Do You Have Time To Waste? Then Send In That Low Short Sale Offer!

Wendy,

Great advice, but low compared to what?

Low compared to your list price or the market?

Not all listing agents are Wendy Rulnick!

Unless I know the lister I look at the list price like e-bay's "Buy it Now" price, often no more than a pipe dream.

Bill

Hi Wendy - This is a pet peeve of mine too.  When we list short sales, we try to come as close as possible to the amount we think the bank can be convinced to take, while being sensitive to the market.  That figure might be only about 50% of what it is owed, and can be a difficult thing to achieve.  Then a buyer comes along and wants to cut that figure in half.  I advise my sellers not to accept that offer. 

Coming in low works for me. However, I won't be able to pull off 250k if the FMV is 350k unless we have some damage. In My area, if the lowes comp is 350k, then I can get away with 315k. Maybe even 300k.

Excellent advice Wendy...this goes for buyer's too!  I'm sick of low ball offers, with agents trying to tell me it's a fair price...are they looking at the same comps I am? 

We regularly have the seller reject totally unreasonable short sale offers.  It will only be a waste of time for all parties involved.

I'm right with you... listing short sales and taking low ball offers for what you describe is a bad practice. Not only for what you mention... but when that home goes back on the market several months later.. it looks like an old listing and buyers start questioning why it's been available for so long.

Let's say the low ball offer does go through... Great! or...

Corelogic recently came out with some report to lenders/servicers concerning short sale mortgage fraud... it appears they are setting up some type of database for short sale transactions to store information and investigate questionable short sales. According to their report, over $310 Million dollars a year are being lost with questionable short sale practices.

I certainly don't want to make some list of short sale services with questionable practices and your post indicates you certainly do not want to be on it either...

Key Phrase in the Short Sale Report to Lenders from Corelogic:

Our results suggest that lenders should take fundamental steps to alert themselves to the possibility of improper short sale-to-resale transactions:

and then

Although the fundamental measures listed above can detect inadvertent or small-scale risks, they rarely expose systematic intentional fraud. To do so, lenders must be able to see any concurrent transactions pending on the short sale property. Traditionally, lenders have had no access to such information (at least not in real time), since two or more separate sales typically involve two or more separate lenders. This information can only be uncovered collectively — affected lenders agree to share information — or via a formal lender consortium. The CoreLogic Mortgage Fraud Consortium is such a group.

AKA a collective database of everybody involved in a short sale transaction. (Notice that the lenders/servicers are starting to require 3rd Party Affidavits and/or collecting information on everybody involved in the transaction. Equator, etc??)

I know some agents that practice the low ball offer theory (and some that do not even send in real offers) and they do get some of the low ball offer deals through. Get 2, 3, 4+ of these deals through and a pattern forms. If I'm a lender/servicer... I launch an investigation. I find out that a short sale servicer has been shorting me.. I blackball them.

Just my thoughts...

Nice Post..

Wendy:  I had a client last week get really irritated with me when I tried to explain that the listing agent had a property priced way to low.  Here in California there are so many comparables in the area that I knew that when the bank got around to doing their BPO they would price the property higher and ask for more money.   I told this to my clients because I didn't want them to be disappointed or perhaps throw in the towel like so many do when the price is countered back higher by the bank. 

Wendy is so right. Especially now with so many of the banks refusing to postpone trustee sales or auctions if the seller presents a lets test the water offer they could very likely lose the house.

Very good post, Wendy. I had a previous client call me today and they found a townhome that is a short sale and they want to make an offer on it. I asked them to give me time to see if it is priced fairly or if the agent just low balled the property to get offers that wouldn't fly. I love your article.

You can always tell a professional !

Hi Wendy, good advice.  I had my first short sale actually go through this month.  I was very happy.  And I did have a buyer that was very patient.

Wendy,

great post.  You brought up good questions.  I agree with you and am not happy to work with anyone who lists a short sale property too low compared to similar properties in the area.  Just 3 weeks ago I showed a buyer a short sale property listed for $758K.  Now a new agent listed it for $530K.  I am not even going to show the property to any of my buyers.  No way the lender is going to approve any offer in that price range.

This is great advice.  I would imagine that submitting ridiculously low offers to the bank could also hurt your reputation as a negotiator as well.

Hi Wendy...this is great advice!! Our primary responsibility is to the Seller.  Unlikely that $100K below market would getaccepted on $350K value but if it does, you may be putting the Seller in a position where they will ask for meaningful cash at closing to contribute to the loss!!  There is no benefit to the Seller unless it's a distant cousin making the offer.  As Realtor's we have to be diligent and on our toes at ALL times!!

Hi Wendy - You make many good points.  Sometimes it can be hard to educate buyers as to fair market value when they find several of these short sales listed way below market value.  Sometimes I have buyers who then think that all of the comps that are fairly priced are priced too high.  It is often hard for them to understand that this is just a fantasy figure the listing agent is running up the flagpole to solicit an offer.  They think that they will actually be able to buy the home at the price that it is listed for.