@Way wrote:
Fantastic....As a followup, I have no real experience with short sales. I understand the risk and we will have a private home inspector look if over carefully. For those of you in the industry, is there any general rule of thumb on what banks will or won't accept? Are they typically looking for a certain percentage of what is still owed? A certain percentage of the appraised value?
The lender is not looking for a percentage of what is still owed. They are looking for market value and in some areas - more than market value. This changes regularly. Right now in my area they are looking at 110% of market value. It is weird, I know. But there was a time when they would accept 85% of market value. The reason it changed is because market demand has increased and inventory levels have dropped. Since it is market driven, it may be entirely different in your area. Your agent, if they do a lot of short sales, should be able to give you a very good idea of how fast the short sales are moving in your area and what the final price is in the neighborhood for similar recent sales.
To determine value the listing agent will have a CMA done (at a minimum) and may or may not list it near the market value. I have seen short sale listings priced way below market to generate interest and multiple offers. No matter what the buyer and the seller agree to in the contract, the lender is the one that has the capacity to approve the contract or not. For the lender to make the decision, the lender will have 1 or 2 BPO's done on the property and may also have an appraisal done. The lender may choose to ignore the BPO info and appraisal info. It is just one of the factors used to determine market value. The lender almost never releases the BPO or appraisal into to the buyer or seller. They will release the value that they will accept. That value is negotiable too, especially if the lender is coming back with something that is above market value.
Be careful if you aren't working with an experienced short sale agent. There are surprises - for example if the seller is in arrears for condo or HOA fees, the bank limits their contribution to at most one years' worth of fees. It is common for HOA's and condos to add in additional fees (penalties, interest, attorney fees, estoppel fees, etc) and if the seller doesn't have the $$ to pay the extra fees, and if the association won't take less, then the buyer is stuck with the fees IF the buyer agrees. Otherwise, the buyer can cancel the deal. There is quite a bit of detail involved with short sales.
