I have experience in Short Sales in the Greater Los Angeles area. They are getting easier all the time. The stimulus package is giving banks incentives to do short sales over taking the house back. I have done short sales in 4 months from start to finish. I would certainly recommend making an offer. Make sure the listing agent has had experience with short sales. Make sure that they have a full package to the bank as soon as you make your offer. Many times, the listing agent will start the package before they even have an offer, you can ask them before you make an offer. These can be better for a buyer because in a high demand market such as LA, there are multiple offers on REOs and the prices get bid up to more than current market price.

I agree that Jim gave you an over-the-top response. So take a look at his very first statement: "Statistics show that only about 1 - 10 (10%) of all short sales actually close." No stop and think about that for a moment. Now think about it one more time. If you've followed my instructions, and you still feel like entering the nightmare arena of short sales, then you should immediately contact Jim. ;-)

Jim did a great job below...Just wanted to add that short sales make up a high percentage of inventory. If you see a great house, write an offer. It can't hurt. If it recently hit the market, there may be a long journey. You may have better luck looking at homes that have been contingent for 2 or more months as most of the buyers are getting tired of the wait and move on to other opportunites. You may write a back up offer on those and all of a sudden you are in first position. Some of those great houses turn into foreclosures so stay up on the inventory. My client wrote on a short sale and ended up buying it as a foreclosure.

Hi BidDogx.

Statistics show that only about 1 - 10 (10%) of all short sales actually close, but I believe that number is higher. A good agent that is a shrewd negotiator and can multi-task should close over 70%.

Are they even worth placing an offer?

Absolutely, if you do a little homework. Before placing an offer, have your agent ask a few simple and basic (but very important) questions of the listing agent:

1. how many loans are involved? If only one, and it was a 'purchase money' loan, then it should be a fairly simple task as long as the seller has a legit hardship. Even if it was an investment purchase, it still has a good chance of getting approved if there's only one loan. Two loans are a different story. If they were part of an 80/20 purchase loan, and with the same bank, then it might not be too bad although it will decrease the chances of approval. If the 2nd loan is a HELOC (Home Equity Line of Credit) and it was taken out after purchase as a loan on the equity of the home, then your chances of success diminish greatly. The reason being this lender does not want to 'roll over' and take just a few thousand dollars to release their lien, which is what the 1st lien holder will try and do.

2. Which banks are involved? Wells Fargo is quick and efficient, and I've closed several short sales with them in just 4-5 weeks. EMC Mortgage, Litton Loan Servicing, Select Portfolio Servicing, Aurora Loans, First Franklin...these are examples of good banks to work with. They are fairly well staffed and respond quick to the agent(s) request for updates and information. Bank of America, on the other hand, is NOT on this list. They are basically overwhelmed at the moment; I was told last week that the week prior they received 400,000 NEW requests for short sales. They are VERY slow to respond to offers and it's not unusual for them to take 12-15 weeks to get a short sale approved and closed, if not more.

3. Are their any other misc. liens on the property? Tax liens, HOA liens, medical/child support liens, etc. These can all hinder the approval process and lengthen it by several days if not weeks, and can sometimes kill the deal entirely.

4. Is the owner/seller cooperative? If the seller doesn't care what happens, and the agent(s) and buyer(s) care more than them, then it's likely you'll have a very difficult time closing the transaction.

5. Who determined the listing price, the bank (pre-approved) or the listing agent? This is crucial. If it's priced too low, then the bank will have a hard time approving the short sale. If it's priced too high, then you run into the problem of it not appraising for the offer amount and maybe overpaying for the property.

6. Look for the ones that say 'Pre-Approved; buyer fell out'. Those should be easier and quicker to deal with if the listing agent knows what they're doing.

You also asked.."if you do place an offer, should it be for the asking amount or lower?"

Have your agent do a market analysis to determine what you should offer. It might be at full list price if the home is priced correctly and in good condition with some upgrades, or you could come in a bit lower and see what the bank says. Always remember...you can always increase your offer and meet the bank's demands for a higher purchase price, but you can't decrease it unless the appraisal comes in lower than your offer. That being said, sometimes the bank just doesn't care what the appraisal says...they want $XXX dollars and they'll either wait until they get it or they'll just foreclose.

In this aggressive market, I'm seeing multiple offers on the good short sales within the first week or two on the market, so it's not unusual for the offers to exceed the listing price by several thousand dollars.

As always, you should consult with a licensed Realtor who can help guide you through the buying process. *remember...by using a Realtor to represent you in the purchase of a home as your 'buyer's agent', you don't pay for that service...our commission is paid by the seller!*

Hope this helps guide you in the right direction!

Regards,

Jim Mitchell
Century 21 All Star, REALTORS
480.231.6769
jim.mitchell@century21.com http://www.agentsofgold.com