Short Sales are the buyer road to riches - if you believe the promo advertising that is all over the place. But the road is not a short one nor is it a smooth one. It is best covered with professional help and guidance.
The buyer attempts to get the bank to give up gads of lost equity is the goal of the short sale investor. The question is how much is the bank going to give up and how much will the seller think reasonable (if the seller has any economic ability to still influence the sale).
Let's talk about two important issues: the low ball offer and the seller's control of the sale.
1. The low ball offer is the buyer goal and the bank's gremlin. The bank's BPO or appraisal is most often going to guide the transaction. Sometimes the BPO will come in low enough to get the bank to get the loan off its books at almost any price. What are the chances of this happening? I don't think there is any analytical study on the subject, but the articles I have read generally say about 10 -25%, with the low numbers coming from the loss mitigation departments of the banks (I wonder why). This is versus a normal best efforts sale procedure and documentation with the bank, which comes in at 70 to 80% success rate. So the low ball of course can work and will cover a far greater upside potential for the buyer - but you may have to go through ten to get one -- or of course you might go through 28 before you get 2. It's playing the odds and the odds ain't good!
2. In this environment of the short sale it seems apparent that the bank controls the sale. Some might say the buyer controls the sale. My opinion is that both statements are primarily incorrect. The seller owns the house. The seller must sign the contract. The seller must sign the deed. Of course, if the seller can't sell and the bank forecloses, then the bank will likely have the REO and the sale is now with them - as the new owner. The issue is that the bank is the "reluctant" owner. The bank has already determined (by working with the seller and buyer in the short sale process) that it is in the bank's best economic interest to sell the house outside of the foreclosure process and prevent an REO occurance. If the bank won't go down low enough and tries to beat up the seller or seller broker - the seller can say NO. What choice does the bank have? It's like playing poker - who is bluffing?
The short sale enterprise is a game. There are usually 3 main players - the bank, the buyer, and the seller. Assisting the players are the seller broker and the appraiser, and sometimes the buyer broker (if 2 brokers are involved). Playing the game takes expertise and knowing how the opposing players think.
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