First of all, you may be waiting a couple of months before hearing anything about your offer. The banks are overwhelmed and until they assign a "Negotiater", to the property no offers will actually be reviewed. There are many steps to completing a short sale and these short sales are all at different stages with different banks that have slightly different procedures.
There is no smooth method or model for purchasing a short sale. Depending on how many loans the defaulting borrower had can make a difference also.
When a property does not appraise the bank will almost always lower the price to the appraised value. I have had them ask for another appraisal on higher priced custom homes that are difficult to find comparables for, but on tract homes it is so easy to find "Recent Sold Comparables", that a second appraisal is usually not necessary.
No body will expect you to come in with money over the appraised value as that is an unreasonable expectation.
You should be looking for "Approved Short Sales". Approved short sales have already gone through the initial process and have had a Broker Price Opinion done and have already had the negotiater assigned.
When this happens often the the lender will make a counteroffer, but not always. I have seen some of these lenders require the buyer to come in with the difference. This really depends on two things:
1. The willingness of the lender to negotiate
2. The skill of the negotiator working the Short Sale.
There are other criteria that may come into play such as it was just a bad appraisal or that there were insufficient market sales to use as comparison properties. Either way there are some things that can be done. The lender can be asked to reduce the price to the appraised value, order a new appraisal, or ask for a compromise somewhere in the middle. If the latter is the result it would be up to you to decide whether you wish to move forward. With most Short Sales either party can terminate the contract until the lender gives their approval of the terms of the original offer that was accepted by the seller. Often the Lender will make a counter offer (typically most lenders will do this even just for small incidentals like COE date or commission reductions) either way this gives the buyer a reason to walk away.
You will generally get your best deal on a new Short Sale as the time it takes to get the approval the market has a tendency to improve (at least in certain markets) thus giving you built-in equity. You could look only a approved Short Sales, but there is often much more competition for these properties.
In any case with Short Sales there is no guarantee of success, however the lenders have been receiving more pressure from the government to cooperate with these types of sales.
First Link Realty
CA DRE 01821999
Office DRE 01926659
CA DRE NMLS 762978
Company NMLS 1008659
another question: how likely is the bank going to approve my new offer which is now $50k under my original. will they ask me to walk or come up with the difference in cash, since there seem to be so many buyers out there fighting over properties?
Withdraw your Offer and come back at the Appraised Value.
Best wishes to you,