If they are willing to negotiate verbally take that first. They know as well as you all the number involved in the deal. As the negotiator you need to continue putting those facts in front of them. I use this formula to decide numbers:
Fair Market Value (FMV): $ _____.
[?] This number indicates how much the property will appraise for after all repairs are made.
// This is the begining number we start with.
Rehab Expenses: $ _____.
[?] This number represents the total rehab expense. Include all sub contracted labor, material expenses, permit fees, etc.
// Subtract this number
Taxes: $ _____.
[?] This number represents all back taxes due to bring property taxes current. You can try to include the next tax payment past what is current, but the lender may not accept it.
// Subtract this number
Commissions: $ _____.
[?] This number represents all commissions to be paid. This generally is the Realtor commission, if there is one, but not always.
// Subtract this number
Closing Costs: $ _____.
[?] This number represents all closing costs including Title & Escrow fees, mortgage company fees, appraisals, ETC.
// Subtract this number.
Your Profit: $
[?] This number indicates your profit spread.
// Subtract this number
Jr. Liens: $ 1,000.00
[?] Subtract for Second Lien Payoff.
// Subtract this number.
Your Short Sale offer is: _____.
// This number represents what you should offer the primary lien holder.
Even when the numbers are black and white and it’s obvious to everyone what the situation is, some lenders will still refuse to listen to reason. I have found that those loss mit reps who have a high failure rate at collecting lost funds are not as willing to discount for you because they are under pressure for sucking at their job.
In this situation I always try to go up a level or two, or to contact other loss mit reps in the office and try to reason with them. I have had success in by passing the rep who is giving me headaches by doing this. Either their boss will take over, order them to accept it, or the case can get reassigned all together. But again, there are some cases where nothing changes and I move on to the next short sale deal.
Good luck! :beer