To make an offer on a short sale - Or not?

Hi Adam,

 I don't have much experience with short sales.  I'm actually still working on my first one.  Based on that vast experience, here's what I know so far - 1. It took the seller's bank about 4 weeks or better just to approve the amount offered.  After that they wanted to close in two weeks.  However, being that we didn't know if they'd accept the offer, we hadn't ordered an appraisal or title work, etc.  We asked for an extension and received one.  Hopefully we can close this by the end of the week. 

 Good luck!

I have seen multiple sales in my area (Anne Arundel County, Maryland) in which the bank took losses like this.  If it were me, I would make a low offer with large deposit and short settlement.  Good Luck!!

It is really not dependent on what the property sold for a year ago.  What really matters is what the current market value is and what the amount of the mortgage is.  If the current market value has dropped signifcantly then a short sale at that price is definitely a possibility. 

Parking here to read the comments.  Great topic.

I agree with Steve.  The bank only cares about getting their money for the loan back...not the actual market value of the property.  If the sellers put $200,000 down when they purchased that home, then $350,000 is not unrealistic.  I hope you get that contract together.

As long as you and the buyers have the UTMOST patience - I would try.  Often the short-sale banks want to make sure the new buyers have great credit and a good downpayment.  Good Luck - perhaps you can write a series of blogs about your short-sale experience!

Hi I would try but be prepared to wait for the bank.  It might take extra time to close the deal.  I wouldn't be afraid unless your buyers are in a tearing hurry.  Short sales are a way to get a property for a little less then market value.   I've been involved in a few.  Ask the listing agent

1. have you started negotioation-  If it is already negotiated it will be easy.
2. Make sure the price is realistic and not a teaser - I just showed a home that was listed at $199K but the bank wouldn't take less then $240K.  I was pretty annoyed and might have lost the customer.
3. Pull title early and make sure there are no liens -  If they are make sure they are negotiated away
4. Check tax liens -  Those are much harder if not impossible to negotiate.
5. Find out if the house is in forclosure -  You can ask the listing agent.
6. Be prepared to wait.
7. You will need a funding letter and/or proof of funds (for cash buyers)
8. Do not let your client spend money until the bank approves the shortsale
9. Make sure all dates of inspections etc are from bank approval not contract deadline

All this said it can be rewarding for both you and your client.  Don't avoid them just be careful.

The agent may not have set the price the bank may have told him what to list it for. Twice in the past six months I was doing a short sale and the bank did a BPO on the properties and wanted me to list them for $10,000 under what I suggested and the BPO suggest just to get them sold. Now, we are not having the problems you are in California, but the bank may have said, just get rid of them. Put in the bid and wait and see.

I would say go for it! The worst a bank will do is counter offer back at their full price, you then counter offer back with your price and let the negotiations begin. You have to make sure your clients are credit worthy enough to pass credit criteria from their in-house lender which they usually want to them to pre-qualify for. They have the choice to use any lender they want but need to pre-qualify. Usually they want a security depoist in certified funds made out to the listing broker as well.

Good luck, there are great deals to be had and if you are patient you can help your clients get a great home at a great price. You will be bragged about for years about the deal that you helped them into.

Adam,

     Like everyone has mentioned... it may be a possibility.  I found that it depends on who's the bank(s)?  That will tell me if it's a waste of your time or not.  It's all about how they assess and how much their appraisal, bpo, or drive by views(are the worst) are... Good luck.