5 Step Short Sale Strategy-Offers-Timing and Ratios

Ground zero-Determine the total debt, what type of loans and who they are with. PMI FHA etc..

Step 1. is to determine what the current fair market value for the home is on a 15 to 20 day price.

Step 2. List the home on the MLS at 90% of FMV. (Fair market value) or 15 to 20 Day price.

This should help any early on drive by BPO’s to still come back in a range that will help your approval.

Step 3. Is to provide an investor cash offer to the bank at 65% of the FMV.

Start the negotiations off on the right foot and set the expectations as low as possible, but high enough to get the process going. It need to be at least around 65% of what the banks AV will be. (automated valuation)

Step 4. Place the home under contract on the MLS for the next 30 to 90 days OR until the bank starts the process and orders the BPO’s.

This will save the seller months of unnecessary showings and calls as almost none of the potential buyers in the first phase will still be around to purchase the property in the final phase.

If the bank approves the investor offer with a clean approval letter, then its a done deal! Mission accomplished.

If they approve the investor offer but ask for a promissory note OR the second mortgage needs more money that the first mortgage is willing to pay, then be happy you started the negotiation low enough and ask the buyer to increase the offer to satisfy the note or have them pay the second mortgage additionally at closing.

If you didn’t send the investor offer in and sent the highest offer you could find, this option most likely wont be available to you.

If the bank sends a counter offer at an “approved price” then you put the home back to active status or provide an offer that will close at the approved price. Which should be a 15 to 20 day price. Which at this point would actually be able to close in 15 to 20 days. Marketing a 15 to 20 day price on a home that cant close for 90 to 120 days is what has caused so much chaos and frustration among short sales in our market.

Step 5. Negotiate a clean settlemnt approval letter with language that the seller is happy with and its a done deal.

NOTE: Listing the home higher than market and showing the bank a listing history with price reductions and feedback CAN help get a market price approved but runs the risk of early drive by BPO’s coming back inflated making the final approval more difficult.

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