Does a Buyers offering price on a Short Sale really matter?

By
Real Estate Agent with eXp Realty
https://activerain.com/droplet/47ff

Does a Buyers offering price on a Short Sale really matter?

 

My immediate response is, you betcha!  When a Real Estate Agent represents a distressed Seller as their Short Sale Agent, they’d better know what they’re doing, as a Short Sale differs from a traditional Real Estate sale and unfortunately, too many distressed Seller’s hire Agents who are not skilled in selling homes as a Short Sale.  When hired, this Agent inexperienced in selling Short Sales can put the distressed Seller at great risk; the risk of not getting their home sold and approved as a Short Sale thus, risking the home falling into foreclosure. I would not want to be that Agent who misrepresents the Seller when this happens. This lack of skill from the Agent can lead to the wrong offer being accepted from a Buyer.

 

Offer price on a short sale

When you receive a Buyer's offering price should you discuss the offer with your Seller and advise them to accept whatever price it is that the Buyer offers, after all, you just need a contract to submit?! I say "NO" absolutely not.  We all know that typically we need to advise the Seller of all offers that Buyers want to submit or do submit. Yet what should be done when a low offer comes in that is way outside of fair market value? This has been an issue of great debate. Let's take a simplistic look at how both sides can affect the outcome of a Short Sale:

 

  1. Buyer submits an offer that is within fair market value of home

  • Offer is submitted to Sellers Lender

  • Offer is reviewed by Sellers Lender.

  • Value is established with appraisal/BPO

  • Offer is within fair market value range of Lender's established value

  • Seller's Lender approves Short Sale; Average processing time of 60/90 days for the Short Sale

  • Sale closes 30 days later

    2.   Buyer submits an offer that is not within fair market value of home; low

          ball offer.

  • Offer is submitted to Seller's Lender

  • Offer is reviewed by Seller's Lender

  • Value is established with appraisal/BPO

  • Offer is determined to be outside of fair market value; below minimum acceptable by Lender

  • Lender counters or rejects Buyer's offer

  • Buyer will not accept Seller's Lenders counter offer or simply isn't qualified to pay the higher needed sales price

  • Offer is cancelled. Average processing time of 60/90 days for the Short Sale has now been wasted due to the Buyers original offer price not being countered at the onset. Wasting of precious time when a Seller is on a time frame deadline to be sure to avoid foreclosure.

  • Home back on the market for sale

Some will argue that any offer is better than no offer, yet if you have a pricing strategy in place for your Short Sale Listing you should be getting acceptable offers. (Ask your Short Sale Real Estate Agent what their pricing strategy is.) Why waste everybody's time with an ineffective offer? Plus, as a Real Estate Agent it questions your professionalism and knowledge of the market, I believe.

 

Too many times, I’ve been challenged by Real Estate Agents that try to even throw additional closing costs at the Seller to pay. Their reasoning being that the Seller’s Lender will pay it, so why does it matter and everybody does it that way. In fact, if you’re reading this as an Agent, you may be scratching your head saying yes, that’s what I heard too! When it comes to getting a Short Sale approved it is all about the net amount going to the Lender. The greater dollar amount going towards that net amount affords the greatest opportunity for Short Sale approval and when I’m representing a homeowner trying to avoid foreclosure, every little cent can add up towards gaining Short Sale approval and ultimately the release of the deficiency balance having to be paid back.

 

Don’t settle, negotiate for an attractive sales price when selling your home as a Short Sale.



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Show All Comments
Rainer
350,119
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine
It is all about the MONEY! If a house is on the market for 90 days than I would take low offers just to establish credibility with the bank, otherwise wait. Many salespeople were experts in short sales long before short sales where in vogue. What a pity.
Nov 23, 2013 01:49 AM #1
Rainmaker
365,288
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Jimmy, you're right as Banks are interested in limiting their losses.  Many claim to be experts with a handful of Short Sale closings and that just doesn't cut it.

Nov 23, 2013 01:52 AM #2
Rainmaker
61,686
Marvin Beninson
Keller Williams Realty - Danbury, CT
Grtr Danbury/Ridgefield, CT + Grtr Orlando. FL.

I think that there are a few ways to market these properties.  Depending on the bank, you may need to start reasonably close to the amount owed to the bank as long as it is not totally over priced for the market.  Then you have a sytematic schedule of price reductions, showings and feedback from showings to prove to the bank that it was marketed at this price and here is the result, we reduced to this and here is the result and finally we reduced it to this price and generated an offer within 3-5% of asking price.  Now you can prove to the bank that the market for this property is what your offer is.  That is how my team does it but I have to admit that if the asset manager is not on their game it can drag on and on and on.....

Nov 23, 2013 07:00 AM #3
Rainmaker
365,288
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Marvin, you're right in that you need to schedule systematic price reductions until you get a Buyer's offer as a distressed Seller doesn't have the luxury of time however, if the amount owed is far off of fair market value than you'll have a difficult time in getting that price and the majority of Short Sales that I've negotiated have had mortage balances that have easily been $100,000 above market value.  A Short Sale should never languish on the market without an offer for months on end, if it does then the Agent has no idea of how to market and close on a Short Sale.

Nov 23, 2013 08:49 AM #4
Rainer
350,119
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

If you price the home right you will get suitable offers. The problem is that we tell the bank what they want to hear and doesn't the government do that to us. Same BAD result.

Dec 08, 2013 09:57 AM #5
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Rainmaker
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Lynn Pineda

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