I’ve had two recent instances where I wrote very low offers on properties, which were not arbitrarily low, and the mortgage companies told ME to pay for the appraisals.
In the first instance, the appraiser told me, “It’s probably going to cost $25k to fix this house!”
In his appraisal, he only made a $12,500 adjustment for condition. Which caused the appraisal to come in higher than it should.
GMAC said that if I wanted, I could get a BPO to dispute… which I did, and her numbers were very close to mine.
My challenge lately is that these bank-ordered appraisals are wholesaled out to very inexperienced, inept people. People who couldn’t accurately price a property if their lives depended on it.
I don’t want to continue wasting time disputing erroneous appraisals.
Would I be smarter to just order an appraisal immediately, with an appraiser who knows what he’s doing, and just call it a cost of doing business?
How do you write a Short Sale offer? - Posted by Richard
Posted by Richard on October 01, 2003 at 12:58:43:
The wife was listening to last nights teleseminar on Short Sales. When we talked later, I couldn’t figure out how one is actually supposed to write up the purchase and sale offer.
If I set the offer at the maximum I will pay, say, 70% of the outstanding loan, and I then get the bank to accept 50%, well, that means the owner gets the rest which isn’t acceptable to the bank (or us!). And if I write it for 70%, doesn’t the Net Sheet then show 70% and then won’t the bank counter at 70% or higher?
Or, do I write the offer at 40% of the outstanding loan and then make an addendum to the P&S offer to match what I am actually able to get from the bank?
I vaugely remember a Carlton Sheets tape that talked about “Net-Net” offers that kind of sound like what we are trying to do, but I don’t recale any details…
Finally, how do you deal with the seller’s closing costs in a Short Sale? Seems to me that most of the time if they can’t make the house payments, they don’t have the ability to make the closing costs either. So do you write the offer for, say, $5k more to cover, giving them the ballance, or do you write it so that the buyer pays all closing costs (I’ve heard that’s not “legal”)
A. As you would any other Offer, but include restrictive language that would make your Offer subject to and contingent upon mortgagee short sale approval. There are other clauses that, if included, steal the mortgagee’s thunder and serve to expedite the approval process.
In my opinion, based upon experience and from feedback I’ve had from others … the majority of courses, books, seminars,and bootcamps on “short sales” is largely hype designed to sell products and services.
The concept is rather simple, the process straightforward. The discounts advertised are the exception to the rule. The variables are the dynamic nature of the market, and the policies internal and specific to a particular lender and loan type.
Your purchase offer should be based not upon what’s owed, but rather upon what you would agree to pay. The short sale procees includes being able to support that sales prices (in your comprehensive proposal) as the greatest possible selling price for the property. Your proposal to the mortgagee(s) should be factual, compelling, and a solution to their problem.
I just answered a similar question in another forum. I don’t utilize the ‘cookie cutter’ approach and hope that 1 in 10 ill-conceived proposals are accepted. I’ll do one at a time after handpicking and prequalifying the short sale candidate. My success rate for preforeclosure shorts and discounted REO is about 75%. Each proposal costs me about $200 in materials and express mail. I’d rather have 3 of 4 approvals, then waste time and hope for 1 in 10. The discounts are predicated upon the lender’s perception of FMV. The amount of discount is proportional to my success in denigrating their perception of value. Yes, there are other aspects, and there is a learning curve, but it’s not rocket science. It’s simply a job. I spend about 10 hours each week helping folks to prequalify their potential ss deals, assemble the boilerplate applications, and devise an accompanying Proposal.