It finally happened. Many didn't believe me. But now I've seen it happen.
A home is listed for sale as a short sale - the sellers owe more on the home than it is worth in today's market.
Here's the scenario (the specifics have been changed, but the story still works):
This home has been on the market for a while now - over six months. The price has been reduced and now stands at $375,000 - a real bargain for this home.
Of course, soon after this price reduction an offer came in: $370,000, all cash, as-is, no contingencies.
Sounds great, right? Wrong.
In all short sales, the bank, when considering whether or not to accept an offer and write off the loss, sends out an appraiser to appraise the property. Of course, the bank sent out their appraiser, who valued the home at $415,000.
Guess what? The bank rejected this all-cash offer.
Banks - even when dealing with short sales and foreclosures - want to sell for fair market value. In a short sale situation, when the offer is less than fair market value, it may make more financial sense for the bank to reject the offer and foreclose on the property. It is a financial decision the bank will make.
Are short sales good deals? Often they are. Especially for homes in need of work - the work needed limits the pool of possible buyers for that home, decreasing the appeal of the home, and thus potentially decreasing the home's value. Short sale homes in need of work can often be good deals.
Other short sale properties may also be good deals. Banks are not emotional when making their decisions. If the offer makes financial sense for the bank, then they will accept it. If the offer is within reason of the fair market value, as determined by an appraisal, then the bank may accept it.
But, if the offer is too low, too far below fair market value, and the bank will fare better financially by foreclosing on the home, then the offer will be rejected.
Lesson Learned. Point Proven. I knew I was right!
Don Fabrizio-Garcia, REALTOR
Connecticut Real Estate & Appraisals
Keller Williams CT Realty
Connecticut Real Estate and Homes for Sale