I would recommend you submit an offer with a price you feel comfortable with. Keep in mind the seller has to agree to then it is subject to the lender(s) approval. I say go for it. The worst that they can say is no at the price you offer and counter or reject outright. You can always submit another offer. your biggest obstacle will be with the lender(s). I suggest you look at some of the comps in the neighborhood of active and recently sold. this should give a good idea of what to offer.
In this area--and the closer in you get to DC--the greater the likelihood that the buyer will pay more than the asking price. There are two ways for this to happen. One is multiple offers on a desirable property; just this week I know of two situations of multiple offers on short-sale properties. Another way is that after a contract is ratified, the bank may give its approval contingent on the buyer throwing in more money (I've seen lenders ask for an additional $10K and even up to $30K more).
Just because the seller might agree to a price that is less than the listed price, it ultimately depends on what the bank will accept and needs to get in order to clear the loan from their books. Unfortunately is seems in the market right now, the listing agent and sellers don't send into the bank all the upfront paperwork, so that delays the process muchless having some idea how much the bank needs, which will ultimately be the sales price.
Taking a position of negotiating a "short sale" could be tricky. Simply stated, with a short sale you are actually negotiating with two owners. First, the traditional owner and then the bank. These transaction will not happen without the approval of both parties,
If you are fortunate enough to identify a "bank approved" ahort sale price, the likleyhood of the lender decreasing their previously agreed upon price is suspect. Unless you can demonstrate through records and documentation that the asking price is unrealistic, a decrease may not occur.
Additionally, with most short sales the buyer first negotiates the acceptable price with the owner and then goes through the same process with the bank. It has been our experience that in most cases the bank takes a position of negotiating a higher contract price than the owner.
In these transactions, the owner wants out while the lender wants to recover as much of their investment as possible. Many times there are unseen expenses associated with a property that the loan holder is not aware of until they have sufficient time to investigate. other loans, judgements, liens, damages, legal fees etc. can also add to the final number.
While getting the owner to lower their asking price, the lender must base their price on the local market activity and the debt tied to the property.
The bank is going to do two BPOs(broker priced opinions) on the property only once an offer is in hand. You may be the first offer so you will be the guinea pig. Your broker should do a CMA to determine prices for the area. The bank will counter based on the BPOs. You make the offer you think is fair but know they will counter.
You should also find out how many banks are involved and whether this is a portfolio loan with the lender or if they are servicing a Fannie or Freddie owned loan. Only about 20% of short sales in our area go to closing. If the bank is only servicing the loan, in a short sale they take the loss. If it goes to foreclosure Fannie or Freddie takes the loss. They have no incentive to take the loss. If there is a second bank, they or the mortgage insurance company may decide that the loss is better taken later and let it go to foreclosure.
There are a lot of variables and an experienced agent should be able to help you with this process and find out where the seller is in the short sale process.
Have your agent check to see if the paperwork has been submitted before wasting your time putting an offer together.
Since there is no guide to establish a set price, there is no rule to establish how far off that someone should offer. As the others have said, have an agent who doesn't represent the seller complete a comprehensive market analysis to establish what the market for similar homes are going for.
An agent experienced with short sales will consider who the lender is, how long it may take (just a guess at best, but different lenders have different track records) and what approach may be most successful with the lender and the seller.
One theory however, is that some lenders will approve a short sale if it is within 10% of the Broker Price Opinions. BPO's are not the list price, but another agentâ€™s independent determination of what it might sell for. Discuss this theory with your agent and proceed as you both see best. Good luck.
If it is listed with a Realtor then the Realtor listed it at what he/she believes the bank will take unless the short sale already has an approval on it, If it does then the price your looking at is the price the bank will accept.
All the Best
Dave & Lisa