Fab Real Estate Blog: Offers on Short Sales

Offers on Short Sales

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
203.746.1199
Connecticut Real Estate and Homes for Sale

Comment balloon 4 commentsDon Fabrizio-Garcia • May 09 2008 06:48PM

Comments

Do Don;

Great post and some great information. I thank you for sharing.

Posted by Anthony Stokes-Pereira, Realtor (Better Homes and Gardens Rand Realty) about 10 years ago

This scenerio has been happening all along in my area. We are having bidding wars on short sales and REOs.

Posted by Jean Powers, CRS,e-PRO,HAFA,SFR Broker, Northern California (Kane & Associates call 510.908.9002) about 10 years ago

Bidding wars on REOs and short sales are marked with a scarlet A.  The process is driving me bonkers on my one and only short sale listing.  The BPO on the 1st came in where we needed it by a licensed appraiser.  The BPO on the 2nd came in 100K TOO HIGH!!!  I am begging the 2nd to get another BPO.  We lost out on two buyers and our market has worsened since we received those two offers so now I have an offer for $30K lower than the first two.

I think when foreclosure time comes the seller would have very good grounds on fighting a deficiency judgment if it comes in any lower than the first bottom line we sent them!!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) about 10 years ago

Anthony - You're very welcome

Jean - We're back into multiple offers here again, too.  But, only on the homes that are priced correctly.

Renee - Short sales are fun, aren't they?  Was that second BPO an exterior BPO?  Was it wrong?  If so, fight it.  Prepare your own BPO, submit it, and request they do another.  And, of course, remember to breathe.  They get easier...

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) about 10 years ago

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