Short sales: Definitely not for everyone. The short sale process can take up to 120 days to close. Your offer maynot be accpted by the lender and if so, they may counter your offer. There are two steps to making an offer: (1) The seller will accept your offer if it is close to what’s called BPO (Brokers Price Opinion). BPO is a price that the home would/should sell for in 30 days. Typcially, this price is market value less 3%. Assuming the seller and/or their listing agent knows where BPO truly is (or, possibly the listing price is already approved by the lender) for the property then they would accept your offer (sign it) and send it along with the “short sale package” (the seller’s hardship letter, assets, liabilities w-2’s etc) and send it onto the lender for their acceptance; (2) Once the seller accepts your offer, the lender will then evaulate the offer by ordering 2 idependant BPO’s. Once completed, the lender will accpet, reject or counter your offer.
Tip: Offers need to be made at or close to BPO. If the list price is advertized as an “approved” price then that price is considered “BPO.” If not, research must be done to determine if any offers have been rejected by the lender because rejected offers typically have “counters” and that counter price establishes BPO. Offering less than BPO is likely a waste of time.
Bank Owned Properties: Also called REO, Corportate Owned (nice name given to foreclosed properties) and foreclosure: Certainly the preferred way to go versus buying a short sale. The response time is fast, usually receiving a counter or acceptance within 5 days of making an offer. But, not necessarily fast to close. Even cash offers can take up to 45 days. Bank owned prperties are different than short sales in that the lender will sell below BPO depending on the length of time the property has been on the market. Often, buyers want to know days on market (DOM) when searching for a home. This statistic s not a good gauge of a sellers motivation. The more DOM a listing has indicates only that the seller was behind the pricing curve. DOM for REO properties does matter. The longer the asset is on the books, the more the lender wll negotiate. Cash rules.
Tip: Act fast and put your best foot forward.
Straight sales or “regular sales”: Offer market less 10% and work up to market value. Sellers sell at the market. The true market price is not a good price for the seller. Sellers typically want more than market value for their homes but ultimately end up selling for market prices. An example of how it works is rather interesting. If a seller prices their proeprty at market plus 5%, buyers will offer market less 10%. Some of those offers/buyers will move to market less 5% and finally one buyer will step forward that truly loves the home and will pay market or very close to it.