If a house is listed as short sale-can the listed price be negotiated and by how much percentage?

Asked by Seeker, 08043 Wed Nov 23, 2011

How is buying a short sale different from buying a regular house?

Thanks a lot.

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Mary Petti, Agent, Edison, NJ
Wed Nov 23, 2011

First let me say that even in a "regular" sale, there is no set percentage to negotiate off the list price.

Sales price is determined by current fair market value and can only be determined by obtaining a market analysis from a Realtor based on recent comparable sales.

In a short sale, the owner of the house can accept any offer, however it's up to the bank to decide if they will accept the offer based on several factors, not the least of which if how much of a deficit there is between sales price and what is owed on the mortgage.

Get yourself a good Realtor who knows the area, get a market analysis done, base your offer on that (which may be at list price), and supply the sellers agent with the comps as well. Sellers agent can then send those comps to the bank to justify your offer. Doesn't guarantee the bank will accept it, but it doesn't hurt.
1 vote
John Sacktig, Agent, New Jersey, NJ
Wed Nov 23, 2011

You can offer an amount on a short sale.. But the word negotiate is not the correct word to use.

A short sale is the seller looking to sell his /her home for less than the amount owed.. there is no "negotiation" with the seller of the home, rather a discussion with the bank for the bank to review the offer and decide if it makes sense for them to incur X amount of a loss on the property before foreclosure.. to see what the banks best financial option is.

The bank will ask for paperwork from the seller to prove hardship, inspect the financials of the seller, once that is approved they will order an appraisal, review that against the offer and either accept it.. or say, this is the price we can work with… at that point You can either buy the house or make another offer.. And see what they say. Some banks will counter, some will just say no.

Be alert! A lot of inexperienced Realtors that get a short sale listing will make you jump through hoops in making an offer and "negotiating" a sale price with the homeowner, when the homeowner really has no say in the sale price of the home. First they tell you to negotiate with the homeowner and then tell you to go into attorney review.. for what? Neither makes any sense as there is no accepted offer until the bank says there is an accepted offer.

You need to align yourself with a Realtor that understands short sales and the process involved. I suggest you speak to a Realtor that has the SFR Designation (Short sale and Foreclosure Resource) or another training designation that says “at least I have an idea” on what to do.

Make your offer based on due diligence in the area, and make a reasonable offer. Too many people waste everyone’s times with silly offers that are $200,000 under asking price on a $400,000 home area with a house that has a $450,000 outstanding lmortgage on it. It is NOT going to work out for you.. Be smart and find the agent that can help you reach your goal.
1 vote
Lali Nanidzh…, Agent, Franklin Lakes, NJ
Fri Nov 25, 2011
Hi, ask your agent "Market price" of that house. Make an offer based on that. Bank may take up to several months to accept or decline your offer. Listing agent would know if BPO was done on that house and what was that amount. Some listing agents keep dropping price to see an action and it is not always work. Ones your offer was accepted by bank in most cases you do not have much time to get mortgage. So, get your mortgage almost ready. Do inspection on that home. All of these, of course, if you really want to buy that house and no other, because it would need some expenses up front from you. Best of luck.
0 votes
Judi Monday,…, Agent, Green Valley, AZ
Fri Nov 25, 2011
Hi Seeker,

Find yourself a great Realtor in your area and let he/she help you determine the best price to offer on a home by using the comps in that neighborhood. There really is no hard and fast % that you can use when making an offer that you can apply across all short sale offers. Like every kind of real estate purchase--each one is different and what to ask depends not only on what the home's market value but also on how long the houses has been on the market, condition of the home, and whether there's going to be competition in the bidding process.
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Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Nov 25, 2011
Hi Seeker, picking up on Phil's response I would add one comment - until an offer is presented for review by the bank, and the bank orders the appraisal, the list price is but a guess. What I am finding is that once the bank gets the appraisal, they are not inclined to operate outside of a 10% band of that price. The short sale market remains challenging for buyers because of they are time consuming and uncertain. And while there are good values to be had, shorts are trading at a closer increment to market value. My recommendation to buyers is to include traditional deals in your search as well. This far into the market correction, the "best deal" may not be a distressed tranaction in the end.

Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes
Larry Sarlo, Agent, North Wildwood, NJ
Wed Nov 23, 2011
First and foremost have an experience short sale professional represent you as the buyer for a short sale.

That experience will be able to guide you thru the process and make sure the property you are looking to purchase will not be a big waste of time. By that I mean the selling agent has to be able to communicate and get the job done. Not just tell you what you want to hear and drag you thru the coals only to find out later, much later, you should have look at another property... You can get emotionally involved in a home purchase... and rightfully you should! But short sales can tear your heart out... But if represented correctly you will have at least a good experience of the buying process, with few obstacles.

PRICING! typically a short sale will sell for about 10-20% off the fair market value. accounting for repairs also must be taken into consideration.
Banks only care about numbers... their bottom line. They are not talking with the seller... they are not visiting the property to see what condition it is in... They don't care about anything but their bottom line.
If you don't mind the wait time, typically 3 months since banks are getting better at these...

Very low offers will mean longer wait times and mostly frustration as a normal buyer. Investors with CASH are out there making low offers constantly. they can afford to wait out the process and lose the deal. But a normal buyer cannot wait. There is too much emotion in the purchase. You will want to price to your favor but realistic. The offer must be presented correctly and follow up with the selling agent has to made along with communication. With out communication a buyer will get frustrated. I will say this, if it is between you and investor, you will win the purchase of the bank. Banks want owner occupants. So as an future owner occupant you have that edge when making your offer.

Search NJ foreclosures and short sale here: http://www.larrysarlo.com/shortsales.aspx

Search the MLS on your phone by Text: In the subject line on your mobile phone- LSAR1 -to number 87778 ... hit send... A GPS feature for listings at your finger tips

Larry Sarlo
RE/MAX Preferred
609-868-1171 call / text / email 7 days

0 votes
R. Eric Axel…, Agent, Cherry Hill, NJ
Wed Nov 23, 2011
Seeker, I've seen you on here often. If you would like a sit-down consultation in a professional setting to answer ALL your questions and explain exactly how the process works, please feel free to contact me.

R. Eric Axelson, Associate Broker
Licensed in NJ and PA
Kurfiss Sotheby's International Realty
856.617.1212 mobile
Web Reference:  http://homefinder360.com
0 votes
Scott Godzyk, Agent, Manchester, NH
Wed Nov 23, 2011
The answer is it depends, some agents list homes below market value to attract more buyers, the key is teh bank will not accept an offer much less than 10% lower than current market value. You need to assess what the home is worth in todays market and base your offer on that.


Please see my blog with a full list of tips for buying a short sale
Web Reference:  http://www.ScottSellsNH.com
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Joseph Manci…, Agent, Sewell, NJ
Wed Nov 23, 2011
All good and accurate advice below, so I'd just like to add one thing about price.... SOMETIMES the listed price is totally irrelevant. huh? What I mean is that the listing agent or seller have, on occassion, pushed the list price so far below market value in an attempt (I presume) to get an offer...any offer! When an offer is received, the bank will counter with a number that is staggeringly different., higher of course.

I am sympathetic to the LA and the seller, but unfortunately that skewed list price might give buyers the wrong idea about what "market value" is... Again, as the other professionals suggested, find a good local realtor who can help you understand what the bank will view as market value, and use that as your starting point, not the listing price.
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Annette Law…, Agent, Palm Harbor, FL
Wed Nov 23, 2011
Great answers already. Everything is negotiable...depending!

How is a short sale different?
In every way! There exists an illusion of rules but the reality is anything goes. In the "Wild, Wild, West of Real Estate' also known as short sales, the buyer is in are the most excruciating roller coaster of a ride imaginable. And, as the buyer, you are in the most insignificant, least influential position of all.

Yes, you and the home owner can agree on a price and sign a contract. That's the easy and mostly irrelevant part.

Next the bank, (or servicer) and investor, and PMI company and second lien holder must ALL agree to the price for which they will let you buy the home. It may be considerably higher than listed price depending on the strategy of the listing organization. So you finally agree to the new negotiated price. If any of the parties involved believe the owner has any money hidden under the carpet there will be a gap in the agreement compelling the owner to come to the table with cash. Not a good indicator for success.

Then the bank presents the final agreement to the owner. This may involve a 1099, unearned income for the deficient amount. If $100k was the write off, the owner can be facing a $30K IRS bill! The owner decides who they want to fight, the bank or the IRS. (every situation is different) After 3, 6, 9 months or more, the deal crashes, all time and effort wasted. Only 30% of listed short sales in the Tampa area close. Short sales are NOT deeply discounted from traditional sales as area statistics reflect.

It's certainly doable. But, it is incredibly important you have a great reserve of patience and trust in the professionals representing you.

Best of success.

Other than that, short sales are great!
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Aaron Weber…, Agent, Middleton, WI
Wed Nov 23, 2011
The quick answer is yes, you can negotiate the price on a short sale, but the percentage varies.

The question now is two fold. First you negotiate with the current home owner. You both agree upon a price and then it moves to the next step, the bank. This step can take sometime. The reason is that banks have a lot of short sales to deal with and don't usually have the personal touch as you are just a number to them. So if your accepted offer to the home owner is to low, they have been know to do nothing on your offer in the hopes that a better one may come in.

My suggestion is to work with a Professional Full Time Realtor who has knowledge in this area. The process can be very slow or sometimes quick. It all depends on how strong the offer is and who you have working for you.

The one thing to note is. If you are getting a loan for a short sale. Once you put in your offer you can't put in an offer on another property until the bank rejects your current offer. Sometimes banks can take well over 90 days. So your "money" can be tied up for long periods of time while dealing with a short sale.

But the recommendation here is to find a professional in your area. Their job is to help make this process go quickly, smoothy, and cost effectively. Don't try this alone......
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Phil Rotondo, Agent, Melbourne, FL
Wed Nov 23, 2011
Unless previously lender approved, the short sale list price is a guestimate of the listing agent. The amount of the offer can be different than the list price; and it's approval will be determined by the lender after an appraisal is done on the home.
Web Reference:  http://www.321property.com
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Suzanne MacD…, Agent, Morristown, NJ
Wed Nov 23, 2011
Yes, the offer price can definitely be negotiated. You would be wise to work with a realtor in your area who can guide you as to how much. You will need an estimate of market value and the realtors' insight as to how much short sales are typically discounted of of market value in that specific geographic area. In my area it is typically between 10 and 15%. You can submit your offer and the bank will negotaite with you.

Buying a short sale is different from buying other homes mostly because of the time they take and also because, after you are finished negotiating with the homeowner, you still ahve to negotiate with the bank. It can take a long time, but the reward is you can usually get the name at a discount off of market value. And, if both realtors, the homeowner and the buyer are all cooperative and working together toward the same goal you can shorten the time frame quite a bit.

Best thing, find a local realtor who has experience with short sales. Good Luck!
0 votes
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