Most investors have been there– See a great deal on MLS, fire up the line to your real estate agent, set an appointment, get excited, start seeing the dollar signs add up, make the offer, then…… then….
Yes, that is part of the process. It is supposed to, and certainly can, add value to the deal. A buyer willing to hang out waiting on the deal to approve.
1. Offer Price is Critical
We all want a deal. Some banks are willing to make that deal, some aren’t so inclined in the current market. One key is to find an experienced professional that understands the back-end finance of a deal. Each lender or servicer has a strict guideline to hit. Present close to your best offer. Don’t expect a lot of counter offers, it’s not a part of their short sale negotiating model most of the time. One fact to remember is that the alternative is foreclosure. If your deal isn’t close enough to what they believe that they can get in a foreclosure, you offer may be dead in the water.
Your offer must be presented complete. If the servicer/lender wants a fully executed contract, proof of financing, estimated settlement statement, signed incorporation paperwork, and a choice of a multitude of other requirements, make sure it is presented all at once. This will help your offer not fall back to the bottom of the review stack. Many servicer’ employees handle 200-25o or more files. Make yours an easy one to review and make a decision on. The clock is ticking and not in your favor. As a buyer, you have much to include, but if you work for the seller, your job is critical.
3. Broker Price Opinion
An often seemingly insignificant item of the process that can make or break a deal. Sometimes its right, sometimes its wrong, but in the end, it is critical to the deal. A Broker Price Opinion (BPO) is a function of valuation for the deal. The servicer/lender will hire one or more agents to provide a BPO. They may also include an appraisal, or even an AVM into their valuation mix, at their discretion. Understanding how a BPO value is determined can significantly increase your chances of getting item 1 correct. See the subscript below for more commentary on a BPO.
Five Tips for Successful Short Sale Deals
I’ve experienced the great short sales and the not so fabulous short sales over the last 7 years. After introducing the concept to my former RE/MAX office, I successfully garnered a short sale from offer to acceptance letter in 5 days, while yet another stretched on for eleven months – It’s all in the process. But how can you control the process, or attempt to control that process?
Here are five success principles I’ve learned over the years of thousands of BPOs.
1.) Keep your list price near to the actual value of the property and keep the offer as near as possible.
Account for condition initially. As a negotiator, agents are responsible to the seller to provide a professional service. By starting too high, the agent may give the lender the opinion that the property is truly worth more and they shouldn’t consider the offer.
2.) Do not take drastic price reductions because its “fire sale time”.
This is an obvious move. The lender/servicer has a record of these changes or requests them in the BPO. Just because the listing agent or the buyer is trying to get a deal, doesn’t mean that the lender is now willing to ‘give away the farm’. You can/should make regular price drops of reasonable amounts.
3.) Do not give the BPO agent any of your ‘strategically found comparables’.
This is a form of steering. Professional BPO agents like William can search for comparables in a matter of minutes. When a property contact offers comparables, it’s clear that they are attempting to steer a value. Nice effort, but could be met with an opposite outcome. Let the BPO agent do their own job and expect a reasonable discount from the lender.
4.) If there are several repairs needed, or a drastic foundation repair, get a written estimate.
BPO agents do not typically understand repair estimating. Having bids from licensed professionals (again, no coersion) can help the agent determine a fair value given the extent of the work needed and be able to document that in the report.
5.) Consider a referral.
If you have done just a few short sales, or if this is your first one, consider a referral to a partner that has the experience to get the job done. Remember, if you are an agent, you have a fiduciary responsibility to the seller. Half of a deal that makes money is better than a whole deal that makes nothing.
Do you have a tip for successful short sales to share? Leave them in the comments below.
Photo Credit: SWoo