Foreclosure in Mebane>Question Details

Shae, Home Buyer in Mebane, NC

How low is too low of a bid to place on a short sale?

Asked by Shae, Mebane, NC Wed Sep 17, 2008

I just placed a bid on a short sale. The first and only owner paid $155,000 for the house 8 years ago then listed the house 100 days ago for $159,900. The price went down to $144,900. The sellers agent said they were talking about lowering the price to $139,900. That was two weeks ago and they haven't lowered it yet. I just placed a bid for $120,000. hoping to negotiate. Do you think this is too low? Also, someone was murdered in the house, that's why it wont sell. It's in great condition.

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You never know how low is too low, until you get a NO! I'm a believer in offering what you think is fair knowing that you could sleep at night if you didn't "get" the house.

Good luck and say some prayers for the person that lost their life! Negative things happen all the time but that doesn't mean the property isn't valuable!
1 vote Thank Flag Link Wed Sep 17, 2008

When banks approve short sales they send out an Agent to do a Broker Price Opinion "BPO", or they have an appraisal completed. Whether Fannie Mae, or Freddie Mac, the bank is looking to net a predetermined dollar amount. I know Freddie Mac wants to net 88% of the Broker's Price Opinion. If your lowball offer nets the magic percentage your offer could be accepted.
0 votes Thank Flag Link Thu Jan 14, 2010
You just never know until you get it submitted - the general rule of thumb with a bank is that you don't have to worry about hurting anyone's feelings. If you are prepared to wait for the offer to get assigned to a negotiator in hopes that the bank will actually agree to a short sale, I personally don't think it really matters where you start - you just want to get the paperwork submitted and the hurry up & wait. They should counter back - eventually, and then you will soon figure out how low they will go.
0 votes Thank Flag Link Thu Jan 14, 2010
Look at this from a bank's perspective. On a short sale, they are going to order a valuation for the property, and compare what that valuation says they can get for the property if they foreclose, versus what your offer is. If the valuation comes back at saying the property is worth $140,000, and the bank knows it typically costs them 15% to foreclose (I made that amount up, only the bank knows what it costs them) then they figure it will cost around $21,000 if the foreclose, so they would want to get more then the Value - FC Costs ($140,000 - $21,000), anything less and they view it as better to FC. (I made up all these numbers, so don't apply them to your particular situation)

You can ask your Realtor to do a CMA on the house to get a rough number as to what the bank's valuation is going to be. Also ask you Realtor to see what similar short sales have sold for in the area, and if any are comparable to the property.

Some things to remember in short sales. What the buyer paid 8 years ago isn't the same as what their current mortgage is. They could have refinanced, or have a second mortgage on it. Many people used their homes as ATM's so they owe more now then what the origianlly paid for the house. Also, listing prices on short sales are deceptive. You could make a full price offer based on the asking price, and it be turned down in a short sale because the lender doesn't approve it. The listing agent lowering the list price on a short sale just serves to get the house noticed by more buyers, it doesn't reflect what the bank is willing to accept. The number that is most important is what the bank's valuation comes back and says its worth. Check some online valuation sites, as the banks use similar things to get initial values, and see what the house is valued at. This will give you a very rough estimate of a value for the house.

You're offering about 80% of the asking price. You need to determine the value based on sold properties over the past 6 months, and then compare your offer to that value. If it's the property I think it is in Mebane, then a $120,000 offer is well below what the bank likely is going to say the property is worth.

And the last thing to remember about short sales, is to have patience. They can take a long time to get an answer from the bank. 30 to 45 days sometimes. The worse they can say is no, and then you increase your offer until you get a yes or decide it's too much for the house.
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0 votes Thank Flag Link Wed Sep 17, 2008
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