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reproduce portions of this site or materials available at this site for personal and
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site must include this copyright statement.
You should consult an attorney for advice regarding your individual situation.
Contacting an attorney does not create an attorney-client relationship. Do not send,
e-mail, or provide confidential information or information you do not wish to be
publicly disseminated until such time as an attorney-client relationship has been
established and requested to do so by an attorney.
Copyright 2009 Law Office of Craig W. Little, P.A. All rights reserved. You may
reproduce portions of this site or materials available at this site for personal and
non-commercial use. All copies of portions of this site or materials available at this
site must include this copyright statement.
Web Articles
Analysis of Short Sales of
Residential or Commercial Property
Buyer's Considerations
Pricing an Offering to Purchase Property in a Short Sale
Other short sales of comparable properties can provide
guidance when pricing an offer for a short sale property. If
pricing information for short sales is not available then
discounting the fair market value of the property can be utilized.
A discount of between five percent and ten percent of the fair
market value of the property is a good baseline with the
discount being adjusted based on extraneous factors including
the amount owed on the loan secured by the property, the
amount of time the property has been on the market, the
number of offers that have been received for the property, the
status of the loan, and the status of lender’s foreclosure
proceedings.
Pricing an offer to purchase property in a short sale greatly
below the fair market value of the property will generally not be
approved by the lender and it may get a slow response from the
lender which will only serve to slow down the entire process.
The buyer must always be aware of the fact that the lender will
obtain pricing information on the property when they are
evaluating an offer to purchase property in a short sale, so the
lender will always have some idea of the market value for the
property. Further, the lender always has the right to foreclose
the property and sell it at a later time, therefore the lender will
not be inclined to accept a short sale offer if the lender believes
the offer is far below market value or if they believe they can
receive a greater return through foreclosure.
One way to actually gauge at what price a lender would approve
an offer to buy property in a short sale is if a short sale of the
property has already been approved by the lender. There are
many instances where a short sale approved by the lender does
not close. The buyer may ultimately not be able to close on the
approved short sale or they may exercise certain termination
rights that are included in the purchase agreement. If this
occurs then the seller will put the property back on the market
as an “approved short sale.” In such case, the next buyer
knows the terms under which that lender previously approved a
short sale. While the lender will not be bound to accept a
subsequent offer on the previously approved terms, such
previously approved terms can provide some guidance for the
buyer.
Repairs and maintenance work are seldom undertaken before a
short sale. The owner has no incentive to make such repairs
and the lender will probably be unwilling to put any money into a
property on which they are already losing a portion of the loan
principle. But such repairs may get factored into the lender’s
evaluation of an offer to purchase the property in a short sale.
The buyer should ask that when the offer and seller
documentation is submitted to the lender that a detailed list of
such work and repairs be included. This may convince the
lender that the actual market value for the property is closer to
the buyer’s proposed purchase price when these costs are
included in the analysis.
Return to Buyer's Short Sale Considerations
Residential or Commercial Property
Buyer's Considerations
Pricing an Offering to Purchase Property in a Short Sale
Other short sales of comparable properties can provide
guidance when pricing an offer for a short sale property. If
pricing information for short sales is not available then
discounting the fair market value of the property can be utilized.
A discount of between five percent and ten percent of the fair
market value of the property is a good baseline with the
discount being adjusted based on extraneous factors including
the amount owed on the loan secured by the property, the
amount of time the property has been on the market, the
number of offers that have been received for the property, the
status of the loan, and the status of lender’s foreclosure
proceedings.
Pricing an offer to purchase property in a short sale greatly
below the fair market value of the property will generally not be
approved by the lender and it may get a slow response from the
lender which will only serve to slow down the entire process.
The buyer must always be aware of the fact that the lender will
obtain pricing information on the property when they are
evaluating an offer to purchase property in a short sale, so the
lender will always have some idea of the market value for the
property. Further, the lender always has the right to foreclose
the property and sell it at a later time, therefore the lender will
not be inclined to accept a short sale offer if the lender believes
the offer is far below market value or if they believe they can
receive a greater return through foreclosure.
One way to actually gauge at what price a lender would approve
an offer to buy property in a short sale is if a short sale of the
property has already been approved by the lender. There are
many instances where a short sale approved by the lender does
not close. The buyer may ultimately not be able to close on the
approved short sale or they may exercise certain termination
rights that are included in the purchase agreement. If this
occurs then the seller will put the property back on the market
as an “approved short sale.” In such case, the next buyer
knows the terms under which that lender previously approved a
short sale. While the lender will not be bound to accept a
subsequent offer on the previously approved terms, such
previously approved terms can provide some guidance for the
buyer.
Repairs and maintenance work are seldom undertaken before a
short sale. The owner has no incentive to make such repairs
and the lender will probably be unwilling to put any money into a
property on which they are already losing a portion of the loan
principle. But such repairs may get factored into the lender’s
evaluation of an offer to purchase the property in a short sale.
The buyer should ask that when the offer and seller
documentation is submitted to the lender that a detailed list of
such work and repairs be included. This may convince the
lender that the actual market value for the property is closer to
the buyer’s proposed purchase price when these costs are
included in the analysis.
Return to Buyer's Short Sale Considerations
Law Office of
Craig W. Little, P.A.