The simple answer to your first question is, â€œNot likely.â€ And if you are going to put an offer in on a short sale, patience is the order of the day. There is nothing â€œshortâ€ about a short sale.
Many Realtors who understand the difficulties with short sales do not like to show short sale listings to their buyers. There are a number of reasons for this:
(1) They may put an offer in, wait for weeks and never get a response.
(2) The offering price may be too low, and, after a wait of weeks, the bank may counter with a higher price that the buyer is either unwilling or unable to pay. Weâ€™ve done short sales where the bank raised the price twice after we were in contract.
(3) The initial price might seem like a good deal, but, after waiting for weeks or even months to close, market prices drop below the offering price and the short sale is no longer a deal.
(4) The property will more than likely be sold â€œas-isâ€ â€“ and usually there are no inspection reports available because no one wants to take the financial risk of doing reports up front. With no inspections in hand, you may be weeks down the road before you discover that your â€œbargainâ€ is not such a good deal after all because of the cost of repairs.
Because many buyersâ€™ agents do not readily show short sales to their buyers, some short sale listing agents often use a gimmick to attract buyers. They artificially lower prices WAY below market value. When this happens, buyers inundate their Realtors with calls asking to see the â€œdeal of the century.â€ They descend on the property like flies and before the weekend is out, there are numerous offers written. And then the wait.
During the wait, a few things happen.
(1) The bank will eventually do a BPO (Broker Price Opinion). Realtors who do BPOs get their data straight from the local MLS and show current sales, actives and pendings. A BPO gives a decent snapshot of the market at the time it is done and gives the bank a good idea of comparable homes prices. The bank will use the BPO to set the price theyâ€™ll accept.
(2) If the listing agent is experienced with short sales, theyâ€™ll have submitted a short sale package to each bank involved and already have had extensive interaction BEFORE a property goes on the market. Once an offer is received, the bank goes through the extensive package required for short sales (hardship letter, complete financial statements, tax records, etc.). This takes time. Notice I said, â€œIF.â€ If the listing agent has collected this data up front, the wait can be shortened considerably. However, Realtors who do not have a lot of short sale experience may have a short sale listing thatâ€™s not been prepared, and then the tedious process of collecting everything happens AFTER offers come in. This lengthens the process considerably and reduces the chances of success. In addition, some properties will NEVER be approved by a bank as a short sale because of the circumstances of the sellers. If this is not sorted out properly UP FRONT by the listing agent, your wait could be in vain.
I know this is a long answer â€“ hang in there. Once a BPO has been done, the bank evaluates the selling price and, if the offer is too low, will counter back with a price closer to market reality. You can try to counter back and forth, but this typically wonâ€™t work. And this all takes a long time. Banks are not motivated to dump short sales in the same way they want to get rid of REOs. They actually want to try to keep the seller in the home and come up with a solution that will save the loan(s). A loan kept on the books even at a loss is better than a foreclosure or a short sale.
Your best bet is as follows:
(1) Locate a local Realtor with a lot of short sale and REO experience. Once a Realtor has done a number of these types of transactions, they have a good feel for what banks will or will not accept. They know the questions to ask a listing Realtor to ensure that everything has been properly done up front. Weâ€™ve done a lot of these types of sales, and, if the circumstances are not right, will not recommend writing on specific homes.
(2) Locate a home that has been on the market a fairly long time. With your Realtor, carefully do your homework about the area and the home in question, then submit an offer. And then get ready to wait.
(3) Some buyers actually submit offers on any number of short sales and wait to see if one of them actually â€œlands.â€ Even though it happens frequently, this is not an accepted practice and has some real ethical difficulties. However, some buyerâ€™s agents are now writing offers that state right in the offer that the buyer is writing on other properties at the same time. Listing agents hate to see this because they can put a lot of time and effort into a listing, get close to a sale and then have the buyer back out at the last minute because they landed another offer somewhere else.
Let' assume that the "appraisal" value you mentioned is a "Fair Market Value" at the moment of making an offer. If this is the case, chances of a lender accepting 50% off FMV are close to zero. It differs from place to place, but lenders usually don't accept offers more than 20% below the FMV. Of course, in location with 10% of homes in foreclosures like Stockton, Tracy or Antioch, it might be different. You can try to wait for a property to go to a foreclosure and buy at the sheriffs sale. After it reverts to the lender, its value usually goes up again when it is sold as an REO (Real Estate Owned) property. Auctions also don't guarantee low price due to a so called "reserve price" set by lenders auctioning properties. Saying all of that, it never hurts to try. Every now and then all "stars align properly" and we get a chance of our lives. The fact that it has not happened in the past, does not mean that it will not happen in the future. The number of foreclosed properties is going to continue to increase.