Don’t Expect A Short Sale Bargain
By JD Esajian on November 18, 2013
There may be nothing worse than being late to a trend. While it seems like decades ago, it was only in the last year or two that short sales dominated the real estate market. During this time, it was not uncommon to see properties heavily discounted by lenders with the sole purpose to remove them from their books. Anyone following the real estate market knows that those days appear to be over. Short sale bargains are few and far between.
If you are making an offer on a short sale property, you can expect to pay at or near the lender’s asking price. With greatly reduced inventory and lender books just now beginning to become balanced, the need to sell is not as great as it was even last year. Strengthening lender financials aside, a distinct lack of inventory has reduced the amount of short sale bargains made available. Between loan modifications, the HARP program and improving household income, there are significantly less homeowners than in years past. This has created less opportunity for buyers and left lenders in a position to seek top dollar for their properties. With more properties sold, there are higher comparable sales and this has further decreased the reduction in short sale properties.
Fortunately, there are still some ways to get the best short sale deals available. The most important thing is to focus on the net amount of cash the lender will receive. If you have an offer with 6% in closing costs and are subject to a mortgage approval, it will be quickly dismissed. You need to make strong cash offers, just below asking price and with the ability to close quickly. Submit a full short sale package with everything signed and executed and wait for an answer.
To get the best deals, you need to concentrate on properties that need work and that nobody else will want. If you are offering on a single family property in good condition, there is no urgency for the lender to sell. You need to focus on properties that are not financeable and will need an excess amount of work. This, supported by picture documentation and a quick cash closing ,will give you the best chance to get a property at a discount.
Regardless of the type of property you are attempting to buy, you should always include some type of supporting documentation in your favor. The lender will order their own BPO on the property, but if you can poke holes in it by pictures and comparables closer to your offer price, you may just be able to get them to see the property your way. This approach works best with listings that have been on the market for months and have not garnered much interest.
In general, if you offer 20% lower than the asking price, you may be wasting you and your realtor’s time. Lenders may still want to sell, but they certainly do not need to like they did a few years ago. You can still get a deal from a short sale, but you have to know the right properties to target and how to package your offer.