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Buyers Are Looking at My Loan Balance!

Buyers Are Looking at My Loan Balance!

One of the market realities I go over with potential sellers in the Orcutt CA, Nipomo CA & Arroyo Grande CA real estate market is the fact that once their home is put on the market, everyone is going to be looking at their loan balance.  During the boom, buyers seemed less concerned about what sellers were making - maybe because they expected to make more.  But now, even on short sales, buyers want to know what the seller paid and what loans were taken out on the property.  Of course, your exact loan balance doesn't show up in public record, that's private information between you and your lender; but in Santa Barbara County and San Luis Obispo County, typically the original loan amount will show up and buyers can and will make a guesstimate from there.  That's right, they are looking directly at your loan balance.

Do you feel violated? 

This can be a big issue for sellers, especially when what they owe is close to their contemplated list price.  Buyers may think that your home sale is a distress sale and believe you are trying to squeeze out of a home that is about to go underwater.  Just last year, I had a listing where the seller was contributing funds to avoid a short sale. We hadn't been on the market long before receiving a low offer with a "Short Sale Addendum" attached to it.  I guess it was the buyer's nice way of saying "I've seen your loan balance."  Unfortunately, her agent had taken the time to look up my client's loan balance, but hadn't bothered to read my agent remarks indicating that "seller to contribute funds to avoid a short sale."

Sellers should also know that real estate agents are required to disclose if a real estate listing is a short sale.  This is a current hot legal topic because of course some less-than-forthright real estate agent somewhere didn't disclose it to a set of buyers who sold their home relying on a purchase contract that did not disclose that the sale was a short sale.  (Of course, the buyers didn't read the preliminary report which also had the lien information.)  And, of course that transaction did not close and I think the buyers were left homeless until they could find a better real estate agent.  So, as a home seller, you should also expect that the real estate agents involved in your transaction will be nosing into your loan balance too. 

Even on a short sale listing, many times buyers want to know that a significant amount of negative equity is being absorbed with the short sale - of course what you paid and what you owe doesn't tell them that - but they are still going to look.  And on REOs, buyers want to see the current tax records for a property too.  In fact recently, I had a buyer who wanted me to chart the sold price history for a REO condo since the unit was built in 1978.  After reviewing that info, she felt like the 1989 sales price was the price that was fair.  Seriously.  After she completed her analysis, I asked her if she also wanted to look at the comps.  LOL.  They just happened to be lower.  Thank goodness she had a good agent.

Copyright © 2011 Tni LeBlanc * Buyers Are Looking at My Loan Balance!*

•  This blog post offers no legal advice.  Nothing in this blog article is intended to solicit listings currently under contract with another broker.  Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement.  Not affiliated with the government.  A lender may refuse to change a loan.

Tni LeBlanc, Broker
(805) 878-9879 mobile/text

tni@mintprop.com
www.MintProp.com
CalBRE #01871795

Comment balloon 29 commentsTni LeBlanc, Realtor®, J.D. • March 20 2011 08:47PM

Comments

In GA, the original mortgage amounts are not very difficult to find.  I am seeing agents using that info more often now to make sure any potential short sale is properly identified.

Posted by Rodney Mason, FHA 203(k) & HomeStyle Renovation-AL,FL,GA,TN (On Q Financial) over 7 years ago

I am seeing lots of clients asking me to research loan balances of sellers.

Posted by Adam R. Cohn, We actually get mortgages closed FAST! (STANDARD MORTGAGE CO.) over 7 years ago

Tni,

As soon as my client is condering a property, I always found out what the seller paid for the property and estimate what they owe. I contact First American Title, and they provide a detailed property profile. In addition to finding out what loans are on the property, I look for adjustable rate riders, to see when the loan resets, and the terms associated with that loan. The seller may be facing a huge increase in monthly payments, and knowing that, a quick close helps the negotiations.

Posted by Michele Norris, ((( Buy or Sell, Call Michele ))) Lake Tahoe NV (Crystal Realty - Incline Village Nevada ) over 7 years ago

Hi Tni - Thank goodness you were/are that good agent... I think it is imperative to look at everything before contemplating a Short sale.. you are trying to see if the Bank will accept it.. but also need to know what the sellers owe.. I just heard a horror story.. a couple informed me they were in contract for a short sale, and discovered at the 11th hour that the sellers had given their house as collateral for a personal loan.. and it only came out late in the game... there are no guarantees but knowing everything you can certainly makes you feel like you  tried..  Best, Gay

Posted by Gay E. Rosen, As Real as Real Estate Gets! (Julia B. Fee Sotheby's International Realty) over 7 years ago

Tni~ in our area it is automatic to verify loan balances. For REO & short sales clients are excited to learn the original price of the home. They want to know they are getting a great deal. (Hope your comps met the 1998 sales price. -;)

Posted by Kristal Wilson, ~Your New Construction Specialist~ (Strategic Sales and Marketing) over 7 years ago

Rodney - Very true that information is being used all the time now.  Sellers should be prepared for that fact.  They are going to look at your loan balance.

Adam - I am as well.  In fact almost every client asks these days.

Michele - Wow you really like FATCO.  I do too -- maybe they are due for a shout out!  That is a very detailed analysis you do for your clients they are lucky to have you.

Gay - Yes, it is important to get that prelim soon on a short sale.  Ideally while you are still waiting on short sale approval.  You can see a lot from that.

Kristal - Actually the comps were lower.  LOL.  (I'm going to add that to the post) Very funny for her to discover because of course that's where I wanted our conversation to start.  Those prices are so meaningless anyway.  Like, "let's look at what people paid when money was hanging from trees." 

 

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

Hi Tni. Great post! Most home sellers have no idea that some of their personal info is public… and easy to access. (And your buyer was no doubt happy to learn that the comps came in lower than her calculated “fair asking price.”)

Posted by Bill Burchard, Broker, Realtor, Representing Buyers and Sellers (3B Realty: 951-347-3818, CA) over 7 years ago

Hi Tni - What a seller owes has nothing to do with fair market value.  It is just the amount that has to be paid in order to give the buyer a clear title.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) over 7 years ago

Tni,

Market value is the key, of course.

Before listing appointments, I look at original loan balances, HELOCs, etc, and ask prospective Sellers, "Can you afford to sell your home."  And I tell them I will be far from the last person to pull that information.

I look at them for my buyers, but don't consider them very meaningful, unless there is doubt created whether the Seller can actually Sell.

Posted by Mike Jaquish, 919-880-2769 Cary, NC, Real Estate (Realty Arts) over 7 years ago

Tni - I often include that in my listing presentation - as well as in the MLS worksheet in Florida - the board has a criteria where you came put in the loan amount of the seller - everything is a value to a future buyer.

Posted by Broker Nick, Broker Nick Relocation Broker Service (South Florida Real Estate & Development, Inc.) over 7 years ago

The main issue is what the property is WORTH in the present market!

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) over 7 years ago

I don't see how the price paid or the loan balance have any bearing whatsoever to the value of the home as a short sale.  It's as if the buyer wants to make sure the seller is going through as much pain as possible.

Posted by Bryan Robertson, Broker, Author, Speaker (Intero Real Estate) over 7 years ago

Tni I recently started looking at mortgage amounts and dates.  I will plug the mortgage amount in to loan calculator, estimate what the rates were at the time and subtract the number of payments.  It's not scientific by no means but it doese give me a good idea of home owners postion.

Posted by Joe Kenny, Better Than Your Average Joe (Realty Executive Midwest) over 7 years ago

Bill - Yes, she was very pleasantly surprised and thanked me exceedingly for remembering to distract her from her own analysis.  And yes, sellers can get upset when they learn that EVERYBODY knows or has to know what they owe on their house.

Conrad - Very true, especially these days.  What they owe does not correspond. They should be looking at the comps and where the current market is.

Mike- I too give the information to buyers and often it is not very useful.  But, still they often want to see it.  So, sellers should know that buyers are going to look.

Nick - It is optional in our MLS to put in the exact amount of the loan balance.  Most of the time I don't fill it in but some agents do here.  However, they can easily click on the tax records field and see the loans against the home.  So, yes people are going to look. 

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

Ruthmarie - I agree.  It often doesn't correspond at all - but the buyers are still going to look at it these days especially.

Bryan - I hate to admit it but I think many times you are exactly right.  But I will say that it is probably because they don't want to put themselves in a bad situation too so I can understand.  Often the information is not helpful at all though.

Joe Kenny - You can usually get a good idea from doing that.  With so many interest only products being sold during the boom, you'd be surprised how many people owe exactly the same amount now as when they took out the loan.

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

Tni - I am a big fan of my borrowers finding out as much as they can about the property they want to buy.  There is so much public info out there on most properties and most buyers just need to know where to go to find it.

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) over 7 years ago

Donne - It is a good idea for buyers to know everything they can.  But, when I show most buyers the loan info/sales price info it is not very useful in my market.  If the people bought in 2004-06, the prices and loans are about 50% higher.  And the market is still competitive so it is more useful for them to look at the comps.  Nonetheless, sellers should be aware that buyers are looking at their loan amounts and what they paid for the property.

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

With all of the technology available, most buyers are coming into the market far more prepared than in years past. 

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 7 years ago

I've thought about the process and when I see that it's a short sale I stay away from it....Until I can gain better knowledge I wouldn't dare have my client left in a situation such as you mentioned.....I love my clients....and I wouldn't want to be done that way...I think that sometime Realtors just do what they do to get paid but when you are not educated as you have mentioned...understanding the process bad things happen..I wouldn't want it to look bad on my end!

Thanks for the post although I haven't encountered this type of buyer yet, It prepares me for those to come!

Posted by Gladys Webb (Avast Realty) over 7 years ago

Tni,

Sellers who are offended by buyers agents doing their job are directing their anger at the wrong person. It wasn't the buyers agent who made their original loan documentation available in the public domain.

I use every legal opportunity at my disposal when I'm working with buyers...or sellers. I'm quite sure you do too.

Rich

Posted by Richard Iarossi, Crofton MD Real Estate, Annapolis MD Real Estate (Coldwell Banker Residential Brokerage) over 7 years ago

Tni....Since our real estate records are all online, I almost always look up that information for my buyers - how much they paid, what the mortgages are, etc. It helps not just in a short sale situation but it gives me an idea of where the Seller might stand. It's not definitive....just part of the overall package.

Posted by Christine Smith, Exclusive Buyer Agent & Attorney, Canton, MA (Buyers Brokers Only LLC - www.BuyersBrokersOnly.com) over 7 years ago

I have to say I agree with Bryan #12. Loan balance has no bearing on market value. The only loan balance the buyer should be concerned with is if there is a junior lien. Most 2nd's are expecting 10% for short payoff. 

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) over 7 years ago

Kathy - So true.  Many come to my office with that information already - they don't need me to look it up for them.  I think that is good - more transparency is good for all.

Gladys - I wish I could say the same.  My market is full of short sales.  You can't avoid them so you have to jump in and figure it out.  Common sense still applies - if you know something.  Disclose it -- in writing.

Rich - Absolutely, that is our job.  I'm sure you read the MLS too!  LOL.  Some sellers do think their info is more private than it is.  They get shocked when buyers come at them with so much info.

Christine - Yes, it's just part of the package.  On a short sale, it's not always very helpful though - it doesn't tell you what they or the bank might take.  And buyers here get nervous if they think a seller is squeaking out of a property for some reason -- they think maybe it is a bad sign.  Could be true or coud not, but sellers should be aware that they are looking.

Pam - I agree as well. Market value and what the seller might accept are two different things.  And I agree as well the amount of a junior lien on a short sale IS important.  But most buyers need an experienced short sale agent -- like yourself -- to tell them that. 

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

Tni

Mortgages are of course a matte rof public records- sellers should be aware that all mortgages re recorded as well as the chain of title. What they owe and what the property is currently worth are two entirely different matters. Buyers are very resourceful- it is amazing how much "digging" they will do.

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) over 7 years ago

I have always hated it when a buyer asks me what the seller of the home they are looking to make an offer on paid.  Does it matter?  Do you care if they do or do not make money?  Why not look at the market value?  Hmmm?  Sound better?

Posted by Chris Ann Cleland, Associate Broker, Bristow, VA (Long and Foster REALTORS®, Gainesville, VA) over 7 years ago

Allison - Very true sellers should be ready for all eyes to be on their mortgage record.  That's just the way things are and they should be prepared.

Chris Ann - In today's market many buyers are indeed out for blood.  They want the seller to make nothing or absolutely nothing if they've bought recently.  I don't think that's a good way to look at it - but nonetheless that is at least some of the sentiment out there and sellers should be prepared to face it.

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

Information is key, Too much information can cloud the buyer's mind. If the current loan is close to the sale price then let the buyer know this might be a short sale. If the seller has plenty of equity in their home it has nothing to do with market value.

Posted by John Handschuh, Realtor ABR SRES, Horsham Real Estate (RE/MAX Action Realty) over 7 years ago

You pretty much summed it up John!

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) over 7 years ago

This is a great post!  Often sellers have no clue how much information is available to potential buyers.  When I do let them know they usually get very upset that their loan amount was considered easily accessible "public information."

Posted by Krista Abshure (Fathom Realty) over 7 years ago

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