What has been your experience with going into a Short Sale with the bank without having a buyer’s purchase offer in hand?



In the world of short sales, a short sale submitted for consideration without an offer is similar to trying to create bread without yeast. Is this true or are there exceptions to this rule?

Thinking to get a jumpstart on the approval process, Jennifer wanted to turn in a short sale package on a home she was working on selling. The property has been on the market for several months now and it looks like she is just chasing the market price downward. In the depressed housing market, she tried to get some leads generated by lowering the asking price several times since the time she got the listing, yet there haven’t been any bites.

It seems there’s no way to beat the game. While Jennifer is waiting for an offer, she can’t start the lengthy short sale approval process with the bank, however, once the offer finally comes in, she runs the chance of losing the buyer waiting for the bank to approve. The process of obtaining a short sale approval from the bank usually takes anywhere from 30 days to several months. During this time anything can change—the buyer can decide to cancel because the process is taking too long, interest rates could go up so the buyer backs out, the buyer may think that the seller is playing a game and holding out for a higher offer, the buyer could spot and jump over to another house that is available immediately without having to go through a drawn out short sale process.

There has to be a way to take a little known path through all this mire and cut to the chase. Is it possible to obtain a SHORT SALE approval before getting an OFFER from a buyer?

When working with short sales, the banks generally require an offer prior to considering a short sale. You will not be able to start the short sale process until the buyer signs a formal purchase contract. You can`t even deal with the "Loss Mitigation" department until you have an offer. The reason for this is that the banks will not negotiate against themselves by giving you upfront the reduced price they are willing to sell for. They want to know that they are negotiating with a buyer on the other end and that they are not just shooting themselves in the foot by prematurely agreeing to a price that could end up being lower than a buyer is willing to pay for the property.

So what can the common person do?

You can spin this card in multiple directions to achieve your objective. One way is to take drastic action to generate some quick leads. Drop the price to "turn some heads" so you can get an offer in. Do a little research and find out how the price of other available homes and strategically price yours to stand out from the crowd. You have to keep dropping the price until you get interest. Once you have the offer, submit everything to the bank. If the offer looks too low, the bank will counter and you will know where they stand and then readjust the price with the buyer from there. You can try changing the price every 2-3 weeks. Your goal is to get it sold, not to get the most money. Regardless of your list price, the bank is going to rely on their appraisals and broker’s price opinion (BPO) for their ultimate value of the property. The ultimate aim is to price the house in a way that gets someone to want it enough that they will proceed with the sale at a later point.

A little known strategy to get the short sale moving is to keep a list of real estate people in your area who buy properties at a discount who will submit offers that are low, but reasonable, just to get the bank talking. These investors usually are looking to get a good deal on a property so their offers will tend to be on the lower end, yet they are professionals at what they do and so when they turn in an offer to purchase, they have reviewed the home and know that it is something they will profit from when escrow closes.

Now you have something to work with once you get the low offer from the investor. Your job is to justify the price in the offer to the bank. With the offer, you can also get the appraisal, or BPO, started on the home to get the process rolling. These investor offers can be considered what I would describe as "surrogate offers" to start the process until another offer arrives. This gives you leeway since you can close out with the investor if the bank will accept the price, or if a homebuyer comes along who will pay more, then you’ve made good progress in getting the home sold.

The surrogate investor offer is also something you can use in preforeclosure cases where time is running out and the trustee sale is imminent. At that stage, you want to do everything you can to try to postpone the sale so you can get a short sale pulled together.