What kind of offer is acceptable in a short sale? (foreclosure, agent)

[CoastieTX]

If a house is a short sale, how does a potential buyer formulate an offer that is likely to be accepted by the lender(s)?

For example, if the buyer can't make the payments any longer, but still owes less than what the house is currently worth, should a buyer:

A. Offer whatever is owed on the house
B. Offer what s/he feels is fair market value
C. Offer fair market value minus some fixed percentage just because it's a short sale

Would a lender accept an offer that would pay off the debt, even though the house may be worth more?

[sheri257]

I'm currently bidding on a short sale right now. The bank obviously wants as much money as they can get so, whoever bids the highest is going to get the house regardless of any other factors.

However, in this particular case, the financing fell through on the highest bid. That's the problem for the bank ... lending guidelines are tightening daily and finding buyers who will actually be able to close is tough ... especially since loan approvals may easily fall though in the 3-4 months it may take to get these deals done.

At first the bank wanted $400K for this house (the orginial loan was $550K) ... the highest bid came in at $350K but, as I previously mentioned, it fell through.

I only feel comfortable bidding $300K because I think there's a lot more downside in this market and I don't want to be caught in a negative equity situation if I can help it.

Somebody else may come in and bid higher and I do love the property but, $300K is the only price I feel comfortable paying. So ... even though I really want the house, if I don't get it at price, so be it.

[irish setter girl]

I have not found a general rule to follow as each short sale is so different. It depends on how many liens are on the property and just how much the seller owes on the house vs. the sale price. Find out what the seller paid for it, how much they owe and if there are any other liens on the property. Once the bank gets the BPO on the property they will assess their losses. I've seen them budge 10-150k depending on the marketabilitly of the home. You asked if the lender would take less than the house is worth but enough to pay off the debt and in my opinion the answer is yes. The bank just wants their money back. The sooner they can get it off their books the better. I have had banks take a lesser price offer simply because the lower offer could close in 3 weeks vs 45 days for the higher offer. They are not in the business of owning real estate and want to unload quickly. I always suggest offering a bit lower price but entince the bank with a quick and simple closing date.

[vpcats]

Quick basic question regarding short sales. I am not familiar with this process at all but this weekend I saw a townhouse with a FSBO sign but with "Auction" written on it.

I called the number listed and asked why it said "Auction" and the owner said they were trying to negotiate a short sale. That the market value was about $230K and that it would sell for above $200K. So I said, thanks very much.

How would I go about getting real information to see if I'm interested?

[Brandon Hoffman]

For buyers the lowest offer the bank will accept is a good offer. The only way to find out is to make an offer and test them.

vpcats: If interested, the owner needs to hire a Realtor to manage the transaction. I don't say this to promote using an agent but because it won't cost the seller any money since the bank pays the commission. The banks would rather deal with a Realtor than the owner for a short sale. You could be proactive and hire an agent that is familiar and has closed short sales to talk to the owner and then list it to go the bank for you. Couple of different approached but it depends on the owners willingness to avoid foreclosure and the right person explaining the process to them.