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How much to offer for a shortsale?

I am looking around shortsale properties. I have seen some of the properties are sold very cheap and below market value. I guess those must be shortsale or foreclosure. I want to offer for a shortsale which is listed as 250k. How much minimum can I offer for this house?

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September 25 2010 - The Heights
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Best Answer

There is no formula or strategy to follow than to check out the local market conditions and go from there. Do additional research to find out how much is owed on the property and who are the lenders.

Finally, get an agent who truly understands what it takes to sell/buy a short sale.

Some agents and their sellers may deliberately price a short sale property much lower than market value , or what we call "artificially low". They do this to attract attention and potential buyers who are willing to wait out a short sale in the hopes that they can get a "good deal."

Depending on the area --- i.e., how much has value fallen? --- one can get an idea of how much to offer. 

For example, one property was bought by the owners for $630k in 2005. But it's now a short sale. Similar properties in the neighborhood were closing at $350K. The new listing was activated at $320K, It received multiple offers for significantly over list price, and close to $400K which is stil 63% of what it last sold for.



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September 26 2010

There isn't a correct answer.  How much do you want this house?

 If you love the area and the home, you will want to offer around 15% below the most current sales have been in that area (not including short sales). You may obtain this information from your real estate agent.

Moreover, do you research before making an offer? You need to find out who is in the title, whether a foreclosure notice was filed, how much is owed to the lender and how many lenders, etc? This is very important because it will help you furthermore in establishing how much to offer.

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October 06 2010
First ask your agent for a Comparative Market Analysis (CMA) for the area. Your Agent will also find out if someone has already given an offer on the property and how many Lenders you have on that property. Also find out if there are deliquent fees such as Homeowners Association Fees (HOA) and who will be required to pay for it. These will help you determine what to offer.
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October 05 2010
As you can see, there's no lack of advice / opinion when it comes to Short Sales. There's a recurring theme, though, in suggesting use of an experienced agent / advisor. Taking this advice will save you time, energy & $$$$!
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September 27 2010
This is a good question one that always come up. If the listing agent has done their homework then they already have in writing what the bank will take. If the the listing agent has not done their homework then ask them to do so before you make an offer.   After 13 years of doing this I know that no matter what the market is like the bank will ALWAYS do an appraisal to set their sale price if it has not been done your wasting your time. 
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September 27 2010
This is a great question. In order to purchase a short sale property, you have to put down a good faith deposit, go through the attorney review process, often pay for an inspection and appraisal, and then your offer is submitted to the bank.
So, you are investing your time and money into this possible transaction. You don't want to make an offer that won't be accepted because you will waste your money. You need two things. One is to work with a professional realtor who has a successful track record with short sales. The second is an attorney who specializes in short sales. Throughout the process, the banks and sellers will try to put charges on the buyer that aren't necessarily yours to incur. A good attorney will get you to the closing table without these charges, earning his/her fee and then some. He/she will also make sure you don't over pay for the property by negotiating hard with the bank.
Please let me know if you would like some assistance.
Best of luck to you.

Bruce Levitt
120 Newark Avenue
Jersey City, NJ
[contact info removed by moderator]
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September 26 2010
Echoing some advice below, start with a realtor who's trained and experienced in short sales.  The current market value of the property, determined by an appraiser working for the bank who owns the paper, is the starting point.  Your buyers agent can attempt to determine that number through their own Comparative Market Analysis (CMA) which any agent can perform.  From there, depending on the kind of loan the owner has, and any additional liens on the property, the two of you should be able to estimate what a strong offer will be.  The listing agent will sometimes share "what it will take" to get the deal done.  That's helpful info, too.  One tip: if there's lots of activity on the property (showings) or a recent price reduction, be prepared to offer 90% of the asking price.  And keep your offer as clean (few contingencies and closing help) as possible.  The bank is inundated with short sale cases, most likely.  The best offers go in the "expedite" pile: the rest, get lost in the sauce. Good luck!
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September 26 2010
Mohancborade, are you working with a Realtor? Are you interested in North Bergen? How will you pay? Regards,
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September 26 2010
Banks do not set the listing price on short sales, the agent does and they are just guessing...it is rare that a bank will do a BPO until they get a bonafied offer.  If the property gets no offers the listing agent will just keep dropping the price till it is too low for reality.

Even if the bank has already approved a sale price for a buyer that "walked" and no longer exists, the bank can change the terms, change the price and renig on anything they promised the 2nd or 3rd mortgage holder or the buyer. With any new offer they start over with a new BPO (Broker Price Opinion) and probably a new mitigator for the bank,

You need a good buyers agent that understands short sales to advise you on an offer and even then there is no gaurantee that you reasonable offer will be accepted. 

I sell a lot of short sales (Florida has more than its share) and am lately seeing banks across the board ask for more than the offer, more than the appraisal, and occasionally more than their own BPO. 

There is no formula you can depend upon as banks do not have to be reasonable and you are totally at their mercy.

Erika in Orlando
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September 25 2010
I don't think there's anything set in stone but, as Ian stated, 80% - 90% are both good amounts to start offering with. Jut remember, there are plenty of them out there right now, don't settle. Find a good real estate professional that will educate you on the short sale process and look around. If you do find that perfect home and really want a good shot at it you should stay around the 90% offer level. 

A few things to remember with short sales... First, they take a while. Every short sale I've had listed has taken at least 4 months to complete once you get the bank talking with your offer. Second, don't ever get emotionally attached to the property you're offering on. Short Sales are always up in the air, there are not really any set rules to them and they can go either way. Lastly, be sure you get an inspection by a professional home inspector. 
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September 25 2010
Banks will usually look at the BPO's (Broker Price Opinion) and/or appraisal they have on the property or will get on the property depending on where in the short sale or foreclosure the property is in.

Some banks will hold out for the full amount of their valuation, most will take 90% and others as low as 85% of their valuation. So working with your agents estimate of the property's value (which may differ from the asking price +/-) start at 80% to 90% of the value depending on how much you want the property.

So in your case, assuming 250K is a fair valuation, a starting bid of 200K would not be an unreasonable starting point if although 225K would be more realistic if you really wanted the home. This is how I would advise my clients in NC and your locale may differ somewhat.
 
Keep in mind that the short sale process can take a long time, in many cases months prior to getting the bank's approval or denial.

Foreclosures the bank already owns and the process is much quicker and price is usually more negotiable than in a short sale situation.
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September 25 2010
It has been my experience that a short sale in most likely to be approved by the lein holder if the offer price is reasonably close to the list price. Not to say that you must offer asking price on a short sale listing. Short sales can often be great deals, and they should be, afterall you are going to wait quite a while for an answer from the lenders. Patience is rewarded. Consult with your realtor to do a comparative market analysis on the home of your interest and make a reasonable educated offer. Best of luck -Jim
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September 25 2010
As I always start... BUYERS ... get a good buyers representative! They really are worth their weight in gold (if they are good) have them figure out in a net $$ where the bank should come in... just because a home is listed low (due to short sale) the bank may or may not take the deal... there are a lot of fractiions that must be considered... and a lot of players to satisify... if you need help with finding a good agent email me ...
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September 25 2010
 
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