Do banks generally allow a short sale for below the listing price? If not, how much higher is the final price different from the listing price?

Asked by Welovetustin, 92780 Sun Sep 26, 2010

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Thom Colby, Agent, Irvine, CA
Sun Sep 26, 2010

I suspect you are the buyer since your other questions relate to typical Buyer questions.

The List Price has NO bearing what so ever on the final sales price. The ONLY thing that matters is what the actual fair market value of the proeprty is, based on homes that are similar to the subject property within 1 mile that have closed in the past 3 months.

Remember, the bank is NOT approving the sale price - they ARE approving the amount of LOSS they are willing to accept based on the loans they currently hold. The bank will provide guidance on items they will not allow to be paid from the proceeds of the sale which would increase their loss, such as delinquent HOA fees, Repairs, etc.

The bank(s) will always have a Broker and an Appraiser provide opinions of value to simply ensure the property is not being sold at too low of a price, too high of a price, but at market value, again based on current sold comparables.

Always use a REALTOR.

Best of luck,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
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2 votes
Felix Hung, Agent, Huntington Beach, CA
Mon May 28, 2012

Thom provides a great answer!

The list price on a short sale is set by the agent and homeowner but it has NO barring on what the short sale lender will evaluate the property at when they do a broker price opinion on the property. If you get a huge counter - most times it's because the listing agent priced the property WAY too low in the first place.

The best advice is to find an agent locally who has short sale knowledge and understands the comps and pricing in the area. Both are needed to properly help a short sale buyer.

0 votes
Stephanie Ha…, Agent, Torrance, CA
Wed May 23, 2012
The value of the property is the determining factor in what the bank will accept. Listing price is sometimes no indicator. If the listing agent knows the market well, they will hopefully price a short sale accordingly. Generally short sales should go for just slightly under market value. Oftentimes there are other factors, such a differed maintenance, or outright neglect, when a short sale is involved. If the listing agent does no groundwork to show the bank the current " as is market value" the value the bank comes up with could be significantly higher than appropriate. Some agents purposefully list short sales at extremely low list prices to bid a property up. It would be best to have your agent run comps and write the offer for around market value.

Happy house hunting!

Stephanie Hart
Forecast Realty
CA DRE 01338444
0 votes
Kawain Payne, Agent, Seal Beach, CA
Fri May 11, 2012
Banks will generally want to reduce the amount of their loss as much as possible in a short sale.

I have seen short sales go for exactly list, or a few thousands $ above list price. Very rarely will they go for below list price unless the property was not price correctly to begin with.

If you are thinking of buying a short sale be preparred to offer at least list price, and be preparred for the bank to even come back and approve the short sale but demand a price above list price.

Best of luck to you.

Kawain Payne, Realtor
0 votes
Scott Aubin, Agent, Mission Viejo, CA
Tue Jun 7, 2011
If you are looking at buying a Short Sale, the listing price is not the price you should be focusing on. I have seen many different pricing strategies for Realtors listing Short Sale properties for sale.

I recommend working with a Realtor who will take the time to look with you the buyer at the recent sales of comparable properties in the area that are similiar to the property you would like to put an offer on to determine the market value of the property and then go from there.

You have to remember, the lienholder (Bank) needs to approve the short sale. If you are making an offer well below market value, most likely the bank will not approve the short sale.

Other things that need to be considered when making an offer is whether or not there are other offers on the property. If there are several offers on a property, it does not make sense to make an offer well below the other offers.

Scott Aubin
LUXRE Realty
0 votes
Ted Zervouda…, Agent, Huntington Beach, CA
Sun Jun 5, 2011
How is your home search going? How many offers do you have out on short sales and have you already closed on one?

The best deals are not always short sales or forclosures. Often times the equity seller who needs to move fast is the best deal because you as the buyer do not have to wait around for the negotiating on the offer.

Hope the hunt is going well.
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Sun Sep 26, 2010
Hi Welovetustin,

I like Tustin too.....:)

Listing prices on short sales are normally just ridiculous....priced so low to get a quick offer. Not always...but normally. If you find a home that you really like (and are willing to wait for) then use a Realtor to help you determine the fair market price based on the comps and then write a reasonable offer. Doesn't mean you need to pay top dollar.....go in at the bottom end of the range of value (unless there are other buyers and you LOVE the house) and then wait for approval. If you are reasonable, normally they will approve your price.

The problems start when an offer is submitted which is so low as to be crazy and then the buyers are just out-of-luck, and time, and the listing agent just moves on with an "approved" price.

If you are looking for an agent......I'd love to speak to you more about this!

0 votes
Terry Bell, Agent, Santa Rosa, CA
Sun Sep 26, 2010
The listing price of a short sale is set by the listing agent after doing some comps. When an offer is received and accepted by the sellers, it goes to the lender for approval for the short sale. It's only then that the lender is going to have their own appraisers do their own comps and decide whether they want to counter offer to the buyers. Since every short sale results in a different amount of loss to the lender, it's really a case by case situation for the lender to assess how much of a loss they are willing to write off vs. waiting for another offer or doing a foreclosure. Terry Bell, Realtor, CPS RE, Santa Rosa, CA
0 votes
Steven Abrah…, Agent, LAGUNA BEACH, CA
Sun Sep 26, 2010
With regard to a short sale, your broker should list the property at or near market. The lending institution will consider, most of the time, but not all, offers 88+% of market value.
Don't focus on the listing or asking price, but the market value.
I am representing a seller in North Tustin and we should be closing in two weeks. The bank agreed to approximately 88% of market value.
A few years ago, short sales were the 'Wild West". Institutions were overwhelmed and frankly they had No real plan of action.
As of lately, the majority of the banks are attempting to get it together.
There are other factors to consider as well, for instance if the loan is an FHA loan.
There are different guidelines for every loan and every lender.
Also, it really boils down to what the owners (investors) of the loan want to do.
Should you need professional assistance, please do not hesitate to contact me.
Steven Abraham
Prudential CA Realty
Licensed Real Estate Broker
"25 Years of Professional Real Estate Experience"
CEO-Laguna Castles, Inc.
949.378.4005 Cell
0 votes
Vicki Lloyd, , Lake Forest, CA
Sun Sep 26, 2010
It all depends on how the bank looks at the realistic value of the list price. Quite often short sales are listed at well below market value to encourage lots of offers quickly.

When the offers come in, the listing agent helps the seller pick the one that looks the strongest with the best qualified buyer. A large down payment, or all-cash offer has a much better chance of being approved by the lender.

Your agent should check the comps and help you write the strongest offer that you are willing to do, and also include the short sale addendum form that allows you to do your inspections and investigate all disclosures after the lender has approved it.

Any time you make an offer on a short sale, be prepared to wait several weeks to several months for a response!
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0 votes
Emily Knell, Agent, Huntington Beach, CA
Sun Sep 26, 2010
The listing price, to me, doesn't amount to a hill of beans, it's just a number. I could list a short sale in a neighborhood that is fetching $450K for on particular model & list it at $420k or $500K, ultimately you REALLY need someone to help you with your homework. Which is, examining with a magnifying glass the actual recent sales, learn them inside & out and compare to the subject property.

No matter what the list price is, the place is going to appraise at a number that is in line with other current area sales. Find that number or small range in difference. Even when you find that number of what appraised value is going to end up being OR even when the appraiser does actually go out & now you have THE number, that price CAN still go down.

Example: I have a short sale I listed at $425K, it appraised for $440K, but we still got the bank to accept $425K & pay 3% towards buyer closing costs.

There is a lot of strategy that goes into negotiating a short sale and it does not have to do with whatever the Listed Price is.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sun Sep 26, 2010
Much will depend on the lender and the listing price, verses, recently sold similar properties in the immediate area--what is your agent suggesting.
0 votes
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