Which short sale offer is more attractive to the lender, a low cash offer, or a higher amount that's financed?

Asked by Rina682, Shepherdstown, WV Sun May 17, 2009

I presented an offer on a short sale, higher than the listed price. My offer is on a pre-approved VA loan. Another offer on the same short sale came in, lower than the listed price, but is offering to pay cash. Which scenario is more attractive to the lender? The low cash offer, or the (much) higher VA loan offer?

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Shelby Hunton’s answer
Shelby Hunton, Agent, Murfreesboro, TN
Sun Jan 24, 2010
It really depends on the spread of what the bank has in the property How long they have held it and buying contingencies. If the difference in offers is 10K I bet they would take the cash with no contingencies.
Hope this helps,
Shelby Hunton

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John C Jones, Agent, Murfreesboro, TN
Mon May 18, 2009
The short sale process can vary dramatically by state, but more importantly and even moreso by the bank lender involved. Different lenders have very different requirements on what they can and will accept.

The single most important thing to the lender is the bottom line. Most banks have a set number that they MUST get for the property. If you present 5 offers lower than that amount the house will likely still get foreclosed on. The trick is finding out what that amount is. Then if you're lucky enough to have multiple offers, which isn't that uncommon in the short sale process, they'll get into the logistics of which offer is better. While more money is usually better, the lower cash offer (which usually goes without contigencies) can be very appealing.

But remember, the persons who approve an offer for a short sale are more often than not, a glorified machine. Meaning: Their hands are tied. They have a list of requirements made by their institution. They go down the list and make a decision. This is why it's amazing that getting a short sale approved can take so long!

In my experience, I think you'll find they typically go for the higher offer regardless of contingency unless there the cash offer is not really much lower than the financed one. What you will definitely find is that an offer with a Sale-of-Home contingency will always be sent to the bottom of the pile in a short sale.
Web Reference:  http://www.johncjones.com
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Vicky Chrisn…, Agent, Purcellvile, VA
Mon May 18, 2009
agreed, but i will add one thing - if you are doing VA, and it is no money down so you're asking for closing costs, you need to deduct that from your sales price- that's what the seller will look at, HOWEVER, the home must appraise for the sales price (before deducting the seller subsidy) and appraisals are a growing problem right now. VA is very unattractive compared to a cash offer; to offset that risk, the price on your offer would need to be significantly more.

Last night, I learned my buyer-with conventional financing - lost to a cash contract on a short sale. VA is les attractive than conventional
0 votes
Get-smart, , Durham, NC
Sun May 17, 2009
I agree, it depends on the condition and contingency of the loan approval. The BPO also has a lot to do with the amount of money the lender will accept for a short sale.
0 votes
Julia Odom, Agent, Cleveland, TN
Sun May 17, 2009
It depends on how much lower the cash offer is as well as the condition of the house. If this home is in excellent condition and your offer is significantly higher it would likely be the winning bid. If the home is in need of repairs, a cash offer is generally more attractive even if it's a little lower as there usually isn't an appraisal contingency.
Web Reference:  http://www.JuliaOdom.com
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