One piece of advice that I usually give about buying short sale properties is to consider the listed price as a “teaser” to get offers. The seller and their agent usually don’t consult with the bank about the asking price. They need an offer to submit to the bank to get them involved in their short sale application. Even though the listed price may be rejected by the bank as being too low, it at least helps to establish what the bank may accept. This is good for the seller with future buyers, but bad for that first buyer unless they are willing to raise their offer to what the bank will really accept.
I just encountered a great example of this. I called an agent representing a condo short sale to check the status of the listing. The condo was listed for $60,000. Looked like a great bargain for my buyer client. However, the listing agent just got an answer from the bank on an offer submitted at “full price”. The bank will not take less than $120,000. Double the listed price. Understandably, my client is no longer interested.
The best way to understand if the asking price is realistic, is to review similar properties in the area that have sold and are listed for sale, particularly bank owned. Your Realtor can help you with this review. If they are similar in value, then the price may be in line with what the bank will accept. Otherwise, you may be wasting your time.
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From an investors viewpoint all first offers are rejected by the bank even if it comes in at what they would take for the property. It’s always good to do your homework before submitting an offer, but don’t hesitate to put in a low offer because the majority of the time it will get rejected. The intitial offer is just a starting point for negotiations with the bank. Also don’t forget to get all the information from the seller to submit the short sale package to the lender along with the offer!