But I figured out a solution!! Bear with me...
After mutual acceptance the bank orders an appraisal or BPO on the property. If that appraisal/bpo comes in higher than your sale price, you're in trouble. Most buyers walk away when you tell them the price has to be increased for bank approval.
When this happend on my listing I felt frustrated and out of control. Here's what I did to get a little control back...
Step 1: TAKE THE KEYBOX OFF OF THE PROPERTY right after mutual acceptance.
Step 2: WAIT FOR AN AGENT OR APPRAISER TO CALL YOU FOR ACCESS TO THE HOUSE. The bank will order an interior bpo or appraisal after they're notified you have mutual acceptance. They're going to need to get into the house and they will call you.
Step 3: TALK TO THAT AGENT OR APPRAISER ABOUT YOUR COMPS AND MARKET CONDITIONS. If the agent BPO or appraisal comes in close to your sale price, you've just avoided a big hurdle in the transaction.
Since I started doing this I've had almost no problems with the Bank trying to influence my sales price after mutual acceptance. Check out http://www.ShortSaleSuccessKit.com for more.
Good Luck! - A few hours ago
Short Sale Expert
Coldwell Banker Residential Brokerage
White Plains, New York
http://www.WestchesterRealEstateNY.com, Visit my website for more info on Short sales and Foreclosures.
Absent pre-clearance and accompanying proof of hardship and fair market value, the mortgage lender will not just sign off on it. Often the agents are neglecting the second mortgagees, too. This is a no-no.
One seller read some book on auctioning and was running an auction on his house. You are correct that the bank is the decision-maker, regardless of how tasty the listing agent tried to make the list price.
Banks are willing, as first lien-holders, to deal, but if the owner financials don't match the deal, they will reject it. For instance, if the second lien-holder is to be paid off, then the first lien should also be paid off -- hence they will re-write the deal to cut out or severely reduce the second's payment at closing. Or, if the owner has other assets that could be converted to cover the loss, they'll throw out the deal, too.
In other states the properties are going for a song compared to 2 years ago, but not here. Typically, short sales are below the balance owing by not more than 10% typically, unless (as you say) your BPO or formal appraisal can show the market is lower. Unlike the formal appraisal, do include the distressed sales in your BPO or estimate to them. I know, the appraisal district ignores them, but the banks don't. They'll still do their desktop analysis including them.
Yes, I have seen lower, but the lower the offer, they less likely the deal will be accepted, not that it will never fly.
So, Bruce, price at market, as Syliva says, but private notation for SHORT SALE OPPORTUNITY. Most of us will get it. Buyers usually don't understand when it is in the public remarks., though.
Prcing below market is not in the client's interest, unless you have pre-approval from the loss mitigation folks that they'll sign off if the loss is less than x. Then you might have them questioning you about why you're offering to give away their money.
At this point S***n Mortgage is probably kicking themselves for allowing foreclosure that would have almost paid off both them and the second. Their REO is still sitting ... now $40k below the deal we offered the loss mitigation people.
However, the lenders would rather have you priced it at market rate (who wants to lose THAT MUCH money), prove that you are not trying to sell it dirt cheap just to get a sale. Those artifically low homes, althought went into contract quickly, do not get approval.
If you price it realistically but can not get an offer, then you can reduce the price systematically until it sells. You will have a btter chance of showing the lender that you did your best but the market just won't take the house at certain price, so they don't feel they are taken advantage of.
That, to me, may take a bit longer to get offer, but when you get it, it has a much better chance to be approved.
It is a cycle that needs to be addressed by the lending industry and it will certainly be more concrete in the near future. I've seen some very low asking prices for properties worth 50% or more ~ there is no doubt that these short sale prices and offers will be rejected.
From my own experience, it seems that the mortgage balance(s) are what needs to be considered when listing and presenting offers on these types of sales. Lenders have formula that they use where a percentage of the debt would be forgiven. It could range fron 30-40% less than the first mortgage. Every market and situation is different. It is a matter of learning from experience and rejection.