With tight inventory, how much of a discount can a short sale investor get off the market value? For example, if the homeowner owes $500,000 and the house is worth $400,000, at what price can the investor/agent in a tight market such as Orange County, CA?
In my experience its somewhere between 10-15% of the BPO value when the listing agent values the home correctly. The problem is that many listing agents will list the home at a much lower rate to attract buyers that the BPO comes back higher than the initial asking price. If you are going to concentrate on buying short sales, then make sure they are "Approved Short Sales" by the bank before wasting your time.
When considering Orange County only 7% of the total inventory is distressed. That being said how many people out there are looking for a deal and how many of them think a short sale or an REO is where you will find the deal? It is possible to get them at a discount, but you will be facing a tremendous amount of competition and a majority of it will be cash. If you have cash and the resources it can be done however, it is extremely tight. In my opinion 10% discount would be a pretty good number(8-10%) with 15% being an outlining occasional deal. Also, another thing to take into consideration with closed short sales is when it got into contract. Appreciation has slowed significantly over the past year, but some closed deals may have received a BPO before some realized appreciation. A lot less likely now, but that was the case about 6 months to a couple years ago.
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