Make an Offer for a Short Sale Property

Make an Offer for a Short Sale Property

Make an Offer for a Short Sale Property

  1. Should my offer match the listed price?

    Like buying any property, to increase a buyer’s chances of success, the offer needs to be competitive. In the case of a short sale, the offer may need to be closer to the market value of the property rather than the list price. Short sale listings are often priced low for the purpose of attracting multiple offers. But this doesn’t mean the property will sell at that listed price. Note that most banks will not evaluate the seller’s request for a short sale until there is an offer on the table.

    The property’s market value can easily be gauged by looking at comparable homes that have sold in the area recently. In today's improving market, short sale prices have risen dramatically. An experienced real estate agent will provide the best advice about how to negotiate a reasonable sales price.

  2. Should I start with a lowball offer in case bidding or negotiations occur?

    The seller's mortgage lender will check property values in the area so a lowball offer is not recommended. Many banks are so overwhelmed with short sale requests and multiple offers that they will most likely not even counter-offer if you submit a lowball.

  3. What should be included when an offer is submitted?

    • The purchase contract that the buyer and the seller sign.
    • Earnest money deposit. To the bank reviewing the offer, a sizeable deposit means the buyer is a serious buyer. An earnest money deposit will be considered part of the down payment.
    • Pre-approval letter as proof that the buyer has the ability to purchase the property at the proposed price. 
    • Information about recent home sales for similar properties in the same area that show prices comparable to what the buyer is offering to pay for the property.
  4. What are the reasons the mortgage lender would reject an offer?

    The most common reason is simply that the offer price is too low. If the short sale will make the lender take a bigger loss than foreclosure, the lender will usually have to foreclose. Both the seller and the buyer need to make sure the sale makes sense for everyone, not just the seller. Other reasons include:

    • Short sale package submitted by the seller is incomplete. An experienced listing agent would prevent this.
    • Seller is not eligible for a short sale because the seller has the money to pay the mortgage, fail to demonstrate financial hardship, the value of the property is likely to be enough to pay off the mortgage, etc.
    • Indication that the short sale may not be an "arms length" transaction. The buyer must be unrelated and unaffiliated with the seller and must agree not to sell or rent the property back to the seller.
    • A subordinate lienholder, like a second mortgage lender, makes unreasonable demands upon the seller and other lenders so that the offer cannot be approved.

    Note that it is not uncommon for the lender to respond with a counteroffer. As with any real estate transaction, buyers will need to know beforehand what their limits are so they can either accept the counteroffer or walk away.

  5. How can I increase the chances of my offer being accepted?

    Short sale buyers, with the help of an experienced real estate professional, may increase their chances of success if they:

    • File all the required short sale paperwork in a timely and efficient manner.
    • Assure the seller they will wait for short sale approval.
    • Have a strong pre-approval letter.
    • Put down a sizeable earnest money deposit.
    • Submit an offer that closely reflects the market value of the property.
    • Follow up diligently to track the review and approval process. It is recommended that buyers obtain a name and contact number of someone at the lender’s loss mitigation department to follow up with. The buyer will need authorization from the seller to allow the mortgage lender to discuss the seller’s loan.
  6. Should I start shopping for a lender even if the property I am interested in has not been approved for short sale? Yes. In evaluating a buyer’s offer, the seller’s mortgage lender will consider the buyer’s ability to purchase the property. Ironically, after a long wait for the lender’s approval, buyers are also expected to move quickly to closethe deal. It is therefore recommended that buyers work with a reputable and flexible lender and secure pre-approval for financing by the time an offer is submitted

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