Hi Joshua:

I usually call the lenders and find out what their policy is regarding short sale pricing. They usually tell me to price at the market value so it will sell. I will do just that, and do a lot of marketing. However, in a buyers market and with a short sale, the buyers will be looking at getting a good deal, which means the prices will generally go down. I will document that while reducing the price.

The banks do want to see good faith effort, and also, if the house is priced artificially low to start with and there is no com parables to show the lenders, then you will have a more difficult to get approved (which means a couple of months down the road - waiting for lender to approve).

If I have priced competitively, showed the banks we have done everything to sell, and dropped the price; along with the CMA and BPOs, I feel we will have a much better chance to get approval from the lenders - I always provide my own CMAs in addition to their BPOs.

Sylvia

Thu May 8 2008, 20:29

From professional experience I have found that you have to put a price on the house to sell quickly. A real hard number to move it. Once you get a contract in force, with applicable contingencies showing that it cannot be a binding contract until seller's lender approval, I would take to the seller's lender and ask if they would accept a short sale. If you advertise upfront that this is SHORT SALE pricing or go that route ahead of time you run the risk that your seller may not truly have acted (in the bank's eyes) in good faith and the may get stuck with a deficiency judgement because the lender might look at the whole short sale idea as "the borrower's idea" and not theirs. Let it be the "lender's decision" once you have a negotiated contract in hand.

Wed May 7 2008, 16:02

Hey Joshua:

Price should be determined with the following considerations - Client Goals, Competing properties, and recent solds usually within the past 6 months (Market Comparables). When listing a short sale complete a proposed BPO (Broker Price Opinion) and pre-submit it to the lender requesting a "range of price" to be considered for a short sale. That becomes a "target" for you and the lender when marketing the property to sale. The key when working with "short sale" properties is loss mitigation, getting the client out of the mortgage with the least amount of loss avoiding foreclosure, and facilitating a quick sale while managing a highly stressfull situation.

Tue Apr 22 2008, 09:46

My experience is that some servicers use BPO's and others use an independant appraisal. I always teach my agents to list to MARKET VALUE-what the market will bear in it's current condition-not what is owed. It may come back to bite you if it is listed for $X but the offer comes in 15-20% or more below that. Then you have to explain why you couldn't get a higher offer. The servicer ownes the mortgage but not the property. Don't expect the servicer to know your current market. If a major plant is closing down, you need to tell them that and document EVERYTHING! Also, keep in mind that the servicers almost never pay for any buyers closing costs because they want that buyer to be vested in the property so that they aren't in the same position in a year or two from now because the buyer is in default. Good Luck!

Tue Apr 22 2008, 09:26

Josh,
Here are the techniques I use and they seem to be extremely effective. Now if you are just talking about pricing then I would say start a bit above the market and move the price down aggressively and consistently over a period of time. For example, if you have a listing that would sell for 250,000 I would start at a list price of 265,000 or 270,000, and then move your price down 5,000 to 10,000 every week. We do this for 2 reasons. Usually when you take the listing you have paperwork to gather from the seller, such as proof of hardship and income verification. This extra week or so on the market will give you time to get your file complete and put your short sale package together. Also this technique allows you to fight the lender if they are going to counter back with an outrageous price. All realtors and everyone needs to relize that a home will only sell for a certain price and with short sales we are finding that they are going a bit below market, because the buyers are leery of wasting time with a short sale that wont go thought and they also have to wait 5 to 10 time longer for an answer form the lender(s). As for negotiating and dealing with your local MLS board that’s a whole different issue.
Hope that helps
John A Cooper
The Cooper Group
Keller Williams Realty
Roseville CA

Tue Apr 22 2008, 08:09

What I've found recently on Short Sales is to price the house like you would any other house ... your goal is to get the seller the highest price possible. And the following information is great to pass on to a seller:
(Hope it's not too long for you.)
Top 10 Seller Short Sale Questions..Answered
Most Common Questions A Seller Will Ask You
Number 10: I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me? Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.
Number 9: If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount? The mortgage insurance is not there for your protection, just the mortgage lender's.
Number 8: Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale? No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.
Number 7: I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale? The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California its taking 6+ months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.
Number 6: Will I still have to pay property taxes if I do a short sale? Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.
Number 5: I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale? The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.
Number 4: Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true? It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.
Number 3: How do you, my listing agent get paid...who pays your commission? The bank will pay the commission along with all the other usual closing costs.
Number 2: Do I have to miss a payment to do a Short Sale? No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.
Number 1: I want to do a short sale and have a 2nd mortgage, does this make me ineligible? No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.

Tue Apr 22 2008, 07:44

You need to check with the bank or mortgage company. They will tell you if they will accept a short sale and what they will take. You then need to add in your commission and any other items to that to come up with a list price.

Tue Apr 22 2008, 06:15

Hi Joshua,
We were just discussing this in my office. I think you have the duty to list a short sale at the reasonable price and in private remarks state that this is a short sale situation. Let the Buyer's Agent then take action. Of course, as I am sure you are aware, price the property low enough to get the attention required to move it.
Hope this helps.

Tue Apr 22 2008, 05:47