Hi all. I’m new to this board but could use some help.
Background
I’m a Realtor and I’m helping my niece and her fiance buy their first home. Where I am (CA) and where they are looking, there are a lot of short sales listed for sale. I’m educating myself and have been to several short sale/foreclosure workshops. I’m no expert - but I’m learning.
Anyway, I want to tell my niece that she should consider buying one of the short sale homes - and maybe she/we can pick one up for say, 75 cents on the dollar, i.e., maybe an $800K home for $600K. The goal is to get some downside protection in case the doomsayers are right and home prices fall another 10-20%.
Obviously it has to be approved by the lender. My niece can afford to wait several months - and they are well qualified. My question is: can we play a “numbers game” and make multiple concurrent offers? The assumption is that it could take 4-8 weeks for an approval, and we would expects rejections. We’d have to write the contracts with protection so that we don’t get caught up with more than one approval. (Wouldn’t that be interesting?)
I’m also a mortgage broker, so we’ll have our pre-approval already lined up.
On the surface this seems like a very viable strategy - but wondering if someone out there with more experience can find some holes in this strategy or offer some other good advice?
Thanks to any and all replies.
Rick
So you already have your end buyer ready to go, now you need the property to sell them. A short sale could be the best option, but there are several ways to find good deals on homes other than short sales. If you find a property that they would be happy with, then it would be worth attempting the short sale.
Don’t be surprised if your 4 to 8 week time line turns into six months or longer. Personally, I have had short sales take as long as 9 months.
Having multiple offers on multiple properties isn’t a bad idea either. In fact, you could use it as an incentive for the lenders you are negotiating a discount with. If there is a stip in the purchase agreements stating that the buyer is looking at several offers, all of which are short sales, and they will purchase whichever one meets their requirements first. One requirement can be a specific short sale payoff number that is within their desired price range. Another could be that they accept by a specific date. The point is to show the lenders that your buyers are not committing themselves to the property unless the short sale offer terms are met.
Rule of thumb, you will have more deals fail than will be successful. So having multiple deals going at the same time gives you better odds of success. Just don’t put so many on you plate that you fail to give the proper amount of attention to each.
Good Luck! :beer
Thanks for the advice, Matt. I hadn’t thought of informing each lender that they were in competition for the buyer’s money. I’m thinking of using the strategy of telling them that the buyer wants to “hedge their bet”, thinking that they expect prices to drop 20% or so in a couple of years, so the 1st lender to accept 75 cents on the dollar gets the sale.
Nearly 30% of all MLS listings where the buyers live are Short Sales, so we might have some leverage.
I guess it will remain to be seen if the lender will take us seriously. I wonder if they might be less inclined to deal with us if they think we’re not likely to follow through because we’re contacting 3-6 other lenders (sellers), for example.
Anyway - sounds like good negotiating advice. The strategy might work equally well for the investor who may want to flip…