Tricks of the Trade

            In the last two posts about short sales (http://activerain.com/blogsview/190644/Short-Sales-Part-1 and http://activerain.com/blogsview/195592/Short-Sales-Part-2), I laid out what a short sale is, why you would use it, and the process it entails. In each post, I included some good common sense ideas, as well as some things most people do not recognize when they are negotiating a short sale.  In this post I want to summarize the out of the box ideas and tips that I can give to anyone negotiating a short sale.

1.      Listing. 

    a.       There is no better way to reduce the sale price on a home than to expose it to the open market.  When working on a property that needs a short sale, it is good to show a long history of expired listings or price reductions on that property for prices above what you are paying.  This can prove to the bank that the home is worth less than what is owed.

    b.      To facilitate a timely short sale, sometime it is a good idea to bring an investor into the mix.  Have them make the initial offer to start the short sale negotiation.  Make sure the purchase agreement is assignable, that way there will be no property flip involved if the end user buys the home before the sale is completed.

2.      Offer.

    a.       A bank will not negotiate without an offer.  Most times the Loss Mitigation Department will not even talk Short Sale without an Offer on the Home.

    b.      Base the purchase price somewhat on the amount of time left before repossession.  The bank generally takes less at the beginning of the foreclosure process because they have fewer costs involved.  If time is of the essence, offer a higher amount because there is not time to negotiate. 

3.      BPO or Appraisal

    a.       DO NOT ALLOW A DRIVE BY APPRAISAL OR BPO!  It is best for all parties involved to have the most accurate and realistic idea of what the home is worth.  Most drive by BPO’s and appraisals come back at a much higher value than what actually exists.

    b.     Tour the Home with the Broker or Appraiser.  Make sure you emphasize all the bad aspects of the home.  The buyer will recognize these right away and the person determining value should account for them too.

4.      Repairs

    .       If you’ve done your work properly, you should have addressed these with the BPO or Appraisal.  If you did or didn’t, it is still a good idea to have these deficiencies in the home accounted for.  Have a Licensed Contractor give an estimate for such repairs.  Remind them to figure for worst case.  You do not want to negotiate too little for something that can be a much bigger project.

5.      Closing

    a.       Make sure throughout your negotiation that you have a deadline to work with.  You may have to account for this in price if time is an issue.  After the negotiations on the sale price are complete, you will still need the typical time period between the contract being agreed upon and the Closing.  Don’t forget this.  I have seen too many deals fall apart because there was not enough time to complete the financing on the Buyer’s End.

I do hope this helps you all with your negotiations on the Short Sales that you do.  May your deals be as quick and painless as possible =)

Copyright 2007  Daniel Sundberg, Five Star Real Estate  All Rights Reserved www.dansundberg.com