My colleague, Broker Bryant Tutas of Central Florida, writes just about the best explanation I've ever seen on how to price a short sale so that two important things are accomplished: 1) an offer is received, and 2) the offer is accepted by the bank. If you work the short sale market and do not have time to read this post now, bookmark it for future reference. As a former English teacher, Bryant's post gets an A+ from me!
One of the keys to having a successful Short Sale is pricing. Now there are folks that say pricing doesn't matter because the seller is receiving no funds anyway. Well....they're worng. Tell that to the seller who has to pay taxes on the "short".
It is imperative that the Short Sale property is priced right. When I say "priced right" I mean as close to market value as possible at a price that will get the property under contract quickly.
One of the problems I see in my market is that many Short Sales are priced way to low. Pricing low may generate a lot of activity but these deals, more than likely, will not close. You have to be able to justify the purchase price to the lender.
Pricing a short sale should be just like pricing any other property. You are looking for a price that will sell the property in a reasonable amount of time and at a reasonable price. The fact that the property is a short sale, requiring 3rd party approval, is nothing more than a negative market condition.
If the true market value of the property, if not a distressed sale, is $200,000, then what you should be doing is taking this figure and making an "adjustment" for the "negative market condition (short sale)". Depending on your market it could be a 10% to 20% downward adjustment. Let's say that your market is showing you that short sales are selling for 20% below a normal sale of similar properties. That means that this property should sell for $160,000. So maybe you price at $165,000 or $169,000 depending on your area's sales price to list price ratio. Reduce as necessary.
Now you have a property that is priced right AND you have a very good chance of getting the Lender to agree to the short sale. The higher the price the easier it is for the Lender to make a decision. What say you?