Home Buying in Truro>Question Details

Kevinb, Home Buyer in Truro, MA

How do you determine what to offer on a "Short Sale " listing?

Asked by Kevinb, Truro, MA Sat Aug 8, 2009

If Mortgage amount owed is 480K and (non Short Sale) comps indicate value of approximately 440-450K...What would be a reasonable offer?

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The best way to determine your offering price is to research the closed sales of comparable properties in the past 90 days and the current offerings on the market. The loss mitigation department for the seller's lender is going to want a sales price that gives them as close to fair market value as they can get. More lenders are willing to accept a discount on their note rather than face the uncertainties and protracted costs of foreclosure, but there are limits on what they will authorize. The asset managers do their home work. They get multiple opinions of value before giving their approval. Remember that the list price is set by the seller and the listing broker. The price might be close to fair market value, or might be lower to attract multiple offers, or it might be some fanciful figure based on what the seller needs. The choice made by the seller depends to a large extent on the dynamics of that particular market. And a particular market means not just geography, but also price range. List prices are not offers to sell. They are marketing tools. Do not rely on some formula. That would only work if list prices were a consistent and constant reflection of fair market value. They are not. Your best tool is to work with an agent who understands the local market and who can analyze current market values.
0 votes Thank Flag Link Tue Aug 11, 2009
Hi Kevin- That's a good start that you've found out what the mortgage balance is. But, I would disagree a bit with the other comments. There "can" be a "steal" made, but only under certain circumstances, and much of that is out of your hands and you will have no knowledge about it. There are many variables as far as the bank's loss mitigation dept. is concerned.
Do you really want this house? Pretend it is not a short sale- would you pay $450K for it? If that is the current real value? What kind of activity is around that house listing? Any other offers?
Of course you want to get it for as little as you can- that makes sense.
If you believe some of the hype that this Fall many banks will be releasing a new "flood" of foreclosed properties for sale- said Bank will be more willing to unload on a short sale because they'll be up to their neck in another month or 2.
Just my 2 cents. You really don't know until you put in an offer and try.
Thanks, and good luck,

Ken L.
0 votes Thank Flag Link Tue Aug 11, 2009
Kevin,

Great question.......

Try to determine how far along in the "short sale" process the seller is and if a bank has done an appraisal. If this is the case, you can depend on them expecting a number close to their appraisal price. If there has been no appraisal, base your offer on the most recent comps. If you are serious about the property and want it, your offer should be a reflection of the current local RE market.....
0 votes Thank Flag Link Mon Aug 10, 2009
When the bank reviews a short sale agreement, they typically request an appraisal or BPO (broker price opinion) to determine what the home is worth. They are not going to let someone come in and "steal" the house. They are going to attempt to get the market value for it.

If the comps are showing a price range of $440-450k, then your offer should be somewhat in that ballpark.

I had a recent shortsale with Countrywide. The house was listed at $264,900. A buyer made an offer of $240,000. The offer made its way through Countrywide. Negotiator 1 approved it, negotiator 2 approved it, then the investor countered the offer back at $255,000. It took two months to go through this process and by that time we thought they were going to accept the $240,000.

The buyer ended up responding with a highest and best of $248,000. Two weeks later Countrywide accepted the $248,000.

I didn't see the appraisal that was done by Countrywide but my guess is that it was for $255,000.

Short Sales take a lot of patience from the buyer. When you view the home, you are excited and it doesn't seem like a big deal to wait on an approval from the bank. As the days go by with no status updates it gets harder for a buyer to wait. I had one buyer wait 5 months last year before pulling the plug and going after another house.

Regards,

Joe Finnerty
484-241-1641
Long & Foster Real Estate, Inc
Bethlehem, PA 18020
Office: 610-865-7776
0 votes Thank Flag Link Sat Aug 8, 2009
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