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How do I price my short sale?

Now that you have prequalified your short sale listing, your next challenge is to correctly price you listing. The first thing you must do to determine your price is to pull comparables, or "comps." Be sure to search specifically for short sales and REOs, if possible. For example, in the MRMLS, you have the ability to customize your searches to include only short sales and REO listings. This feature can be found under the "legal" section of the detail search criteria.

Now that you have your comps, the second thing you should do is analyze them. In the one-line view of your MLS search, organize your listings by price, from lowest to highest. This may take a little due diligence on your part, because some MLS sites will not provide you with the ability to search specific listings of REOs and short sales. What you want to discover is which short sales are priced slightly higher than the REOs. The lowest target price for your listing should be no less than 5% lower than the lowest active non-REO.

Ultimately, you should try to have your listing as one of the 5 lowest active listings above the highest active REO. The reason for this is that once the lender has received your offer, you will need to justify that offer amount. You'll find that it is virtually impossible to get a lender to approve an amount that is lower than an REO. One of the few times you might be able to get a lender to approve a price that is lower than an REO is if they are recapturing at least 80% of the original loan amount.

For more information on pricing your short sale, or if you have any questions on short sales in general, please call Phil Williams at 1-866-820-4357 ext. 25 or e-mail him at phil@foreclosehelp.com

Posted by Pete Gliniak on 06/26/2008 02:10 PM

Comments (17)

short sale, short sales, short pay, short sale pricing, pricing, mls, default, foreclosure, nod, reo

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17 Comments on How do I price my short sale?

JUN

2008

Good information. Make sense. I will get to price one soon I hope.

Pete,

Thanks so much for this great information. The "mystery number" of what is and is not acceptable to the banks seems so arbitrary sometimes....

Looking forward to more of your posts.

JUN

2008

Pete, good post and well written.

Chuck - Good luck, I hope it goes well for you.

Julie - Yes, pricing a short sale properly can be very confusing, as there are many variables that can affect how much the lenders are willing to accept. Of course, what I wrote was a more general guideline for pricing, not something that is set in stone. It's not a perfect science, but it should help you to generate interest in your listings and to be able to justify the price to the lenders.

Jim - Thank you. I wanted to try to make a complicated subject at least a little clearer. Have you been encountering many short sales over there in the Orange County area?

JUN

2008

Pete, Yes, there are shortsales in OC. I also find that there are also alot in LA as well. Many NOD being filed daily. It looks like the market is going to be like this for a bit here.

What is your closing success rate on the shortsales approval?

i am confused - I didn't think that the bank would help with pricing until the first offer comes in - at which time they do a BPO - Can you actually get a price out of the bank before that first offer?

JUN

2008

Jim - We receive many short sale leads at our offices daily and conduct viability studies on every single one. After these studies weed out the non-viable ones, we close approximately 80% of all our viable leads.

Marcia - No, you can't get a price out of the bank before a first offer, but based on our many years of experience we have developed this formula to assist in pricing our short sales so that we can get that first offer.

JUL

2008

Hi Pete. Thanks for sharing the great tip! Keep them coming.

JUL

2008

Vincent - Thank you. Be sure to check out my other blog entries as well, I have posted some valuable information in them.

This method works for me every time:

Lower the price every week until you get an offer. Hasn't failed me yet!

JUL

2008

Best case scenario I can give you would be to follow the BPO guidelines the lenders use to Value your home once an offer is presented. Sold comps less than 90 days old within 1 mile 93 miles if suburban) +/- 5 years in age and +/- 10% in square footage. If your comps are truly reflective of these prices then this is your sales price.

The bigger issue is what price is the 2nd mortgage company going to accept? Are you asking for a 50% write down? If so unless your market is REO driven the lender is going to be difficult to convince

Covina! I grew up in Baldwin Park, about, uh, 45 years ago! A long time! I am working short sales here in Indiana and price them similiar to your description. Sometimes it is still too high and you have to go out on a limb and hope to attract attention!

JUL

2008

Butler - Great idea. I also use that approach, but I have found that every week is a little too frequent. I tend to lower the price every 15 days in hopes of generating more interest in the listing.

Paul - The formula you outlined is a great set of guidlines for pulling comparables. As I'm sure you realize, there are a number of equally viable ways to price a listing. As for the second part, I have discovered that most lenders are unwilling to even negotiate unless they are going to recapture at least 10% of the original loan amount. As it stands today, most 2nd/Junior lenders would be getting nothing for the majority of potential short sales.

Evelyn - It's always nice to meet a fellow short sale specialist, especially one raised in the area. Lowering the prices on your short sales even further in hopes of attracting attention is a scenario that you will see quite frequently in an REO-saturated market, like we are in right now.

JUL

2008

I agree with Butler although I don't lower the price every week. I start at just a bit under FMV, and then systemically lower the price until propect traffic is generated.

JUL

2008

Wendy - As I said earlier in my response to Butler, I have found that lowering the price approximately every 15 days is the right amount to hopefully generate some interest in your listing.

JUL

2008

One negotiator at Citi has indicated with Citi to initially list the Short Sale at the price of the highest comp, coinciding with your BPO.

JUL

2008

Heather - Did this negotiator disclose to you how often they would agree to reduce the price, and at what dollar increments? If they have not indicated these to you, I would ask them what they are ok with. If you do start high as they have requested, they may be more willing to approve your lower offers, but you will most likely need to reduce your price multiple times in order to get these offers. If your clients have just begun to miss payments, you might have enough time to start high as the lender requested, but if the house is further into the foreclosure process you may have to request that the lender meet you halfway on the pricing. Given today's market, your final price will more than likely coincide with the formula previously outlined.

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