Short Sale Buying Strategies?

Question

I was hoping to get some advice from those who have invested successfully in short sales. I tend to not like to have to wait 60 days or more for a response from a bank that often even then takes much longer.

I'm looking at a property that is priced very low, and I feel it might be only to attract buyers. If I really want this property do those who have experience in short sales would it be best to offer full asking price and put the ball in the banks court? Do people find often that with under priced short sale properties they are just trying to reel in offers?

I have two short sales in particular I am looking at. One is new to the market the other has been for sale for almost 2 years!

I'm curious to see others would plan for! Thanks!

Dell Schlabach · Answer

We purchased three short sales in the last year, one we got for about 5,000 below list price, it was on the market for about 90 days before we offered, had a couple price drops before we offered.

One our realtor called, a deal fell through with buyer at last minute, we picked it up for about 6k less then previous accepted offer, because we had cash and could close right away, within 5 days, fastest short sale I ever saw.

One we offered 79,900 list price a day after it came on the market, two weeks later they countered offered at 85,000, I had never heard that the list an "teaser price" but apparently its common in some areas. We said no. Two weeks layer they accepted our offer price...almost four month later we finally closed last week.

Also had one that was listed on the market for about a year,  they accepted 10k below list, we had it under contract for about four month with extension after extension, we finally walked from that one.

@Jen Shrock

John M Pierro · Answer

Hello Mike,

Just putting in my two cents on your original question about teaser list pricing on Short Sale Listing?

Rarely have I seen a realtor list a Short Sale property well below the perceived value in order to get phone calls to show a property. What you will want to ask is how long the Short sale has been listed, you'll want the whole history of that particular listing. Many times if a property has been listed with little action and no offers for 30-60 days then they usually will adjust the listing price downward. It's very possible this has occurred multiple times on this listing. The other possible cause for the low list price may be that there was an offer on the property which prompted the bank to order a BPO (Broker Price Opinion) and the valuation came in low so they have listed the price accordingly. You can also find that this ShortSale was in contract to be sold already, but for whatever reason the buyer fell through... The last thing the realtor wants is to list a Shortsale to low because it may not even trigger a BPO to be ordered by the bank which is ultimately what needs to happen before we know what the banks position is going to be on a property. So you need to make out a list of questions and sit down with the listing agent to clear up the history of this listing. I would not offer the full listing price until I got more information. Best case scenario would be that there is a significant (High) 2nd mortgage and the listing price is close to what is owed on the 1st mortgage, Shortsales with high 2 nd mortgages have a tremendous potential for larger profits because the bank in the 2nd position has no leverage and will usually take Very little to get out of the way in which case you can get the property very cheap.

Good luck and happy deal hunting

John M Pierro

Brent Coombs · Answer

@Mike Barry, what you could have done in parallel with your Short Sale Offers was concentrate on non-Short Sales for your desired "quick" outcomes while dutifully ignoring the Bank-Sellers once your Short Sale Offers were in. If you had been patient, those original deals you wrote about might be yours by now. Are they? And all the other Short Sale Offers you should have made soon after April 20 could also be yours, or very soon. Because a "quick Short Sale" is fairly much an oxymoron! Cheers...

VAUGHN BLACK · Answer

Great insight in responses . Good luck

Jen Shrock · Answer

@Dell Schlabach  Beautiful work, even if it was a split entry.  ;). (Haha - I just went on a mini rant about them in another post.). Should I say thank you for adding even more fuel to the fire of my non-stop thinking??...well yes.

At first, by your last post, I was thinking you probably started at a higher price point, with your ending sales being what you mention.  Interesting to see the transformation from the starting price point to the grand finale in the hands of a very successful and seasoned pro.  I would imagine that it is quite a competition zone in that starting price range.

I think the biggest block I have in my brain right now is the deal analysis and getting the numbers to work right.  Once I have a couple of deals under my belt, that should fade away.  I am much more hands on in my learning style.  Accounting type math is not my brain'a thing, but a couple of actual deals will smooth that out.  I tend to be relatively well versed on the rehab side of things (thanks dad for teaching me to dig in and be hands on).  Will just need to retrain my brain on the costs associated with contractors doing work, instead of just myself.

Thanks for taking the time to respond and share one of your gorgeous flips.  You certainly cannot say you are bored with all that you have described!!  What you said in your previous post about backing into a deal price based on your profit margin definitely makes sense.  You have certainly fanned the flame of determination in me and given my mind more to chew on.  Your tidbits of advice and before and after pic's are greatly appreciated!

Dell Schlabach · Answer

@Jen Shrock

Couple links to before and after pictures of our latest rehab, gives you an idea of what we do.

Before

http://www.estately.com/sold/2555-ranfield

After

http://www.zillow.com/homedetails/2555-Ranfield-Rd...

Dell Schlabach · Answer

@Jen Shrock we look at, analyze and crunch numbers on about 30-40 potential deals in a typical week. We are looking for properties that meet our net  profit criteria. I don't pay much attention to discount amount or %, except in a sense of; considering what we are willing to pay, is that discount an amount that the odds of acceptance are high enough to make it worth writing an offer.

Our average home sells for around 150,000-175,000 we do an occasional one in the low 100s and we have two right now in 250-350,000 range, roughly 30% are above 250,000.

There are plenty of properties we offer 10-30 below list, there are also ones we offer significantly above list when they first come on. We lost three last week in multiple offer situations two we offered significantly above list.  We bought one that we offered about 20k below list and ended up buying 12k below list yesterday.

Jen Shrock · Answer

@Dell Schlabach  I have been thinking quite a bit about your examples over the last couple of days. When you evaluate, are you thinking more of wanting a discount of a certain percentage or a flat rate amount?  Not knowing the price range you are buying in, the two could be very different animals.  While I work on finishing my own property renovtion to the put up for sale, I have time to think about the business model I want to develop for RE Investing once it is sold.  I like the idea of buy and hold for future stability, but I also ie the thrill of the hunt in finding a deal and bringing it back to it's glory.  I want to use and grow my money wisely.  Just thinking through some scenarios on properties that have come across my radar.

Jen Shrock · Answer

@Wayne Brooks  Thank you for the thoughts as to why something wasn't moving.  It is something that I will have to keep in mind and look into with the property that has caught my eye.  The property is a bit basterdized in the sense that, while there are both a SFR and MFR for sale side by side, they are interrelated with some things so it sets them up to be both investor related, at least in my mind.  Both were purchased by the same person and both are under short sale status.  At this point, the ads say make an offer, so we will see.

@Dell Schlabach  I appreciate the examples.  Right now I am having patience because I am working on my own residence to sell.  There is a lot more leg work that I would need to do to see if I feel that the properties of interest are what I think that they could be.  I was hoping that you would have a grand tale of being able to swoop in on something that had sat in short sale for so long and get a screaming deal.  :)  Isn't that what we all dream of, though.  Before I make a jump with this, I will need to collect my numbers and will throw it out for BP nation to tear apart the deal.  Thanks again for the insight, though.  Coming from someone who is dealing with so many of these, it is a good dose of reality.

Dell Schlabach · Answer

See above for my experience,,its not uncommon to wait 60-120 days after offer is accepted in my limited experience.

@mike berry

Short Sale Buying Strategies?

Most Popular Reply