and told me that they have put some money into upgrading the home including some high hats, new stove, washer dryer, outdoor lighting...and he said whether I offered $1.00 or $600,000.00 for the property he does not care, he is not going to get a penny back from the bank because of how much he owes. However, he thinks the upgrades he did was worth 20K, and he wants to get 20K from me "on the side", and in exchange, he will disclose to me the rock bottom price the bank will take, a number he said he figured out from previous sellers sending contracts back and forth with the bank.

So basically his "upgrades" are worthless, he is offering to sell me this magic number for 20K, or another way to look at it, he is giving me an opportunity to buy it for 20K above the bank's bottom line.

Any comments?

Thanks in advance.

How did you acess the property? Do you have an agent? A good buyer's agent can explain the market and give you a value. No need to pay that seller!! Don't do that, if you don't have an agent-Get one. There are several good Florida agents that post here.

Have the Lender(s) agreed to NOT pursue him for the Deficiency?

That might cause him to care. Sounds penny wise and pound foolish.

I do have an agent and I am going to get comps and arrive at a fair market value, taking into the repairs and issues etc...it will have to be an AS-IS offer.

However the FMV is not the same as the price the bank will accept. As I understand it the bank will hire their own people and do a BPO and typically they have some rules that varies from bank to bank to accept a certain percentage of that BPO price. Some bank will take a reduction up to 50% off BPO but I have no way of knowing what that number is if I want to get a good deal.

However based on the fact that they have two lenders the chance of being able to walk away with a steal is slim...I think.

I do not know. From what I know this also varies from lender to lender here, some lenders will give the seller a waive and some reserve the rights to pursue for the difference. I don't know their situations. What I do know is even if the bank waives the difference, they may get a 1099 from the bank at the end of the year to pay taxes for the difference the bank written off as a loss which to them is a "gain".

James this seller is full of crap and not motivated. They have been riding the free rent wave for 18 months.

The seller is trying to work a dirty deal to pocket some cash.The on little problem is both you the buyer and the seller will sign documents at closing stating the seller is not receiving proceeds from the sale on the HUD-1 OR outside of closing. If the bank is taking a loss the seller will not be paid a gain.

The last thing you want to do is be involved in a fraudulent transaction. I don't know this deal but for it to fall apart multiple times before I don't believe this seller. I think what happened is the seller found out both time he will get nothing from closing so he opted for free rent instead with no mortgage.

In a short sale unless the seller signs off you have nothing.

My gut tells me you need to move on from this one. No legal advice.

I am inclined to walk away from this.

Like super realtor said, this is fraudulent. I don't think I can write this into the contract as an "additional seller consideration" addendum, this has to be done off to the side under the table and it's just not cool.

Secondly, them having two lenders means it is highly unlikely I will get a steal out of this and be able to satisfy both lenders.

Thirdly, they have previous buyers walked away, how good a deal can this be?

Forth, it is possible, when the seller says they want to sell me these "fixtures and appliances" for 20K, they are also saying if I don't give them 20K off the side, they would trash the house and damage these items...and I do know a lot of people are getting trashed and uninhabitable homes via short sales and foreclosures.

Sounds like the right decision. Before throwing in the towel, you may want to discuss the situation with your Attorney to see if there is a safe way to further the Transaction without participating in a conspiracy to commit Bank Fraud.

You now know what kind of character you'd be dealing with. These are desperate times and otherwise honest people are drawn to consider activities that would not cross their minds in normal times. We all have to adopt a more defensive posture.

There are plenty of other "good deals" for you to consider without having to worry about that "knock on the door" that might come at a later date.

(Forth, it is possible, when the seller says they want to sell me these "fixtures and appliances" for 20K.)

What the seller is trying to do is disguise a PAYOFF as a "bill of sale" of personal property. This is a common scheme of investors to try to do a work around from paying the seller no money at closing on a short sale. Years later the government can come after all parties for a fraudulent transaction. This doesn't mean many investors do not take the chance day in and day out.

The seller has no interest in selling. To me their credit is already trashed so unless they get an illegal payoff to sell than they come out much better with FREE rent and eventually when it does foreclose they will get a "cash for keys" to vacate the premises. They could also file BK right when you get the short sale approved to by another 6 months to 1 year of time to make no payments. Many people in short sales have true hardships and are honest but some are gaming the system.

This seller sounds like a gamer and I really don't think consulting an attorney will keep this seller in line. The bank does not own the property so the seller has to sign off on everything and without a payoff they are not moving.

There is too much lower hanging fruit than to keep jumping high reaching for the rotten apple.

Good luck.

I'm glad this topic came up because I have a question regarding the sale of the sellers "personal property" in the house. I have a seller that was told by the bank that he could sell his appliances, light fixtures, furniture, ect since he was the owner of record and he purchased these items out of his own pocket. He wants to sell these items to a buyer but do a seperate transaction after closing. I have spoken to a couple attorney's regarding this and they say he has the right to sell his items. I'm confused with this because of the arms length doc. you need to sign from the bank now. Do you need to disclose to the bank that the seller is selling some of his belongings to the buyer?

If it is a legit bill of sale there is no problem but if it is away for an investor buyer to pay cash to the seller to go along with the short sale then you have to worry about fraud. Just make sure you get all the proper disclosures signed to protect you so if they comeback later you have your bases covered.

Many will tell you things verbally and then say they never said it so get everything in writing and signed or don't move forward.

In speaking to the FAR attorney hotline today they said the personal item transaction must be disclosed to the bank. I forwarded this info to my seller and am leaving it up to him if he wants to proceed with the short sale. The seller really needs the money to move on with his life,get an apartment, and just live in general. Since the common denominator is that he is selling these items to the buyer of the home he needs to disclose. Wish he would have sold them at a garage sale that would have made my life a lot easier..

LOL @ the garage sale comment. It sure would have been easier on the whole process. At this point, I would just recommend getting everything in writing (i.e. bill of sale) so that there is nothing left out.

This story sounds a bit strange. There is no logic for the seller to withhold the bank's bottom line price to the buyer if they are aware of it. If the seller truly wants to complete a short sale, they should be advertising the hell out of that bottom line price to any buyers so they can move forward with a good buyer and complete the short sale. On the other hand if the seller wants to legally sell some of his belongings in the property, he has the complete right to do so with a bill of sale. But these should be kept as two seperate issues and not to try and squeeze a buyer for more money just to do the short sale.

Not legal advice. Seek an attorney.