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How Much To Offer On Short Sale Properties?

If a short sale property is already listed at below market price, how much shall a buyer offer on the property? To answer this, we need to understand seller's and lender's prospective first.

1. Seller's Prospective
Since sellers owe more than the house's worth, they will not net any profit once the house is sold. Therefore, seller will sign any offers presented.

2. Lender's Prospective
Lenders are the ones who will suffer the financial lost on a short sale. Therefore, they have the right to approve or disapprove the short sale. However, since lenders stand to lose more money if the house is foreclosed, they are actually more willing to negotiate on the short sale than taking it back. Lender's decision is mostly based on not selling the property below certain percentage of the appraisal value and the percentage guideline varies from lender to lender.

When making offers on short sale properties, it is important to start with very low price since lenders always counter offer multiple times to get higher price from the buyer. The counter offer stage may take as long as 2 to 3 months.

It is not an absolute guideline but from my experience, I will suggest starting with 20% below asking price and counter offer upwards to about 10% below asking price.

Since short sales takes about 2 to 6 months to transact from making the initial offer to close the escrow, it will only work for those buyers who have time and patient to see a good deal through.

I am an experience short sale agent who can help you purchase a property with great condition at a bargain price. Please call me at (626) 922-8408 if you are interested in buying a short sale property.

Posted by Caroline Tsou Chai on 12/15/2008 03:29 PM

Comments (5)

sellers, buyers

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5 Comments on How Much To Offer On Short Sale Properties?

DEC

That would be my advice as well. Short sales are usually settled at about 10% of the asking price. Start with 20% to see if you might get it lower. I would be prepared for a wait, but in the end it is worth it!-Dinah Lee

I wouldn't say a seller doesn't care. Especially if they are going to get slapped with a deficiency judgment. The bigger the loss take in that instance the more they may have to pay back. All agents listing short sales should be advising their sellers of the possibility of a deficiency judgment.

I got one done earlier this year at 90k under appraised value. It was 70k under asking price. We actually had the buyer call the bank and say I'm ready to go so if you want to unload this house you'll agree to our asking price and we'll settle friday (it was a monday) and it went.

It does take time, I think we got lucky. Either my business partner or I called the bank every single day, sometimes more than once. Just know that your commission will likely take a hit.

Brian, if it falls into the legislation that was passed earlier this year, they will not be 1099 tax back to the seller. If it doesn't, then yes, they would be taxed on the defiency.

Also, In my experience, banks prefer a well written offer to a "formula" of starting low to get the best deal. Taking a home that is already 20K under what is owed and then dropping another 20k off that will get you nowhere fast!

Brian,

Thanks for sharing on this very important aspect of short sale.

Deficiency judgments resulted from short sale will hurt seller's credit. Often times, sellers have no other choices but to short sale their properties. It is still better than foreclosure.

A good agent shall always negotiate for a non-deficient judgment on the liens whenever possible for the sellers.

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