Short Sales at 40% Below Market Value

[Ayo F.]

Hello all,

I have heard of people getting short sales at 40% - 50% below market value.

Can a few of you share your success story and what factors contributed to such successes.

Getting shorts at 20% below market value is quite common as long as its not a Fannie or Freddy or a loan with PMI. But 40%, that's unbelievable.

Any thoughts?

[J Scott]

There's a big difference between getting properties at 50% below *MARKET VALUE* and 50% below *ARV* (you use the terms interchangeably in your two posts above).

Market value takes into account the distressed nature of the asset and the cost to renovate it to the point where it can be sold. ARV assumes the property is already in saleable condition.

As an example, if you can pick up a house for $50K that has an ARV of $100K, it is 50% below ARV. But, if it needs $50K in renovation to get it to where it's worth that $100K ARV, that's not a good deal. On the other hand, if you can buy it at $50K and it's market value is $100K (i.e., you can resell it for $100K as-is) then that's a great deal.

It's important to distinguish between the two...