Making an Short Sale Offer

I'm looking into buying a short sale home. Can I offer below the value of the short sale or should I offer at the short sale price?

1 Answer

"Short Sale" means only one thing--that the market value of the property is less than the balance of loans secured by that property. It is not code for " screaming deal."

In fact, the price may have little to do with the property's value: Listing agents may price it very low to generate a lot of offers only to have the lender reject them all. Or the asking price may be no bargain.

And short sales have their pitfalls. It is not uncommon for the lender to take weeks to respond to an offer. Some have a policy of only responding once there are several offers. And sometimes after all you go through you find that the owners have not documented a genuine hardship and the lender won't even allow a short sale.

So the only reason to bother jumping through the hoops of a short sale is when you really, really want the property or have reason to believe that you can get it at a substantial discount. ****Otherwise you can often get a better and faster deal by buying real estate owned (REO) that is already on the lender's books. If you do want a short sale property, your best bet is to enlist the help of a real estate agent experienced in short sale transactions. An expert will know the lender's quirks as well as particulars of valuing property in your market. 

Here is one very large bank's normal timeline for short sale transactions (as an example of what you can expect to go through):

The Short Sale Timeframe

A short sale approve / decline can take 30-60 days from the date the offer is received. Several stages determine this timeframe:

  • Day 1: Legitimate offer (legitimate means all needed documents are included, such as listing agreement, MLS listing, preliminary HUD-1 from the title company, hardship letter from the owner, and a signed purchase agreement)

  • Day 2-15: Order appraisal

  • Day 15-25: Owner considerations: (owner to provide needed documentation to determine hardship and ability to contribute to the loss, this timeframe depends on current owner’s compliance)

  • **Day 25 - 30:******Negotiate delegated decisions.   ***Non-delegated decisions will take an additional 30-60 days. *Investors like Fannie Mae and Freddie Mac and insurers (FHA, VA, MI companies) have to approve the short sale before it can proceed.  Subordinate lenders (such as those who hold second mortgages)  must agree to accept a reduced payoff amount to release their lien.

  • Day 30 - 35: Approve or decline.

  • **Day 35 – 80:******Proceed with sale until closing

In short, offer what you are willing to pay for the property, taking into consideration the uncertainty and extra work involved. Good luck!