35% of the overall market value -
What I meant was something like this.
Say a home is worth $100K. A regular seller may sell you the home for 90K in this market. A bank (foreclosure) may sell you the home for $80K to $75K and a short sale may allow you to get the home at $65K.
So you may get an addition % due to the fact that it is a short sale over and above what you would get on the market for foreclosures or resales.
Hope that clears it up.
I usually call the lenders and find out what their policy is regarding short sale pricing. They usually tell me to price at the market value so it will sell. I will do just that, and do a lot of marketing. However, in a buyers market and with a short sale, the buyers will be looking at getting a good deal, which means the prices will generally go down. I will document that while reducing the price.
The banks do want to see good faith effort, and also, if the house is priced artificially low to start with and there is no com parables to show the lenders, then you will have a more difficult to get approved (which means a couple of months down the road - waiting for lender to approve).
If I have priced competitively, showed the banks we have done everything to sell, and dropped the price; along with the CMA and BPOs, I feel we will have a much better chance to get approval from the lenders - I always provide my own CMAs in addition to their BPOs.
Price should be determined with the following considerations - Client Goals, Competing properties, and recent solds usually within the past 6 months (Market Comparables). When listing a short sale complete a proposed BPO (Broker Price Opinion) and pre-submit it to the lender requesting a "range of price" to be considered for a short sale. That becomes a "target" for you and the lender when marketing the property to sale. The key when working with "short sale" properties is loss mitigation, getting the client out of the mortgage with the least amount of loss avoiding foreclosure, and facilitating a quick sale while managing a highly stressfull situation.
Here are the techniques I use and they seem to be extremely effective. Now if you are just talking about pricing then I would say start a bit above the market and move the price down aggressively and consistently over a period of time. For example, if you have a listing that would sell for 250,000 I would start at a list price of 265,000 or 270,000, and then move your price down 5,000 to 10,000 every week. We do this for 2 reasons. Usually when you take the listing you have paperwork to gather from the seller, such as proof of hardship and income verification. This extra week or so on the market will give you time to get your file complete and put your short sale package together. Also this technique allows you to fight the lender if they are going to counter back with an outrageous price. All realtors and everyone needs to relize that a home will only sell for a certain price and with short sales we are finding that they are going a bit below market, because the buyers are leery of wasting time with a short sale that wont go thought and they also have to wait 5 to 10 time longer for an answer form the lender(s). As for negotiating and dealing with your local MLS board thatâ€™s a whole different issue.
Hope that helps
John A Cooper
The Cooper Group
Keller Williams Realty
We were just discussing this in my office. I think you have the duty to list a short sale at the reasonable price and in private remarks state that this is a short sale situation. Let the Buyer's Agent then take action. Of course, as I am sure you are aware, price the property low enough to get the attention required to move it.
Hope this helps.
Most Short Sale properties should be priced at or near fair market value, although some agents will begin with the total payoff amount owned by the homeowner. Consider listing the property based on your YPO or appraisal 10% below the 1st mortgage payoff, PLUS 10% of the 2nd mortgage payoff. Do not include commissions, unpaid taxes, liens, or repairs in your list price.
Anthony Acosta, Jr.
Short Sale Specialist
866-515-1966 Toll Free Cell
But I figured out a solution!! Bear with me...
After mutual acceptance the bank orders an appraisal or BPO on the property. If that appraisal/bpo comes in higher than your sale price, you're in trouble. Most buyers walk away when you tell them the price has to be increased for bank approval.
When this happend on my listing I felt frustrated and out of control. Here's what I did to get a little control back...
Step 1: TAKE THE KEYBOX OFF OF THE PROPERTY right after mutual acceptance.
Step 2: WAIT FOR AN AGENT OR APPRAISER TO CALL YOU FOR ACCESS TO THE HOUSE. The bank will order an interior bpo or appraisal after they're notified you have mutual acceptance. They're going to need to get into the house and they will call you.
Step 3: TALK TO THAT AGENT OR APPRAISER ABOUT YOUR COMPS AND MARKET CONDITIONS. If the agent BPO or appraisal comes in close to your sale price, you've just avoided a big hurdle in the transaction.
Since I started doing this I've had almost no problems with the Bank trying to influence my sales price after mutual acceptance. Check out http://www.ShortSaleSuccessKit.com for more.
The reward is an extra 5 to 10% below what the market (in Georgia anyway) is for foreclosures. Sometimes that's up to a 35% off of the market value (and YES, it's worth the wait - assuming you have suitable living arrangements).
Your Realtor may be saying that about those types of homes due to your situation. I would tell buyers to avoid short sales in particular if they need to be in a home in 60 days or less.
(Hope it's not too long for you.)
Top 10 Seller Short Sale Questions..Answered
Most Common Questions A Seller Will Ask You
Number 10: I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me? Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.
Number 9: If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount? The mortgage insurance is not there for your protection, just the mortgage lender's.
Number 8: Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale? No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.
Number 7: I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale? The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California its taking 6+ months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.
Number 6: Will I still have to pay property taxes if I do a short sale? Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.
Number 5: I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale? The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.
Number 4: Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true? It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.
Number 3: How do you, my listing agent get paid...who pays your commission? The bank will pay the commission along with all the other usual closing costs.
Number 2: Do I have to miss a payment to do a Short Sale? No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.
Number 1: I want to do a short sale and have a 2nd mortgage, does this make me ineligible? No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.