When writing an offer on any property there are certian things that we look at to help us establish what our offering price should be. The homes location, size, amenities, desireability ( are there multiplt offers?) all need to be taken into consideration.
The next thing we need to do is put together a comparative market analysis looking at homes with similar features that have sold in the past three months. This will show us what homes are currently active, have gone pending, or have recently sold in a specific area.
Remember don't let the name "short" sale fool you, these transactions can take a very long time to close(unless we are dealing with Wachovia who has a much better short sale process) and sometimes they will die on the vine and not close at all.
When writing an offer on a short sale price is not the only things to consider, terms oft the contract are equally as important when negotiating with the bank.
I hope this information is useful. Feel free to contact me if I can answer any other questions for you.
Your agent should be able to guide you through this process. That's their job. Not just to write contracts, but to share their knowledge. As a matter of fact, it's exactly what separates a good agent from a great agent, their knowledge.
If I were you, I would go over the the most recent sold properties within the last 30-90 days. I would also go over what is available right now. Then ask yourself this question. What else can I buy for the same price?
You also need to take into account of the sq ft, lot size, condition, and also the location. With that said, it's very difficult to tell you how much to offer without knowing more.
Short sales can be great buys for consumers, but they can also take a very long time to close. Some never do.
Ask your agent to probe with the listing agent and find out if they are expecting any other offers, if they have had any dialogue with the lender, and if they are willing to use a 3rd party negotiator.
I hope this helps. If you have any other questions, feel free to shoot me an email or you can give me a call.
Happy New Years Years to you and everyone else.
I do not believe the fact theat a property is a short sale has any effect on value.
Say you have 2 identical houses located right next to each other - they are in the same condition, same size, same floor plan, etc etc. Say one is a short sale and say one is not a short sale.
Would you say that the value of these 2 properties is the same? I would.
The value of a property is not dependent on the amount of loan on the property.
Would you pay more or less for the same property just because the loan amount on the property is different.
I would say not.
If you believe the above, then trying to figure out how much to offer on a short sale property is NO different than trying to figure out what to offer on a NON short sale property.
Buyers figure out how much to offer by looking at lots of houses in the same area - over time buyers get a sense of what the market is like in their particular area. Buyers figure out what to offer by looking at recent sales in the neighborhood. Buyers figure out how much to offer by consulting with their agent and getting the agents input.
So my advice would be to forget it is a short sale (because in my opinion that is irrevalent to value) and based on the houses you have seen on the market and the ones that sell, come up with a value that the property is worth to you.
Hope that makes sense.
- Comparables in that area
- Are there any inspection reports available? If not, did the listing agent provide his/her visual disclosures?
- What is the fair market value of the property?
- Will the lender be able to get a higher purchase price as a REO (foreclosure/bank-owned) net of expenses?
- Is your purchase price slightly less than fair market value or is it substantially below?
- Is the list price low enough to generate buyer's activity? (in which case there will most likely be multiple offers)
- Do you have all the necessary contingencies (inspection, financing, appraisal, etc) to protect yourself?
- Based on your interaction with the listing agent, do you feel that there is a high likelihood that the lender will approve the short sale?
Let me know if you have further questions.
Alain Pinel Realtors
â€œHorseshoesâ€ a.k.a. Zillow:
Zillow describes their "Zesstimate" as a "starting point." While I applaud their efforts to inform the public, quite frankly, for those that seek relative accuracy Zillow is a data source I would completely avoid.
For example, for San Mateo County here's Zillow's Accuracy:
Within 5% of Sale Price - 26%
Within 10% of Sale Price - 46%
Within 20% of Sale Price - 71%
Median Error - 8.7%
You might want to apply some of the stats above to the purchase price you are looking at to get a relative error value in dollars.
"Darts" a.k.a. Realtor CMA:
I believe the Zillow data above shows estimating a home's value based solely on numbers does not work because it completely discounts the qualitative aspects of a home, and that's a huge mistake because while price is important in buying a home we all know location, amenities, look and feel play a large role in determining market value as well.
If you are serious about accurate valuations you must be working with a licensed Realtor with a little "scar tissue" in the area you are looking in. A Realtor can prepare a Comparative Market Analysis, which other than an actual appraisal, is the "gold standard" for approximating market value - period. A Comparative Market Analysis (CMA) gives you the best representation of market price/activity/trend direction - for the specific search property details you search on (i.e. 3 bed, 2.5 bath, 1500-1800 square feet, etc.). Keep in mind that just because a property sells right next door to another does not mean that it's a comparative match.
Also, DO NOT rely on median-based statistics, these measures are meaningless for targeted selling/purchasing as they have no regard for any of the specifics you may be comparing and can be skewed by segments of market activity not matching your individual situation. A â€œmedianâ€ is defined as â€œthe number separating the higher half of a sample from the lower half.â€
For example, letâ€™s say three homes sell in a neighborhood for $400K, $425, and $575K in one month. The first two may be neglected REOs, and the third has been maintained beautifully. The current monthly median value for this neighborhood becomes $425K.
A buyer/seller should look specifically at the targeted segment of properties that match their search criteria for the information to be meaningful. Generalized stats are easier to come by, but that doesnâ€™t mean they should be used to make one of the most important financial decisions of your life.
Best of all, a Realtor will do this for free!
"Competitive Archery" a.k.a. Appraisal
While I would not advise it due to the $350-$400 fee and the unknown probability of having your offer accepted by the Lender(s), an Appraisal would hold the highest level of accuracy. Addtionally, given the timeline for short sales can be very long (4-12 months) the appraised value might be "stale" once the lenders' approval is granted because the value is based on the date performed! So, you very well might end up wasting your money.
In any case, if you would like to find a professional appraiser on your own you can find one here (or ask your Buyer's Agent): http://www.orea.ca.gov/html/lic_appraisers.asp
There are four levels of real estate appraiser licensing (below).
AT - Trainee License
AL - Residential License
AR - Certified Residential License
AG - Certified General License
You can see what is required for each level here: http://www.orea.ca.gov/pdf/Upgrade2008.pdf
Short sale listing agents and the sellers utilize a variety of strategies went setting the listing price for a home. The best way to know what to offer is to have a real estate agent pull the comparable sales in the neighborhood. A good rule of thumb is within 1 mile of the subject property sold within the last 6 months. Also have your agent show you other active homes in the neighborhood/complex so that you might compare updates to price.
Well from my experience you should offer at atleast asking price. If you have anymore questions, please feel free to contact me anytime.
Happy New Year!