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How much is reasonable to offer on short sale?

Considering making short sale offer.  Home has been listed for 96 days.  Price has been reduced $41,000.  My agent has not been able to find out how much is owed on the loan.  Would it be unreasonable to offer 10% less, or even more?  I have had no appraisal on the home and land, but was able to find out that the owners loan 3 years ago was for $70,000 more.  I really like the home,however,  the asking price would be exactly the amount I was approved for and would be more comfortable with a smaller mortgage payment.
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August 10 2011 - Madison
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Answers (10)

There is more to a short sale offer, than the price.  Following are some suggestions to help get yours accepted:

1.  Offer - keep in mind often times short sales are already listed 10-30% below similar properties in order to attract more buyers.  Ask your real estate agent to do a "buyer's analysis" of the subject property which will help you determine a fair market offer.  The bank will do a BPO (Broker Price Opinion) to determine the value, and will take this BPO value into consideration when accepting an offer.

2.  Deposit - many short sale offers are submitted with a deposit amount due "within 3, 5, ...days of lender approval".  Put some skin in the game, ask your real estate agent to recommend a fair deposit amount - keeping in mind once you the check is deposited into the escrow account, it could be weeks or months until you get it back (depending on the stage of the short sale).

3.  Agree to take the property in it's As-is condition.  Don't ask the seller/bank to make any repairs - what you see is what you get.

4.  Wait - give the bank a reasonable amount of time to accept the offer, agree to wait 120 days or more (if necessary, depending on the conversation your real estate agent had with the listing agent).  This gives the bank confidence that you are not "shopping" the market.

5.  Pay your buyer fees - often time's buyers feel like they are doing banks a favor to put in an offer on a short sale, and therefore, ask the bank to pay fees a traditional seller would not pay.  Ask your real estate agent what fees the buyer typically pays in a traditional sale (this will vary region to region), and pay them.  (Remember, pigs get fat, hogs get slaughtered).

6.  Get Pre-approved - this is not a prequalification letter, but a true Pre-approval letter.  Also, if the short sale approval takes longer than 90 or 120 days, you may need an updated pre-approval letter.  So, don't do anything that will adversely affect your credit.

7.  Inspections - get your inspections done in a timely manner - in my market, 15 days is the typical inspection period.  However, I can get inspections done within 2-3 days (though I wouldn't suggest it), but 7 days is very reasonable.  Once again, this shows the bank you are serious - and that you don't want to waste your time or theirs.

Hope this helps, I always advise my clients buying short sales to bring their patience and flexibility, and to know this could be a bumpy ride.

Best regards, 
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August 11 2011
Don't worry so much about the complexities of how much is owed and how many liens are on the property, concentrate on obtaining comps for the area, if necessary submit your comps along with your offer.  Good luck!
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August 11 2011
Have your agent look up all comparable sales that have sold in the past 3 months. Make your offer 15% - 20% lower and the lender can always counter back.
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August 11 2011
10% less than the lowest sold comp in the area is a good rule of thumb.
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August 11 2011
Profile picture for minotau
Exactly why hasn't your agent been able to find out what they owe on the property?  One phone call to the listing agent and that should be clear.

Before you start chasing a short you want to understand how much is owed and to whom, if there are multiple mortgages involved, if there is PMI involved, what's the strategy for getting any secondary mortgage holders to sign off (may involve negotiating a payment to them), if there have been any conversations with the bank to date, if there's already been a NOD and NTS filed, what the owners current status is with their mortgage payments (how long ago they stopped paying/if they've stopped paying), what conversations they've had with the primary lien holder regarding a short, has an appraisal been ordered/completed by the seller, etc., etc., etc.

If you can't get this type of information from the seller then you might want to think twice about chasing this.  A short should be a vastly different process than with a "standard" equity sale, there should be a lot more transparency and cooperation between the buyer and seller - you both need to be focused on selling your offer to the bank.  And you need to understand what the banks most likely, most profitable path is.
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August 11 2011
When all is said and done, I believe that you can offer them 85% of the asking price and be most likely to get a favorable response. However, on homes of this price point, you may not get as much leeway in the price from the bank. They have already received opinions of value and feel that the asking price is market value.
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August 11 2011
I would focus on the incredible low 30 year fixed mortgage rate, as low as 4%, and not mess around with a 10% lower offer.  These interest rates will not be around much longer.
David Cooper
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August 10 2011
Ask your agent to pull comparable home sales and review them with you. Once you have this information you can formulate a reasonable asking price.

Don't put to much thought into what is owed on the home.  A huge part of the Lender's decision to approve a short sale is based on the home's current market value. They will do an appraisal or BPO (informal type of appraisal) to determine what it is worth.  From there they will crunch numbers and do what is in there best interest, That could mean approving a short sale or deciding to go ahead with the foreclosure.

Good Luck

Melvin

  
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August 10 2011
Profile picture for wetdawgs
The right offer on the home is not driven by what they owe or paid but instead what the house is worth.   There is no magic formula that says after 96 days on the market one should offer 10% less.   Instead, your agent should pull comps that have sold in the last couple of months.  Spend some time evaluating them, drive by and look at them.   Then come up with an offer price.  Remember, it isn't just the owner who has to approve your offer price, but the lender.

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August 10 2011
Making a successful offer on a short sale is all about what the bank's opinion on the price will be. They take in consideration what has sold recently in the area and how much of a loss they'll have to take on the defaulting seller, etc.
 I would have your Realtor run a comparable market analysis for the property and it's surrounding area. That should give you an idea about what the home is really worth vs. what it's listed at and you can make a decision from there.
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August 10 2011
 
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