A point of clarification - in a short sale the contract to sell the home is between the buyer and the seller. The short sale lender is NOT a party to the contract. As with a standard sale, the seller accepts the best offer they can get. The lender than has to agree to accept payment of less than the amount owed them (a discounted payoff) in exchange for releasing their lien against the property, which allows the buyer to obtain title to the property free and clear of liens. An experienced short sale agent will counter a "low ball" offer rather than waste their time negotiating an offer they know the short sale lender will not accept.
As I stated in a prior post, the bank obtains either an appraisal or a BPO (broker's price opinion) on the property and therefore they get an understanding of the value of the property. The sale needs to be within a reasonable percentage of the fair market value or the bank will REJECT the discounted payoff, thus preventing the sale of the property.
In California, due to a new law that went into effect on 01/01/11 and amended on 07/01/11, a lender who accepts a discounted payoff also waives their rights to pursue the original borrower for the deficiency. This is creating a climate where the lenders really scrutinize values and push for more money. A good negotiator will be able to get you a discount on the fair market value due to the home being outdated, but generally the banks only want to discount for NECESSARY repairs, not tile countertops.
I hope this provides you some good insight into the short sale process. Good luck in your home search and Dare to Dream.
Shel-lee Davis, QSCÂ®
Certified Distressed Property Expert â€“ CDPEÂ®
Short Sale & Foreclosure Resource â€“ SFRÂ®
Certified HAFA Specialist â€“ CHSÂ®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty