The person only has one mortgage on their house. the house is worth 300K and the owner owes 290K on only one mortgage. They would like to do a short sale. What short sale price should i try to negotiate down to? Is 250K too low? Would the lender even want to give the house away for that cheap when they could try to sell the home for 300K if in good condition and did not mind having the house on the market for 6 months. What do you think? I have quite a few leads that are this same scenario but haven’t tried to pursue yet because i am not sure if that is a good opportunity for a short sale.
Any and all advice would be greatly appreciated.
The real important fact here is what the BPO will come in at and who the mortgage company is. Some are more easily worked with than others. A negotiated settlement at 80 or 85% of the BPO is not unreasonable.
The seller will have to be in arrears or be able to prove they are about to go into arrears before you can begin the short sale process. It is also helpful if the house is listed in MLS and has not had offers.
How are you planning to make your money on this deal? What is your exit strategy or are you looking to buy and hold?
I was thinking that I would negotiate the short sale with the lender and get them down to a low payoff. And then find someone to buy the house and I would do a simultaneous close. I have a lot of leads like this one and was not sure if they were worth pursuing because there is only one lender. I have never actually closed a short sale but it sounds like it is mostly a game of numbers. I think my problem is that I want to know everything about something before I do it. I think in this case I need to jump right in and start negotiating these leads. Thank you for your advice and any other words of wisdom would be greatly appreciated. Thanks again.
does the house need a lot of repair? that helps. what is the arv?
you want to start low so you have room to come up as you go back & forth a few times . it is an absolute must to meet the bpo agent at tha bpo appt. & have your comps (low) ready to present . then also your repairs list with estimates(high).then you can send an offer of around 80% of the bpo. they’ll counter etc. etc.
depending on the area ,you don’t want to hold very long. just wholesale it. use this formula for your highest offer: 60% of arv minus repairs. it gives you room to wholesale even if you hold a few months
& i doubt you’ll have to if you offer a good deal & market it well, then
it will move !! generally values are falling & we can’t afford to hold & lose our profit while we wait to sell.holding costs can eat you alive,
especially in a soft market. leave some equity for the buyer & i know it will move. never get greedy, it will almost always, if not always , come back to bite you. :bobble
ALWAYS do your due diligence & if the numbers don’t work , then walk ! there will be other deals that WILL work when you run the numbers.
Question? Is there a way to have the lender carry the new Short Sale agreeded upon amount or do you need to refinance if you can’t find someone to purchase the home right way?
Ideally you would want to deal with one lender or have the first and second with the same lender. How low you can go is dependent on the BPO. Meet the person doing the BPO and feed him low comps and any repair estimates you have. In California, the biggest decrease I got was 80% of the BPO. The BPO came back at 910k and I got the house for 730k.
You were going to do a simultaneous close? Were you going to sell to an investor for cash? If you are selling to an end buyer you will have a problem because when the end buyer applies for financing you will not appear to have an equitable interest in the property. If you are selling to an investor for cash this will not be a problem. Were you planning on doing a dry closing on this deal? If so you need to find a title company that will cooperate with you. It is better to do it this way so the investor will not see how much you are making.
I have a good title company that i have used and have closed many purchases and refinances with. Can you explain the dry close that you had mentioned? Thanks again for the good info.
The fact that there is only one lender here is not relevant at all. The bottom line is what the lender is going to lose in the transaction. If I were writing the offer I would submit it on a 300k house for 210,000.00 here is how I come up with that number.
Appraised Value 300,000.00
Realtors Fee 5% 15,000.00
Attorney Fee 7.5% 22,500.00
Holding costs 36,024.00
Closing costs 4,600.00
Taxes (My Guess) 2,500.00
LENDER WILL NET $173,900.00
so my offer of $210,000.00 will net them $36,100 more in less time. They will argue the fact the Insurance will cover there loss. So argue that the insurance will also cover there loss here as well.