Home Buying in 91360>Question Details

Curt3006, Home Buyer in 91360

Cash offer on short sale that does not meet lender approval?

Asked by Curt3006, 91360 Tue Aug 2, 2011

I'm looking at a short sale that needs a lot of work and will mostly only get approved with a cash offer. I was wondering what percentage under the listed price would be reasonable to offer?

I'm thinking 20% under the listed price. But, I know it takes a while for them to look at offers and curious if anyone has any advice.

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Curt you were thinking wrong, most asking prices aren't even accepted, that is because the Realtor that listed it had to come up with a price, and that price was not necessarily one the bank agrees to except but rather a teaser price o bring interest to the property! The fact that you are paying cash has nothing to do with thinking you can get a discount!
0 votes Thank Flag Link Sat Aug 13, 2011
Curt,
You can basically offer any price you want. Whether the price makes sense will depend on the presence of other able and willing buyers who will bid against you and on the bank's current willingness to accept a short sale at all. If there are others submitting offers, your offer will have to at least best their bids. And, your offer will need to be high enough to entice the lender to accept the short sale. If it's too low, you've just wasted your time and effort. Nothing wrong with that if you're willing to put in the effort for a slim chance at a discount.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Sat Aug 13, 2011
Hi Curt! It is hard to be formulaic (i.e. a % of list) about what to offer- on a short sale or any sale, as it depends on a lot of factors. It depends on how well it is priced to begin with, and yes, you can factor in the condition of the home with that, it depends on what the comps in the area are for similar homes, etc. And it also depends on your bottom line, and what the home is worth to you. The home may be worth one price to an investor, and another to a buyer who wants to fix it up to live there.
0 votes Thank Flag Link Fri Aug 12, 2011
Hi Curt, I hope you are working with an experienced buyers agent who has a lot of background in representing buyers on short sales. Your question, while perfectly understandable, are something that you should really be collaborating on with your Realtor and your Realtor should be working with the sellers Realtor to determine the "Plan". I have represented some buyers in similiar situations and we have approached it a number of ways and in my personal experience there are homes where having a cash buyer is considerably advantagous.

In a case where the home will not qualify for FHA financing, the buyer pool is diminished, if the home wont qualify for conventional financing, the buyer pool diminishes further. When the home has a diminished pool of buyers, less competition equals lower price. It's that simple.
In the case of a short sale that needs this much work, your Realtor, in my opinion, should be asking the listing Realtor to procure a comprehensive bid from a general contractor. Your offer should reflect the comperable market value for the home, less the comprehensive bid. This works best if there is a condition of the property that makes it not qualify for financing. The sellers lender WILL more often than not in my experience fully consider offers in line with this.

You will have your savings in doing as much of the work as possible and basically acting as the general. General Contractors, true general contractors, typically estimate the entire job and add 10% for running the job. That is some built in equity. But be respectful of the GC, especially if you pick them. They will put in a bunch of time to provide the bid and as a courtesy, you may want to try and hire them, if they did a good job and will negotiate with your further, for the parts of the job that you cant do yourself. After all those guys dont get paid to write bids, so we need to be respectful of their work product. .
Web Reference: http://www.ConejoLiving.com
0 votes Thank Flag Link Tue Aug 9, 2011
The seller's agent has probably listed the property at what he/she believes to be at or slightly below fair market value. The bank will have their own agent determine fair market value. Whatever you offer on the property will most likely be met with a counter offer. So if you offer 20% below the listed price, the bank may reject it outright. But either way, be prepared to up your offer somewhat when the bank gives you a counter offer. The bank is happy when they get a cash buyer, but they are happy with any buyer. You really won't have much leverage with a bank in a short sale when you pay cash. Even in a normal sale, you won't have that much leverage with cash. Look at it this way. If you are selling your own house (not a short sale) and it is listed at $200,000 and a cash buyer offers you $160,000, but a buyer getting a loan offers you $190,000. Which would you choose? Personally, I'd choose the $190,000 and take my chances. But if the cash buyer offered $190,000 and the borrower offered $195,000? I'd choose the cash buyer. I hope this helps.
0 votes Thank Flag Link Tue Aug 2, 2011
Does the property's list price already reflect the value of the property the way it is?

There's no formula on what to offer for a distressed property. Some are artificially underpriced to attract the biggest pool of buyers.

Just because it's a distressed property doesn't mean one should automatically offer less than list price, specially if it's already priced low to begin with to allow for improvements to make it habitable.

What does your realtor tell you?
0 votes Thank Flag Link Tue Aug 2, 2011
Hi Curt,
The list price on short sales may or may not reflect market value. Trying to determine an offer price using the list price doesn't always work. Estimate what the market value of the home would be once repairs are complete. Then estimate the cost of repairs to determine approximate value. I would then offer some 10-13% below because of the short sale and see how the bank responds.
Good luck,
Web Reference: http://ocnorth.com
0 votes Thank Flag Link Tue Aug 2, 2011
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