Short Sales In Woodland Hills California- This short sale series is to help sellers, buyers and their agents understand the complexity of using the Short Sale process as an alternative to Foreclosures.
What You Need to know if you are buying or Selling
Do You Qualify to Do a Short Sale In Woodland Hills California
What You Need to Have In Your Short Sale Package
The Process of The Short Sale What's Next
This post Is about how do we Make a decision regarding the amount we are going to offer on a short sale, myths and truths about the right prices on short sales.
There is a hough amount of wrong information regarding how much you can buy a short sale for. There are people who are watching too much late night TV, seeing these so called gurus that tell you how to get rich fast by buying real estate at 50 cents on the dollar and with no money down.
MYTH- The lenders have so many properties and are so desperate they will accept any low amount that is offered on a short sale.
TRUTH- The lenders prefer to work out a feasible agreement with the homeowner. Lenders have a formula they use to determine the amount they are willing to lose and what the actual net proceeds they will accept at a short sale closing.
MYTH- Lenders are just siting and waiting for your low offer!
TRUTH- Lenders have a policy they follow, the policy is : The seller's agent submits a short sale package, with the short sales offer from the buyer, At that time the lender orders a BPO, the BPO is a Broker's Price Opinion, This is not a regular appraisal, the lender is paying the agent somewhere between $50 to $100 to do a BPO, versus $400 to an appraiser. That usually takes 5-10 days to complete.
Once the BPO is back they figure out their formula , the lender sends us a statement with the amount they need to net from the property, the BPO is usually the amount of similar properties sold. The lender will accept about 5%-15% less
MYTH- You can offer as low as 30 cents to 50 cents on the dollar of what the listed price is.
TRUTH- The above statement is NOT true. The lender will take a small discount off of the BPO value. They want the offer to be right below market value.
The list price is not your starting point in the negotiations on a short sale offer. You must pull up the county records and check to see how much the owner owes to the lender. You will look to see if a notice of default has been filed. You will also need to take into consideration that if this house is in in defaulter there are other bills they most likely have not paid for and affect the sale of the property.
Those are:
- Second notes or home equity lines of credit
- Unpaid HOA fees and related attorney's collection fees
All of these are going to have be paid at the closing. The seller is not likely to have these amounts of money at closing, the additional expenses will be part of the lenders closing fees, which they will have to approve and be reduced.
Once you know the amounts the seller owes on his/her property you will have a a picture of as to how to structure your offer.
If this short sale is in Woodland Hills California it is very likely that you could get the property for 70 cents on the dollar on what the seller loans are, NOT what the list price is. The list price is usually very close to market value. This is where the misunderstanding comes in for most offers.
You must look at what is owed to the bank versus what the market value is; the list price. The lender is actually reducing the loan down to the market value which can be a reduction of up to 50% it depends on the market area you are in, some have dropped that much in the last couple of years.
Many times you can get a better idea if you are a buyer by making an offer on a property that has equity in it and the seller is motivated to accept a lower than market value offer. When making an offer on a short sale you must have allot of patience. If you need to be in a house at a certain time , trying to buy a short sale that is at the very beginning of the process and there is no BPO yet on the property, its most likely not in your best interest to pursue the offer.
You can ask your agent to find short sales that already have a BPO from a previous offer, and the original offerer is no longer on the table. In this case you know the amount the lender will accept as his bottom net and you can decide if you want to pursue with buying that property. In this situations we can close the purchase rather quickly, usually within 4-6 weeks.
So make your offer based on TRUTH not MYTH.
Disclaimer: This post is not intended to be or to provide legal advice. We recommend that you speak to your tax accountant regarding specifics and to find out if this is the best option for you in your situation.
The information provided herein is supplied by several sources and is subject to change without notice. Woodland Homes and Estates Blog does not guarantee or is any way responsible for its accuracy, and provides said information without warranties of any kind, either express or implied. Entries on Woodland Hills Homes and Estates Blog represent the opinions and ideas of the author(s). .
Contact : Rachel Zeppinick @ 818.288.7255
Copyright © 2008 By Rachel Zeppinick, All Rights Reserved.Short Sales- Part 5 Short Sale Myths and Truths About Offers. * Contact Rachel Zeppinick for Customized Listing packages.
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P.S. If you are listing your home as a short sale in Woodland Hills California make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 818-288-7255 to find out more.