short sale

[lifelesson]

Not sure if here is the right place but thought someone would know.

A house on my street is listed for SHORT SALE they are asking $125,000 (should be more like $145,000. the folks pay $155,000 in 2005)

Co-worker is looking to buy a house.
What should be the offer they make? (how low will the bank accept?)

Thanks.

[StartingOver08]

A short sale offering means the market price is less than the outstanding mortgage(s) on the property.

To answer your question: The buyer needs to do an analysis of the market to determine what the property is worth to him based on the current recent closed comparable sales within the last 90 days. The most common percentage of accepted short sale closings is 88% and above of Fair Market Value.

Please recognize that short sales rarely actually close. Many go under contract but the percentage of actual closed short sales is small.

When the listing office prices the property, they can use several different valuation methods to price the property. One of the most accurate pricing method is to use the closed comparable property sales within the last 90 days to determine Fair Market Value (FMV). The bank is under no obligation to accept a short sale offer. The servicer will consider the offer, but that does not mean the bank/lender will accept it. Part of the process of considering the offer is the valuation of the property. The bank servicer will send out for an appraisal or a BPO to determine the market value. Then the negotiator will either reject the buyers offer, counter offer or accept the offer. (Except BOA/Countrywide - they usually just employ stalling tactics to not respond to the offer.)

Once the servicer for the lender responds, then you will know if the sale can be put together. In our area, the bank responds 90% of the time with a counteroffer condition that CAN NOT be met by the SELLER of the property - so the deal falls apart. Usually the condition is to have the seller bring a large lump sum of cash to closing. BTW, in the banks counteroffer, they may or may not counter with something close to FMV. Sometimes they just come back with a high price to shut down negotiations. There is a myth that the banks want to cooperate in the short sale process - they do not want to cooperate. What they want to do is show market time to the mortgage insurer so they can collect on the mortgage insurance when they foreclose.

[HHM]

It's tough to say. Your co-workers realtor would want to talk to the sellers realtor about how far along the short sale negotiation is; odds are it hasn't started, most banks won't entertain any sort of short sale negotiation until there is a live offer on the table. If the Co-worker really wants the house, he should offer the asking price of $125,000, if the buyer could take it or leave it and simply wants to try to get a deal, then probably knock off 10%, 112,500, but if market value of homes in the area are $145,000, he will be hard pressed to get the house under the $125,000 asking price.