Short sales come down to one thing. Net loss. Each bank has their own calculation for coming up with what percentage of BPO/appraisal price they are willing to accept. I have done over 20 short sales since January and I can tell you that regardless of what some people are advertising, the banks are netting approximately 90% (for a bank or securites backed loan) -100% (Fannie or Freddie backed loan) of value on their short sales. They do not consider our market bad enough to take major losses. Back in January, we were getting approximately 80% of market value, but that number has decreased significantly since June.
In most cases, the bank will call the Realtor with what net they will accept and it can be accepted or rejected. They don't tend to do counter offers, but they will allow you to bring your offer up. Be careful though because some lenders, including the largest loan servicer in America, will just close the file if the offer is too low without ever giving a net amount.
I tell all my short sale buyers to purchase a house because they love it and really want to live there, not because it is a short sale. As Scott mentioned, most do not close. Take a look at Eagle, Idaho. Only 5% of the short sales since January 1st have gone to closing YTD. Improve your chances and make sure the listing agent has experience negotiating short sales. This will save you time and heartache.
Jim Paulson, CRS, GRI, EPRO, Broker
Owner/Broker - Progressive Realty Corporation
You are obviously getting quite an education about short sales here. Kristine is correct in what she is saying about short sales. The best way to approach them is to have your agent do a market analysis on the home. Typically all the short sales I have successfully completed the banks will not accept more than an 8-12% loss.
If the bank has already approved 330K the there is not much chance they are going to come off that price as it's what they have determined is worth it to take the loss vs. the cost of the foreclosure process. The upside is if they have already approved it your closing should go much quicker.
If you do get an accepted offer it will come with an addendum that you are buying the property "as is." I would wait to do an inspection until the offer has been accepted by the lender but you should still do one none the less to make sure there aren't any major repairs needed.
As you've already made clear the process is very confusing, and it isn't helped any by the number of agents who have different ways of doing them. Some of the tactics agents are using are not the most ethical. Most of what you see in this post is correct. Like Kristine says it's critical to get an agent experienced in handling these. On the flip side if the agent representing the seller is doing something that doesn't seem right, run away. These types of sales take too much time and energy to waste it on a transaction that is not likely to go anywhere.
Thanks for posting a great question.
When the seller accepts the offer, it is with a contingency that the lender also approve it. For the record, lenders can also unexplicably decline offers. There are lenders who do not do any short sales at all, some that will not short sale anything other than primary residences, or firsts that feel they have enough equity that they should not accept a loss because they can get more for it in the *REO market.
*REO is a home that has been foreclosed upon, gone to auction, did not sell at auction and is returned to the market as a banked owned property by .
If the appraisal is less than approximately 45 days (90 for Fannie or Freddie) old they will usually use the one they have on file and it is doubtful they will come down much off their original net price. If it is older they will order a new one or a BPO to determine value changes. I will tell you the fact that more than one offer has been submitted will probably hurt your chances of getting the price down. They will most likely respond with a multiple counter offer to bring the offers up.
Your agent can ask for the offer price on the other offer. The decision will be made by the seller and sellers agent as to whether they will tell you. It depends on which scenario benefits them more.
The fact that they have already approved the short sale definitely will cut down on the amount of waiting time. A lot of the tie up on short sales is verifying the information provided by the seller to approve the short sale. You are definitely ahead of the curve.
It is impossible to tell you the best offer because I don't know anything about the house or the area, but I would go with Scott's recommendation and put your best foot forward.
Just make your best offer and maybe you will get lucky. I recommend that you have your realtor discuss with the listing agent the stage in the process they are in with the bank. That may give you some idea of your chances with the bank. If you aren't working with a realtor, or if they are not comfortable with the short sale process - I strongly recommend that you find one that is. Let me know if you need any help with this.
BPO = Broker's Price Opinion. It is basically an appraisal done by a real estate broker. The bank already telling them they are willing to accept the listing price would be a good sign if you were planning on making an offer for that. Where you want to offer less will still cause you to go through the long process.