After making tons of short sale offers we still haven't had any AGENTS interested in working with us.
Do you basically need to personally know short sale listing agent personally to get an offer accepted? Or do they only deal with buyers who offer them "under the table cash"?
I've done everything I know that's legal to try to get my offers accepted: Main thing is I show a bank account proof of funds with over $450k. I also offer them to double list the deal if they want it to move more "efficiently". I mean at this point I really don't give..., I just want some sort of response.
I'd assume that banks would still want the highest and best offer they can get, but they're obviously not getting this when these agents are double-ending and pocket listing deals. I have a feeling wholesellers or large scale flippers are simply offering them money on top of the commission to take their deals.
Here's an example of a current deal we've been submitting offers and trying to get some communication going for the past YEAR.
Last List Price $225k
Our Cash offer: $280k Cash with proof of funds ($450k in bank account for past 6 mo+)
Accepted Price: $220k
[Just for your info ARV was around $450-500k after around $100k conservative rehab estiate ]
[We also submitted a $290k cash offer about 6 months ago, but at that time the property was listed at $415k (which is the entire amount of the loan due)]
This is just one of several examples of offers we've had out where we offer much more, and cash, and the short selling agent (who controls the entire deal) accepts something else. Contingencies?
Is there a way to just contact banks and offer them cash for their properties? I'm sure I could out-bid most of these listed properties....But this isn't really how short sales seem to work. I'm contemplating just renewing my license and becoming a short sale listing agent and just offer the cash directly to the bank.
at this point I think I'm just venting but my question really is...
What do I need to do to play their game?
The same thing with OREOs. Often times its who gets the offer in first. Being such a long process(short sales, huh) it may take a while for you to find out someone who bidded lower actually won the listing. Crazy I know... try to keep your offer in the game by having your agent negotiate with the bank for you to be the back-up buyer should the accepted offer doesn't close. Its always good to use a bank r.e. agent. Someone that already has a great rapport, track record with the bank...my coin.
I feel short sales are an area ripe for abuse. Regardless if the home is sold 5k or 500k under what is owed to the bank, the seller generally gets nothing. There's really no incentive for the seller or their agent to submit the best offer to the bank, as long as they feel the offer they submit will get the job done.
A year ago I had a neighbor list their home as a short sale. An acquaintance of mine looked at the home and submitted a strong offer. A couple of weeks later I find out that the neighbor accepted and submitting a much lower offer to their bank. When I asked the neighbor why they did this, their answer was that that the buyer was going to pay them 10k cash outside of closing. I let them know this was likely illegal. Their response was their realtor told them this happens all the time.
Short sales are difficult but not impossible. The homeowner must get the bank to agree to accept a short sale but the bank comes up with the price. They will either accept or reject an offer, so whatever the price they like to see close to that figure.
Now I stay away from that illegal activity and I suggest you do the same. It's not worth it even if the Realtor says it happens all the time.
Our team closed several hundred short-sales last year and I can tell you there are numerous strategies for being successful at buying them.
First you should realize the national average discount for a short-sale is 18%+/- of the appraised value. This is not critical knowledge for getting your offer accepted, but it is critical for not wasting time on deals that are not worth pursing.
As some have previously stated, getting your offer in first is critical. Many times we already have the property under contract before it ever even hits the local MLS system. Agents love to work with us because they know our buyers will preform when it gets approved whether it takes two months or a year. Agents HATE putting a property under contract just to have it fall out. It is a lot of paperwork for them and then the process starts all over with a new buyer. They are basically selling the same property multiple times but only getting paid once. Building a relationship with one or more of your top local short-sale agents should be a priority. One way to build a relationship is to offer to let the short-sale agent be your listing agent when it's time for you to sell your property.
Contingencies can help you in the beginning getting deals accepted, but they can also hurt you in the end. The stronger your reputation the more contingencies you will be able to get away with in your contract. I can tell you I would never accept our contingencies from another buyer which include:
- Due diligence starts at receipt of bank approval letter
- Earnest money due within 7-10 days of receipt of bank approval letter
- EM held by our attorney who also must close the transaction (difficult when another attorney is handling the short negotiations but there are ways to structure it where they still get paid and our attorney closes it)
- Property is vacant at least 24 hours prior to closing
These contingencies help protect our earnest money in the event values during the time it takes to get approval. I'd be happy to give any suggestions to help but real estate is local and there may be rules or regulations that may make some of these suggestions unavailable in your area...
@Kathyrn excellent information.
What you may need to do is find short sales off market. Make an offer, contingent on bank approval, and have it ACCEPTED by the seller. Then you can give it to a realtor who will work the short sale. The owner can not accept more than one offer. The bank may in turn either accept or reject it.
Thanks for the advice especially @Kathryn C.
Also @Larry T. , I think you're right perhaps I need to find the short sale off market and get my offer in, or make friends with the sellers.
The thing about this deal is I've been following it for a year. The price was $415k and lowered to $225k.
We put in an offer of $290k cash offer about 6 months ago, when he property was listed at $415k.
Then, they recently dropped the sales price to just $225k about a month ago and we still had that $290k offer in 6 months ago. We also put in another offer since we figured they threw away the $290k offer.
So it just seems odd that they would lower the price way below what our initial offer was. I think the agent just never bothered submitting our buy offer.
What most likely happened was the bank appraisal came back lower. Now I have absolutely no clue why, but when that happens sometimes the agents lower the price on the MLS and sometimes they don't. In this case I am guessing they did lower it on the MLS but kept the original buyer. I am guessing the lender and/or negotiator had the agent lower the price in the MLS for some internal reason. Someone else here may know why this is done but I do not know. We had a deal a few months ago where the bank actually had us lower the contract price by $40,000 to match the appraisal and this was a cash sale (no loan appraisal for the buyer needed). I'm sure there is some valid reason they do these kinds of weird things though.
Thanks Kathryn. That helps.
So am I to understand that the owner is still involved in the sale of the property?
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Yes, the owner stills owns it, so they have to sign everything....purchase contracts, arms length affidavits, etc. Only an executed contract by the owner, not offers, gets submitted to the bank.
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