Offers: Don't Waste Your, or My Time!

Great post.  I know roughly what the bank will take on my listing, and with my sellers going into foreclosure it's not right that low-ballers want to offer $50,000 less than the bank will likely take just so they can play around and see if they get a steal.  That would be crucial days/months off market that we don't have.

Buyers want a deal or a steal and seem to want to clog the system.  The seller can always reject a low ball offer.

Good info - I'm not sure you need to remind realtors - but I guess you do - BUT without a doubt this is a discussion any realtor working with a buyer on a short sale NEEDS to have with his or her buyer. 

Somewhat unrelated question - Have you ever closed on a short sale where the sellers were not late in their payments (yet) ?

Beautiful post Frank.  It gets tiring with all these "buyers" who think they can pick up houses for pennies on the dollar.  This is a breath of fresh air.

Chris

Frank, I appreciate your post, but there a number of things that you didn't take into consideration. One of those is the amount of inventory that the particular bank has on hand. That is great that you definitely seem to be more of a listing agent and you don't like buyers or their agents that come in with a low ball offer. But it is a fact of life and people are getting those types of deals. It may take them 100 low ball offers to get it or maybe 200 but they are. Most of my investors get at least a 20 percent discount on any given property (depends on area). Remember that banks like cash offers and quick closing, especially in this day and age. Don't take it personally when you get a low offer, just fulfill your Realtor duties and submit it.

Overall I agree that most short sales sell close to market value, but there are exceptions.  I don't view those exceptions as a waste of time, but an opportunity for my buyer client.

The listing agent that gets ticked off by a low offer is doing an injustice to their seller.  By presenting the offer in a negative light, you are closing the door on a possible deal with no negotiation. 

The seller or the bank can and should counter an unacceptable offer in this market. 

Frank, I enjoyed reading your blog.  You provided some great information here. 

Thanks for the "rule of thumb" Frank. 

I have made offers on several short sales, mostly for investors who are terrified of overpaying in a deteriorating market.  Now I have a buyer who wants to make a lowball offer on a functionally obsolete 2 bedroom single family built in 1975 that is basically a teardown.  The listing says it can't be a teardown, but the building official says otherwise.  So much for "market rate" and "typical transaction".  This post will serve me well in educating future buyers.  Thanks for the info.   

Great blog! I was involved with a short sale where the bpo priced the home above the current list price despite the fact that the home was tested at several price points along the way & generated no offers at the higher prices. Then the agent brings in an offer well below the price he established in his bpo just 3 weeks before!  BPO agents need to keep in mind that their valuations must take into account market condition & be valid for at least 6 months.  If prices are deflating at 1% a month, it would be prudent to factor that into your pricing, wouldn't it?  I've noticed that some agents who primarily  focus on reo properties tend to overprice homes that aren't so dire because they become accustomed to seeing such wrecks that they aren't in tune to how fussy the non investor has become.

Frank:  Low-balls work best to get the ball rolling in the process, if no other offer is available.  MAny banks will not start the process until an offer is on the table.  However, low balls are best served on as-is houses and/or REO properties that need work!

Buyers agents need to guide their buyers a little in this venue. Listing Agents have done their comps and take property condition into account when determining price - especially in a short sale. We are working with time constraints. I understand buyers are looking for a great deal amongst distressed properties but a bank is rarely going to approve a ridiculously low ball offer on a short sale. They'll put it into foreclosure before they accept anything tens of thousands of dollars below market comps for the area.  At least in a foreclosure situation they can ask for highest and best and work multiple offers off one another simultaneously.  Buyers must be patient and understand that this is a very tedious process. If you haven't got a flexible time line, a short sale is not for you!

Nice effort,  too many times people try to make things more complex when they really should be trying to make them simple like you did with your diagram.  With regard to low ball offers agents on both sides of the transaction have to work to keep the buyer's and seller's eyes on the prize - a sale - and help them get to a price that will stand the test of an appraisal.  A crazy price that is too low won't have a chance and the buyer will miss out on a property.  The upside is the seller my discover what price the bank is willing to take.  Either way it's a lot of work for a maybe.  I've found that it's more efficient to go after foreclosures or listings that are priced right with sellers that are ready, willing and able to sell at market prices.

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This is a great post but I am a bit confused.  You stated that sometimes low ball offers work.  Your profile has a list of properties that sold for drastic percentages below "as-is" value.  I agree with everyone that it is important to counsel clients to have reasonable expectations. 

I posted in the short sale forum regarding this subject - is there actually something formulaic that specific lenders adhere to?  It stands to reason that guidelines exist, yet those of us who call themselves foreclosure experts (myself included) never seem to actually accumulate real data to determine if the big dogs out there actually have objective guidelines for acceptable percentages.

I think this would be the way for each of us to get a lot more knowledge - accumulate that data of what is acceptable and track it.  Take into account the control factors like loan amounts, appraisal amounts, list pricing, time on market, etc. and really start taking a harder look at data instead of throwing slightly more educated mud at the lenders' walls.

Does that make sense?

The biggest waste of time I see is listing agents for short sales list them at a crazy low price that the lender would never take. I remember one listing I had many of my buyers call about. It was listed at $98,000 I called the agent he told me he had offers in the $130,000s waiting on a reply from the lender. He keep it active at $98,000. It stayed in the MLS at $98,000. I keep getting calls I would call the listing agent he told me I can not take offers now the seller filed for bankruptcy and could not take offers. I keep getting calls about it from my buyers who found it online. The loan ammount was well over $200,000.

What a pain I was so glad when it expired.

Hi Frank, in my area (Orange County CA), we can get away with 10% below the lowest sold comp we can find + repair costs for THIS price range. So in your example, assuming these were the lowest comps in that area, we would be able to get it at 342k plus $10,200 in closing cost.

Good offer. . . specially for investors looking for bargains. .

Frank,

Afraid I must disagree.  If you are a Buyer's agent your client expects you to find him/her a deal.....negotiation basics, whomever gives a number first loses....UNLESS TE OFFER IS VERY LOW!!!!!  For short sales, submit teh low offer, force teh lenders hand, and, be flexible when your firs toffer is denied.  Most short sale listing agents will be thankful just to get an offer and get teh ball rolling rather than trying to guess where the BPO number needs to come in (unless of ocourse it is an FHA loan and you received the HUD FOrm 90045 and know what to list the home for).

Anyway, best of luck to you.

Sincerely, Ben Benita, Expert Short Sales Negotiator, www.United-IG.com

Hi Frank,  Too many agents out there running around with a " bottom feeder " next to them in the car !  Well said.

Humm..Some buyers  just feel it is there God given right to make a very low offer. They thoughts are the seller is desperate and will accept the offer. If they only knew how banks worked.

Great Post!  My team and I are the Short Sale Authority in Indianapolis - we have around 90 active short sales at any one time,  and I agree to the fullest.  Yet it still happens every week,  an agent will bring a buyer and put in an offer incredibly low,  right after they put the offer in I start getting calls and even office drop bys " have you heard anything yet?"  "did the bank accept yet."  We always list at fair market value and I feel like my team is very good at researching it.  If someones low ball offer gets accept days later,  I promise I would call you right away,  no need to stop in each day and ask about that offer of yours. 

The worst part is,  We currently have several incredible deals on our roster of homes,  I find that some buyers will never recognize a good deal for what it is,  They have to offer 70% of list price no matter what.  Even if we already did the work for them and dropped the price several times and now it is at the minimum. 

Anyhow,  Please allow for time to hear back on these offers agents.  I know your buyer will get antsy,  but that is how short sales work.   Many of my listings we will go through 3 or 4 buyers, because they get sick of waiting!

Great Post Frank!