They Sure Can Be, If You Do Your Homework!
The first thing buyers always want to know when they are considering placing a bid on a short sale is “How much money do the sellers owe on the property?” That figure is irrelevant. What matters are the area comps and how much the house is actually worth.
The bank is only looking at the numbers….Will they benefit more if they foreclose or will they make more if they settle through a short sale.
So with respect to this, look for properties that have sold in the last six months of homes that were built within 5 years of the subject property, same number of bedrooms, close in square footage and lot size. (I actually start by looking only 3 months back. Then if I can not find at least 3, I go 6 months back.) If you still don’t have 3 good comps then look for them by extending your search of sold properties out to within a mile radius of subject property to a maximum of 3 miles. In specialty neighborhoods builder may also be a factor.
This is how the bank does it, so it makes sense to understand the way they look at information and make decisions. Foreclosure proceedings are a bit costly for them but not so much that they will agree to low ball offers. If you keep your offer close to the lowest comp you stand a chance of being considered at the best/lowest price.
It’s more complex than that though and here are some other factors to consider before becoming involved:
- Is there more than one loan on the property? Unless you love the home, move on. These take a long time. A year ago second loans were easier to negotiate, more recently…not so much. The industry keeps changing though so ask your realtor a little more about this one. But before moving on, ask the listing realtor if they have already negotiated the 2nd loan.
- What price range you are in makes a difference. Don’t mess around with low ball offers if you are looking at homes priced below $200,000. Our inventory in that price range is declining and there is actually buyer competition in many parts of the valley as of this writing. Luxury homes have less buyer competition which may mean more flexibility on price (maybe.) When I refer to low ball offers I’m talking in direct relation to the comps., not the listing/asking price. It may not be priced right.
- Once you have the facts, knowing what you can put up with during the process is King! A short sale can take 2-3 months typically and sometimes longer. And it presents an ethical issue. Are you allowed to continue to shop for other homes? Well technically you have the right to withdraw your offer up until the point the bank accepts it. Ethically this seller is under tremendous stress and doing their best to help the bank settle the debt and help themselves avoid the credit implications among other things. They are racing with the clock. This is where a buyer should perhaps dig a little deep and only place offers on short sale homes that they love and will wait for. It’s a suggestion.
Happy House Hunting!
Show Appeal Realty