Belt Auction

First-time buyers considering a short sale home?

We're first-time buyers, and found a house listed for 275K as a short sale. The estimate on Zillow.com (which I know isn't necessarily accurate) is about 220K. So I'm wondering how to go about negotiating with the lender on a price that I can afford. Should I get an appraisal done, access public records to find out about foreclosure, and bid 200K (total price, including closing costs) and wait for them to counter-offer? I'm new to the real estate market, but have done a little bit of research. Should I hire a broker who's experienced in short sales?

Public Comments

1. Zillow's usually pretty accurate so I'd be real cautious about that much difference. A bid of $200K on a short sale where the asking price is $275K; that would probably take 6 months or longer while the lender waits for better offers. Short sales are notorious for that and that's when the offering price and asking price are close. I just bought a short sale a few weeks ago and it went well. But I offered the bank's asking price, a figure that was priced very aggressively. If you're first-time buyers I wouldn't recommend going it alone on a regular sale let alone a short sale. It can be a long frustrating wait only to find out after 6 months that the bank has decided to go with another offer. Short sales can be a great buy but be cautious. First time buyers often get eyes that see only what they want to see.
2. You should not be out looking for a house without your Realtor. And your Realtor should not be showing you houses without being re-qualified for a loan. AFTER you have those two things in line, and with the helpful advice of your Realtor, you decide if looking at a short sale property is within the time frame that you have available. Your Realtor has to do a market analysis on the house and determine what it is worth, and help you decide how much to offer. If it's worth 325k, then it would be a waste of paper to do an offer of 200k. Even if it's only worth 220k, it might be a waste of time right now to offer 200k - the seller is selling it short (not going to zero out) at 275k. It's a long way to 200k and that might take a year or so.
3. No one can answer your question accurately without knowing more information. Don't believe people who answer questions with absolute certainty. My experience is that they are as often wrong as they are right. As to your question, the best I can do is to get all the information you can about the debt on the property. That will tell you if the 275k is below that debt level. Then you need to shore up your comparables to know exactly what the property is worth today. Zillow is a great resource for getting an idea of value, but it's better used to get recent sales data on comparable properties. You can work with a broker to get an even better idea of market value. However, you should know that a broker that says they are experienced in short sales is often only experienced in getting enough of a discount to get their commission and close the sale. They may not know how to get you a really great deal from the bank. If you really want to go after this property and get the best deal you can get, you need to know how to negotiate with the bank yourself. And the best resource out there for learning to negotiate with the bank, including how to prepare your offer package correctly, how to talk to the bank, how to get the best price, and how to win at the negotiation before it starts, is The Complete Short Sale System from http://www.theshortsalegoods.com. Good luck.
4. It is estimated that less than 30% of short sales transactions actually get completed. These transactions are long, difficult and usually don't get get done. You're better off to get qualified by a lender and then go out and look for bank-owned properties that meet your needs. Good luck if you go the short sales route.