Home Buying in Chicago>Question Details

Ivonne, Home Buyer in Highland Park, IL

looking at a short sale home price at $159000 questions what is a short sale and can I offer less and would an offer of 120000 b ok house buy as is?

Asked by Ivonne, Highland Park, IL Fri Nov 5, 2010

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Thank you for your question about making an offer on a short sale. First, as indicated in previous answers, I suggest getting a buyers agent to help you.

A short sale is a sale where the price falls short of the loan. The Lender must agree to the sale. It is done to avoid foreclosure which can cost more. A note is left on the borrowers credit that the lender settled for less.

Consult a buyers agent to help you determine what an acceptable offer for that specific property is.
0 votes Thank Flag Link Tue Nov 9, 2010
I agree with getting a Realtor to represent you.

There are just too many unknowns to give one answer and there are many different things to consider - length of time on market, market area, comp price points, condition of home etc...
0 votes Thank Flag Link Tue Nov 9, 2010
Ivonne, where's your agent on this? You do know that, ordinarily, the agent's commission is not something you would pay out of your own pocket, right? It's high time home buyers started seeking the representation that's so readily available to them. PLEASE call a buyer's agent to help you with this. We on this forum speak in such broad terms, there's no way for us to know all of the particulars of each transaction.

Good luck!
0 votes Thank Flag Link Mon Nov 8, 2010
What is your agent advising--as for what to offer on a short sale, it depends--before moving forward, do ask your agent for comps--recently sold similar properties in the immediate area, review the data and make a determination as to a fair offer; do keep in mind that if the property is priced at today's market or slightly below multiple offers may occur. Short sales occur when the owner owes more than the property is worth; if the owner has proven financial hardship to the lender, a short sale can take place--the owner can accept whatever offer he/she wishes, however the lender decides to accept, reject or at times counter offer. Short sales are by no means fast sales unless already pre-approved by the lender--again, your agent can best advise.
0 votes Thank Flag Link Sat Nov 6, 2010
Hi Ivonne,

The explanation of a short sale has been taken care of here. But what hasn't been addressed is that the list price may or may not be a strategy.

It's possible the list price is a pre approved short sale price (via the HAFA program), or, the price could be strategic to get interested buyers coming through and possibly creating a multiple offer scenario, or it could be that it's fair market value. Hard to say without the address.

I would highly recommend you work with a buyers agent that is experienced in working with distressed properties. Short sale is not a transaction (or any other real estate purchase for that matter) that you should venture off on your own. The listing agent represents the seller and his/her goal is to get the most amount of money not to give you the "insight" of what he/she thinks the bank will settle for.

Your buyers agent will conduct a fair market analysis to ensure you don't over pay or at the very least you'll know what the market value is. Your agent will also negotiate on your behalf, write up the offer, provide you with resource, i.e. home inspectors, attorneys, lenders, contractors, etc...walk you through the entire buying process. All at no charge to you!

Interview a few agents, myself included, and determine who you feel has your best interest as a priority. Start with the agents that responded right here on Trulia.

Good luck!
0 votes Thank Flag Link Sat Nov 6, 2010
The answers below are good explanations of a short sale. I would suggest you get a good buyers agent who has good experience handling these types of properties. This way you have someone to walk you through the process, at no cost to you. Interview two or three agents and go with the one you mesh best with.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
0 votes Thank Flag Link Fri Nov 5, 2010
You already have answers defining what a short sale is so I will not explain that again however I will tell you all short sales are not the same and all realtors doing them are not qualified to do them. Look for an agent that is SFR certified and understand the process and can educate you about how to buy a short sale. In your example I am sure the list price is at or below market value and I am not sure a bank is going to accept an offer of 120,000. It depends on whether the Short Sale has been approved at the list price (HAFA) or agent is just guessing on what the BPO value is of the home. To answer your question requires some work and knowledge. i suggest you visit my website for answers or email or call me directly as I would be glad to help you.
0 votes Thank Flag Link Fri Nov 5, 2010
Hi Ivonne- 1st you should know that the bank has agreed to accept a payment,from the owners, from the sale of the house that is less than what is owed to them. Hence the term short sale. There are many factors to take into consideration such as: the length of time the house has been on the market, how much is owed to the bank, and what bank you are dealing with. Even though the owners still technically own the house the bank is still going to have to approve the final price. Also keep in mind that when the seller defaulted on their payments, the bank, if FDIC insured, received a payment from the federal government for 80% of the original loan amount. so yes it is ok to go low on an offer. The bank is making money anyway. To buy a house as is is simply a legal way for the sellers and the bank not to be responsible for any repairs the house might need so be sure to do an inspection before you close. I'd love to help you with this and answer any further questions you may have so feel free to call me at 847-707-1590 anytime. Stay in touch, Aislinn Ryan American Realty Network Inc
0 votes Thank Flag Link Fri Nov 5, 2010
A short sale is when the seller owes more for the property then what the property is worth. Most likely the seller paid more at the time they bought the house then what the current market value is. The seller must meet requirements in order to qualify for a short sale. If the seller qualifies, then the seller sells the property and asks the bank to forgive the difference between what the property sells for and what they owe the bank.

A short sale home is usually listed at or very near the current market value. The banks are looking for the best and highest offer that they can get. It's not always price that the banks look at. Cash offers usually fair better then offers with financing if you are looking to make a low offer.

What you need to know about short sales, is that you are dealing with the seller and not the bank. The seller is the one who agrees to the terms of your offer and then presents the offer to the bank and asks the bank to approve the sale. Your offer gets accepted by the seller subject to bank approval. The bank can accept the offer, deny it, or counter the offer. It can take months to get a response back from the bank. It will all depend on the bank and what they have on their plate at the time. The seller can accept other offers, but they should be considered back up offers and presented only if and when the first offer is refected.

You may still do a home inspection but don't expect the seller or bank to give any money towards repairs. Also, as the buyer, there may be fees and costs that you would need to pay for in order to close. Another thing to keep in mind is that lately some banks are asking the sellers to sign a promisorry note for part of the amount the bank is forgiving. If the seller can not or does not want to do that, then the bank will cancel the closing. Make sure that you know the risks involved when dealing with a short sale.
0 votes Thank Flag Link Fri Nov 5, 2010
As stated, a short sale is when the market value of the house is less than the loan balance. The owner does not care too much what price you offer because the owner just wants the house to sell so they can move on with their life, but the bank must agree to the price and they do care and rarely just give the property away. The price you offer is to a great extent based on the current market value of past sales of similar properties in that neighborhood because that is what the bank will look at to decide whether or not to accept any offer. You cannot just arbitrarily offer some price that you feel like paying because if you do the bank may reject it althought they usually counter. The short sale process can take 2-5 months so if 120K is far below the current market value, potentially you will be wasting 2-5 months of your time waiting for the bank to respond negatively. Then again, market value might be 100K so your 120K might be too high or the market value might be 160K so then again you would not likely succeed. There is no % off the list price that banks are looking for. Each bank is different and they are far from consitant in how they operate.
I doubt that you found a 159K house in Highland Park, but wherever it is located my web site lets you search the MLS if you want to check out comparables or obviously I could help. I have worked the city & many Burbs, particularly the North Shore for over 20 years.
0 votes Thank Flag Link Fri Nov 5, 2010
Hi Ivonne, A Short sale simply means that the Bank allows th owner to sell the property Short of what the owner actually owes. As an Investor I usaually offer about 30% less the asking price. In most cases the bank will either accept the offer or come back with a counter. If you are a cash buyer offer less and let them know you can close fast. Typically the bank will not close fast, but it gives you a better negotiating position. All short sales are as is simply because you are getting it at a discount and below market value. Check the market value on Cyberhomes.com

Good Luck! Adam T Barrera
0 votes Thank Flag Link Fri Nov 5, 2010
A "short sale" means the sale of a property for less or "short" of what is owed to the bank. There are many factors to consider when pursuing a home listed as such, but the approach and strategy in presenting the short sale package to the bank are vital. The potential for a below market purchase price is real.

If you are not working with an experienced Buyer's agent representing your best interest (Which I assume you are not since you are asking questions on this forum), feel free to contact me.

I am nationally and locally certified as a Short sale & Foreclosure Resource.

John Gall, ABR SFR
Realty Executives SourceOne
0 votes Thank Flag Link Fri Nov 5, 2010
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