How Much Do Your Short Sales Save?

Question

Have you closed one or more short sales in the last couple years?

If so, how many have you closed and what's the typical write-down you are able to get banks to accept nowadays?  15%?  50%?

I'm hearing conflicting accounts about what's realistic so thought I'd ask the pros who do them.  :)

Thanks in advance for your time.

Sean Kuhn · Answer

Elizabeth  Colegrove  makes a great point. I love putting an offer in a house I know I can't afford yet, but 3 to 9 months later I'll be able to. All three short sales I've got are in great shape too.

J Scott · Answer

You can purchase a short sale using a new mortgage.  I'm sure you can use the same bank to provide the loan, but the process would be equivalent to getting a mortgage from any bank for any type of deal.  In another words, you won't get any special treatment just because the bank owns the current loan (and you won't get worse treatment either).

David Weiss · Answer

@J  Scott , @Ned Carey , @Elizabeth  C. and everyone else, thank you so much for sharing your experiences and insights.  I'm going to bookmark this thread for referral whenever contemplating a situation where a short sale might be useful.

PS:  J Scott, your eBooks are fantastic--thank you so much for creating them and thank you BP for distributing them!

J Scott · Answer

First, I'm not sure what you mean by "savings" or "write down"?

I've purchased about a dozen short sales, and the price the lender will accept generally has nothing to do with the list price or what the seller owes.  The lender will typically settle for some percentage of the BPO or appraised value -- typically 80-92% of that value in my experience.

The best ways to get good deals is to find houses that are so distressed that the BPO is exceptionally low or convince the appraiser/agent/lender who is doing/reviewing the BPO that the value is low.  This can be in the form of pictures, contractor bids, discussions, etc.

Elizabeth Colegrove · Answer

@David Weiss

We have been able to get a 20-25% "savings" on the houses. The savings were usually not realized instantly but within 6-12 months. The best time to get the "savings" is while the area is artificially depressed with LOTS of short sales. For a while short sales had a bad stigma so they were being avoid by many non-investors.

For us the major factor has been the market. Their has been less of a savings in California this past summer because the inventory was so low and the demand was high. Plus they were closing in 2ish months.

In the past 3 weeks it has become almost quiet, so short sales are becoming "deals" again. You also have to know the game. If you can get a short sale before it comes on the market or when their isn't a crazy bidding time. You can get a great deal.

Beyond the "discount" I love short sales because

*Since they take 3-9 months you can lock in a price and than pay at closing. This is great for planning and also locking in low prices without having to pay the cash at the time

*The houses usually aren't destroyed because the owner is "voluntarily" giving up their house.

We have bought 3 short sales, 1 foreclosure, 1 short sale in the works, 1 foreclsoure in the works and another short sale "potential". Let me know if you have any questions.

Mark Ferguson · Answer

I have bought four in the last two years.  List price is really not a factor on what the bank will accept. I would not have bought any of them if they weren't 20% below market or more. They were all very close to list price.  I have two more under contract that I am waiting for an answer on.

Ned Carey · Answer

I don't know if there is a "typical"  Are you talking about a big national bank or a local bank with only a few branches? Is it a first or a second?  Has the loan already been written off? Who is the investor who bought the note?  All of these questions factor into the kind of discount you may get.

I have only done 1 short sale in the last two years. I got Chase down from $66K to $5K. That was an exceptional situation, that had many factors leading to that kind of discount.  - Ned

Phil Z. · Answer

Your not going to get the right discount for a profitable flip unless the property needs major repairs and is valued with only cash investors in mind, or the appraisal comes in mistakably too low.

Billy Hills · Answer

@J  Scott

Thank you

Billy Hills · Answer

Are short sales paid in cash at closing, or will the bank remortgage to a new borrower?

How Much Do Your Short Sales Save?

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