I am constantly surprised at the number of agents who claim they know short sales, but negotiate on opposite terms that could benefit their client. To illustrate my case, I'll use an agent I met with for lunch the other day. He had a listing from a residential seller that he has listed as a short sale. I had a client who is interested in the property. So, I asked “Is that price approved” to which he responded “Of course not…it’s a short sale.” I went on:
So have you had any offers?
Yeah, we’ve had a number of offers, but they were too low. I advised my seller to negotiate hard and he rejected the offers.
What do you mean? Has the bank indicated that you need to get within a specific price?
You must not have listed a short sale before. I don’t know the price the bank will take, but no one should accept an offer that low.
By this time, my head was about to explode. I had a lot to explain, but was running short on time. Thankfully, my phone rang--and while the call was far from urgent, I made it sound like I needed to get back to the office or chaos would ensue. With a short sale, the listing agent usually only knows what the bank will take for the property (or if the seller is even short sale worthy) only after an offer is submitted. Those of us who have done more than our fair share of short sale offers know about what the bank will take, so we estimate based on the market and the balance owed on the property. However, we don’t have exact figures until everything is sent in to the bank for review of the offer. That’s why I love low offers.
When an offer rolls across your desk that’s 70% of asking price, it takes all of one's courage and strength to keep from sliding it into the trash can. With a short sale, a low offer is the listing agent’s best friend. The agent can instruct the seller to sign the offer, package it with the paperwork requested by the bank, and send it in for review. The bank will either reject or counter the offer. Also, the review can be helpful by revealing other red flags to the seller. This could delay closing on a legitimate offer received later on.
With the bank’s counter-offer in hand, you now have an "approved" price that you can sell. Also, you have the ability to turn the file around much more quickly if the buyer rejects the counter. If this happens with my friend, he can now market the house with his approved price. Most importantly, this leads to a potentially shorter closing, which prevents the foreclosure of his client.