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The Formula for Pricing Short Sale Properties.

Real Estate Broker/Owner with Vision Real Estate

June 26, 2008 06:03 PM

I would like to thank all of you for the great feedback. I will now reveal the simple formula for pricing Short Sale Properties.

By the way we have a winner... or close. Eric Reid from Lawrenceville GA with Renaissance Realty Group is pretty close. Please join our group if you haven't already. If anyone has a Short Sale that you need help with in GA or a referral I'm confident from his response you would be in good hands with Mr. Reid.

What you do not want to do with a Short Sale is price it to high and risk sending your clients home to foreclosure and end up working for free. Remember one of the golden rules we first learned in real estate. We have an optimum selling window the first 14 days or so, then our interest drops dramatically every day that passes.

You have to price the home right when you first list it, that is one of the keys to a successful Short Sale. Do not chase the market. Here are a couple of other pricing suggestions before we get to the formula.

Get the written authority when you list the home to have complete control of the pricing, remember you are the expert.
When you price the home be sure you have seen and really understand the recent SOLD comparables.

Ok... I can't expose all the tricks now or you won't buy my book! Just kidding no book... yet!

Pricing Formula:

The price is not based on a 1st or 2nd mortgage. The banks, actually the investor groups will generally accept 10%, in certian markets as much as 15% below the BPO or Appraisal in some markets... (I hate to mention names, CA - NV - AZ - FL). The BPO is required to provide the lowest basis to arrive at a value. IE: they should use the most recent - lowest SOLD.

Example:

If your most recent SOLD comparable is $300,000, then 10% of this would be $30,000 with a list price of $270,000. Really quite simple and that is information directly from my dealings with many, to many loss mitigators.

Thanks again for the comments and suggestions, I hope this may help a few. Feel free to check back often and join our Short Sales for Dummies Group.

Comments (14)
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Bill C. Merrell

Merrell Institute ~ Appraisal Education Network - Bohemia, NY

Ph.D. - Merrell Institue

Good Advise- Thanks for the posting.

Bill

Jun 26, 2008 06:11 PM

Christine Donovan

Donovan Blatt Realty - Costa Mesa, CA

Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I have bookmarked this for future reference. Thank you for your willingness to share your secrets.

Jun 26, 2008 06:12 PM

Lisa Lambert

The Law Offices of Elisabeth A. Lambert - Fresno, CA

Esq. 1031 Exchange Expert

Great information Christi. Yes, California has been a tougher short sale market. But I think it's because we were seeing faster devaluation than in some markets.

Jun 26, 2008 06:24 PM

Jaret Ghent

Vision Real Estate - Roseville, CA

Expert Real Estate Advice

Thanks Bill, check back often!

Thanks Christine, we believe sharing is caring! Feel free to join our Short Sales for Dummies Group.

Thanks Christi, we feel your pain I SOLD homes in 11 different Northern California County's since 1997 until we left in late 2007. Glad to be back in Boise Idaho! Check in often and maybe learn a few more tips and tricks.

Jun 26, 2008 06:49 PM

Jim Quinn

Century 21 - Anaheim, CA

North Orange County Real Estate

Thanks for the advice and the formula. However, I have heard that some lenders will not approve a shortsale if it is priced 10% below market value of the last SOLD comps, especially if it is an REO.

Jun 26, 2008 07:10 PM

Mihaela Stoops

Aloha Realty Group - Lahaina, HI

REALTOR - Broker, Your Maui Real Estate Professional

i see short sale properties here ( Maui) listed for 20% more than the sold comps....

Jun 26, 2008 07:22 PM

Jaret Ghent

Vision Real Estate - Roseville, CA

Expert Real Estate Advice

Jim,

Our experience is that 10% less than the lowest SOLD is what the investor groups will approve in a Short Sale about 90% of the time. Although, the key is truly understanding and knowing what that comparable is. You are correct about REO's, they are different because they are an asset, not a liability. REO's should be priced at market value, IE: not more than 10% less than the current competition (actives) or not less than the most comparable recent SOLD in the past 30 days to 60 days max.

Thanks for stopping by, come back soon!

Mihaela,

I'm sure your correct about Short Sales being LISTED for as much as 20% more than SOLD comparables. I see this all the time... and it is why they do not SELL. Take a look at what your market Short Sales are actually selling for and get back to us.

Thanks for your comment.

Jun 27, 2008 06:02 AM

Jim Quinn

Century 21 - Anaheim, CA

North Orange County Real Estate

I spoke with a loss mitigator on one of the files and she stated that I cannot use the REO sold comps as comparables. I cannot believe that. She said those are REO and their investor will not look at those as acceptable comps. It would have to regular sales that were SOLD recently. Have you experienced this on your shortsales?

Jun 27, 2008 07:37 PM

Jaret Ghent

Vision Real Estate - Roseville, CA

Expert Real Estate Advice

Yes,

They have to be SOLDs that are not REO's... because typically the REO's as stated earlier are priced 10% less than the active RETAIL market.

Here is a good rule of thumb: When pricing distress sales, only use non distressed sales or solds as comparables.

Hopefully this is some further insight!

Jun 28, 2008 04:57 AM

Jim Quinn

Century 21 - Anaheim, CA

North Orange County Real Estate

Kristi/Jaret,

The only problem about finding non distressed sales that are SOLD are very rare. The majority of the similar comps SOLD are the ones that are REOs. If we cannot use them as comps, it is difficult to get comps that are nonREO. That is the problem I've been seeing.

The way I see it is if they are similar comps, whether distressed or not, it should be considered as comps. That is what the market dictates and it just makes sense to be allowed. This is the most distressing part about finding comps for these distressed properties. However, I do see agents pricing them at or below those REO properties that are active.

Jun 28, 2008 05:10 AM

Jaret Ghent

Vision Real Estate - Roseville, CA

Expert Real Estate Advice

Jim,

And your right, it is difficult to find non-REO comparables. Again... your right the banks should allow them and some are starting to understand this, especially in certain deflated markets. Unfortunately, like everything else, since they are not on the "streets" instead sitting behind a desk somewhere in the country or possibly somewhere in the Middle East they do not really understand the "real market".

Jun 28, 2008 07:38 AM

Robin Chlad

Realty Executives Southern Arizona - Tucson, AZ

HI Kristy, I have been reading all your info on short sales and I find it very helpful. I have never sold a short sale because I have been told by several seasoned agents and brokers to stay away from them if you can. But I am faced with selling my own house as a short sale. Have you had any experience with banks not being so cooperative with agent owned short sale properties? If you have, what has been the out come?

Jul 06, 2008 03:43 AM

Jaret Ghent

Vision Real Estate - Roseville, CA

Expert Real Estate Advice

Robin,

Great question, I will write a post on "Agents Selling their Own Homes". It will be filled with some great insight and advice. Keep a watch for the post and thanks for stopping by.

Jul 06, 2008 04:18 AM

Rosemary Brooks

BMC Real Estate - 209-910-3706 - Stockton, CA

The Mother & Daughter Realty Team

Great post and great group. I did find it, so I don't need the invite. I can't wait for the post "agents selling their own homes".

Jul 06, 2008 04:23 AM

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