Is my realtor with the facts?

Question

For the most part, I've really only been doing hud deals and a couple of bank REO's. I went to look at a short sale property the other day and it needed quite a bit of work. I told my realtor I wanted to put in an offer but she gave me some speech about Freddie being limited to getting 82% net of market value.

i.e. She's saying that if the BPO comes in at 100k, the lowest offer they can accept is 82k plus the closing costs and any unpaid liens (i.e. taxes).

This doesn't sound correct to me but I have no way to know if
thats correct.

This house is listed at 75k and probably needs 30k in rehab to make
it right. I want to offer 50k so I can be all in at my number (80k). The house, if done right, would probably come in around 125 to 135k which is right in my sweet spot for properties - although I don't typically consider houses that need so much rehab. But I am willing to make an exception to pick this one up since its so close to home.

Should I put the offer in? Is my realtor off her rocker?
I've never heard anyone mention this crazy 82% rule before but
I don't do a lot of searching on short sales either.

Suggestions????

Mike H. · Answer

Ok. thanks. Good thing I didn't push back too hard with the realtor then. I was doing everything I could to bite my tongue. But I really wanted to say that rule didnt' jibe with what I was hearing about the deals on short sales.

82% of a BPO isn't any kind of deal to me. Why in the world would I want to wait 6 to 9 months in some cases to get 20% off the market value of a property?

I can get a lot more than that off simple bank owned stuff and those are houses the banks have already eaten all the foreclosure costs.

If I'm saving them the foreclosure costs, I should be getting a much bigger discount, shouldn't I?

J Scott · Answer

Generally speaking, your realtor is correct.  I believe they start at 88% of the BPO and will drop to 82% after 30 days. But, if the seller is willing to get bids on how much the repair costs will be, the lender will often go lower if the bids substantiate it.