Short Sale SellersMaking a Short Sale Offer
In a short sale, the bank or lender(s) is agreeing to take less than the amount owed on the loan(s). For this reason, buying a short sale property is a bit more difficult than a traditional sale due the number of parties involved to close the sale and depending on the lenders final say and approval on the short sale property.
Lenders want to minimize their monetary losses, and the bigger the lender the chances of the greater the amount of properties to foreclose on and the higher risk of losses.
For many short sale offers, the time it takes to close on the deal can be quite an obstacle. Real estate agents will price the properties well below market value to get offers, but that doesn’t necessarily mean it is a price that the lender agrees with. Many short sales fail to close, so it’s important to offer a price that is competitive for the lender up front. Usually if the price is too low, the bank or lender will ignore the offer.
Determining a Short Sale Offer
To determine the Fair Market Value (FMV) use comparable properties in similar neighborhoods or close proximity to determine a value. A real estate agent has access to the MLS (Multiple Listing Service) and will be able to create a CMA (Comparative Market Analysis). The sold time frame should be within 6 to 12 months when pulling properties in the surrounding areas (stay within 2 mile radius).
Can You Have a Short Sale Time Contingency?
Unfortunately, your time contingency will most likely expire before the bank even gets around to approving it. Most of the time the bank will not pay attention to the time contingency outlined in the purchase agreement. If you really desire the property, then all you can do is wait till you hear a response as your offer is not binding until the bank has approved the offer.
Real Estate Short Sale BPO
The bank will request a BPO (Broker Price Opinion) to get an idea of how much the property is worth. If the BPO comes in too high, the bank will decline the sale as they may think they can foreclose on the property and get more money. If the BPO is around the price that you offered, then they will feel more compelled to approve the short sale offer.
Banks will sell as low as 90% of the appraised value on a short sale. Don’t be surprised if it takes 3 to 4 weeks to get a response on your offer if you are the first offer on the property and a BPO hasn’t been offered.
How Long Will It Take for the Bank to Respond
It depends on the lender involved. Countrywide will do things different than Wells Fargo, and so on. The process starts with the lender receiving the first offer and the homeowner’s short sale package which includes the sellers finances, information from the Realtor, bank records and a hardship letter. Since the lender has the final say, they will decide to either accept, counter or reject the offer.
Does Having an FHA Loan Make a Difference on Getting Lender Approval
In this market it most definitely does. Since FHA loans have stricter guidelines on the condition of the home when purchased in a short sale, many lenders are choosing to stay away from these loans and are moving in favor towards accepting conventional loan offers. Even if they are for less money. This will play a factor in your offer being approved.