Short sale

[happygirl]

Hi everyone. I was hoping someone could give me a basic understanding of how a short sale works. There is a house near mine that a friend would love to have, however, the asking price for the house is around 75000 over what she wants to spend. She asked me if there is a chance of her getting it at such a discount since it's a short sale, but I'm not familiar with how short sales work. I believe it means the bank just wants the balance of the loan paid off, but I could be wrong. So again, can someone give me a basic understanding of what a short sale is and should my friend even consider making such a low offer. The home is listed at 305k I believe and she wants to spend no more than 230k.

Thank you in advance!

[disneysteve]

There is certainly nothing wrong with her making an offer. The bank may or may not choose to accept it but it can't hurt to try.

[artwest]

When an individual has a house up for a short sale, they are trying to get as much out of the house as possible realizing that it will be less than what they owe. For example, they owe $200,000 on a house and have it on the market for $150,000. They may take less than the $150,000 depending how desperate they are to get rid of the house. They are then liable to the bank for the difference. If they sell the house for $150,000, they would then be liable for $50,000. Being $50,000 in debt is better than $200,000.

If a bank repossess a house and then puts it up for sale, they may take any offer depending on how much they want to mess with owning a house.

I would suggest that she go ahead and make an offer. The worst thing that could happen is that it gets rejected.

[Petunia 100]

A "short sale" is a sale in which the bank agrees to take less than the amount currently owed on the mortgage. This means the bank accepts or declines the offer, not the owner. Your friend can make any offer she likes, but it is doubtful a bank will accept a below-market offer.

Some owners have already spoken with their lender and have been approved for a short sale. Some owners have not. Personally, I would not bother with making an offer on any house which has not already been approved. The approval process is long and the bank is under no obligation to agree. Typically, they agree because the homeowner is unable to pay due to a change in circumstances (job loss, job transfer, etc.).

Short sales can take a long, long time and still fall apart at the last minute. Your friend should know that going in.

[happygirl]

Thanks for the input. She told me today that she talked with the realtor who suggested she offer 240-250k. Apparently, there has been no interest in the house since it went on the market over the summer. She said the realtor said the bank is trying to keep the house from going into foreclosure.

[Petunia 100]

Originally Posted by happygirl

Thanks for the input. She told me today that she talked with the realtor who suggested she offer 240-250k. Apparently, there has been no interest in the house since it went on the market over the summer. She said the realtor said the bank is trying to keep the house from going into foreclosure.

It must be overpriced, then. She should make an offer. The worst they can say is "no".

[happygirl]

That's something that confuses me. It's not overpriced at all, but for some reason in this area, the less expensive houses sell, although not always quickly, but anything over 280k just seems to sit on the market forever.

I feel kind of sad for the people trying to sell it. I remember when they bought the house, maybe in 2006. I'm pretty sure they paid nearly 500k for it.

[JoshuaHeckathorn]

Originally Posted by happygirl

That's something that confuses me. It's not overpriced at all, but for some reason in this area, the less expensive houses sell, although not always quickly, but anything over 280k just seems to sit on the market forever.

I feel kind of sad for the people trying to sell it. I remember when they bought the house, maybe in 2006. I'm pretty sure they paid nearly 500k for it.

You might as well shoot really low with your first offer. I bought a place on a short sale in April and my first offer was 50% less than what the home was bought for in early 2007. I countered with their bank twice and they eventually agreed to a price that was about 45% less than the previous sales price. It took 90 days to close from when I made my first offer. Make sure the seller's realtor/lawyer knows how to handle short sales. If they don't, you could be in for a really aggravating experience.

[Petunia 100]

Originally Posted by happygirl

That's something that confuses me. It's not overpriced at all, but for some reason in this area, the less expensive houses sell, although not always quickly, but anything over 280k just seems to sit on the market forever.

I feel kind of sad for the people trying to sell it. I remember when they bought the house, maybe in 2006. I'm pretty sure they paid nearly 500k for it.

Smaller, less expensive houses sell well because there are so many investors snapping them up. Many times, you can rent them out for more than the payment. Then just sit back and wait a decade or two until they have appreciated nicely. A high-end home is not a good rental property, so there are fewer buyers in that market.

[jadet]

Doesn't hurt to make the offer and keep looking. Who knows there might be a better deal that pops up as she waits.

[snafu]

Lower cost homes often sell faster because more people qualify for lower sum mortgages than qualify for higher priced homes in most areas.

Buying a home is fully democratic process...the buyer can offer any sum they feel is realistic and the seller/bank can accept, reject or counter offer. Negotiations can go on for extended time so it's important not to get emotionally involved and keep a business mindset. What the house originally cost, what it sold for through it's history is not relevant in current condition. Value is based on size of property [land], square footage of house [footprint] compared to the other houses in that specific district.

Add and subtract for features like services, school district, garage, number of bedrms, number of bthrms, age/quality of appliances, landscaping, jacuzzi, hot tub, fitted closets, vacuum system, new flooring, fresh paint. If she uses an experienced realtor, they can valuate every aspect based on the past 20 sales.

[all4money]

I just went through a short sale purchasing process:

June 14
We put in an offer of $300k on a short sale house that is listed at $395k (down from $550k)

June 24
The sellers accept but the bank says no and counters us at $375k

June 28
We offer a counter to their counter of $305k plus $1k in seller's closing costs

July 28
The bank says OK to our offer!!

We closed on the house on Sept. 15 so right at 3 months from start to finish.

Your friend needs to offer what she thinks is the right price for the house. Period. We knew that the house we got would need a ton of work and we were only willing to pay right around the $300k number since we would have to put in $$ to fix it back up. It's amazing that this same house sold years ago near the $600k number so we feel really good about the investment.

[Petunia 100]

Originally Posted by all4money

I just went through a short sale purchasing process:

June 14
We put in an offer of $300k on a short sale house that is listed at $395k (down from $550k)

June 24
The sellers accept but the bank says no and counters us at $375k

June 28
We offer a counter to their counter of $305k plus $1k in seller's closing costs

July 28
The bank says OK to our offer!!

We closed on the house on Sept. 15 so right at 3 months from start to finish.

Your friend needs to offer what she thinks is the right price for the house. Period. We knew that the house we got would need a ton of work and we were only willing to pay right around the $300k number since we would have to put in $$ to fix it back up. It's amazing that this same house sold years ago near the $600k number so we feel really good about the investment.

That's awesome! Congratulations.

[happygirl]

Originally Posted by all4money

I just went through a short sale purchasing process:

June 14
We put in an offer of $300k on a short sale house that is listed at $395k (down from $550k)

June 24
The sellers accept but the bank says no and counters us at $375k

June 28
We offer a counter to their counter of $305k plus $1k in seller's closing costs

July 28
The bank says OK to our offer!!

We closed on the house on Sept. 15 so right at 3 months from start to finish.

Your friend needs to offer what she thinks is the right price for the house. Period. We knew that the house we got would need a ton of work and we were only willing to pay right around the $300k number since we would have to put in $$ to fix it back up. It's amazing that this same house sold years ago near the $600k number so we feel really good about the investment.

Wow, that's wonderful! I'm not sure if she'll follow up or not. I guess I'll just wait and see. As always, I've learned something new from this forum though!

[Gina23]

My short sale experience was a bit different than the stories described above. When I found my home it was listed as a short sale. It was orignially listed at 310k. The owner re-listed it at 245k just to draw interest, which caught my eye - and many others. A bidding war ensued driving the price of it up to 275k (my bid). So it became an emotional mess before the bank even approved that amount. It took about 3 months for the bank to approve that amount after many up's and down's. Once it was approved, it took another month or so to close. After I closed I was moving in and I had a guy about my age approach me as I was unloading boxes from my car. From the sidewalk he asked - "So you were the winning bidder, how much did you pay?" I just walked away as I found it to be totally rude. He then screamed that it was "supposed to be his house" or something along those lines. I was this close to calling the cops as he was visibly upset.

Moral of this story... how much is emotional pain worth?