Need Help With First SS
I am working on my first Short Sale and would love some help from all you pros out there.
The lady who owns the house is fed up and just wants out of it completely. Her husband had had some health problems so they moved in with their children. She had sold the house on a land contract but the buyers stopped paying and she took it back. FMV is around 120k. She owes about the same. The house needs about 15k in fix-up. There was a BPO done about a month ago that came in at 120k but they didn't see the inside where all the damage is. I asked if they would do another BPO so I could let them inside but they told me they wouldn't do another one for a few months. They told me to have my own done and then send it with my offer. Does this sound right?
I'm a little hesitant to spend the money for an appraisal not knowing if the bank is going to work with me. My other question is what a reasonable offer might be in this case. I would like to get it for 80k but I don't know (this being my 1st attempt at SS) if this is too low or even worst too high. Thanks to anyone who can offer some advice.
Brian
general rule - 60% of FMV or 80% of B.P.O. most lenders requirments for shorts are 80% of B.P.O. so you could go a little lower and leave yourself some room to raise if they dont go for it. F.H.A. requires 82% hope this helps. Jeb
Thanks Jeb
Now would you have your own appraisal done or would you just make an offer? The BPO is on target if the house were in perfect shape but the inside needs some serious work... ie all new carpet, new paint, new back deck, some landscaping, and about 3 dumpsterfuls of trash hauled out. Can I take my own pictures and just send those along with my offer or should I pay $250 for an appraisal and let them do all the picture taking?
Thanks Brian
I'd make certain that you have an accurate and defendable position as to it's as-is, FMV. If you are comfortable with real estate and can do your own CMA, you don't need to have an appraisal done. If you have a copy of the BPO that had been perfomed, that would be a good place to start buildng your own CMA. Taking photographs in support of written estimates for repair is a good technique to denigrate their perception of value.
Without knowing the as-is FMV, making an offer is like throwing darts...
Another typical criteria for short sale consideration is owner occupancy... so you may have to sidestep a few obstacles.
[addsig]
you could pay to have an inside B.P.O. done, you always want to meet the broker there to show your case on how it should come in lower. i dont know why they are being unreasonable and wont have another done. i guess just send in pictures of all the bad parts inside the house stating your case of why a new B.P.O. needs to be done(punch holes in the walls, spray soda on the ceiling like it leeks, spread trash around the yard) just kidding dont do that but i have heard of someone who does. how much time do you have? could you send in your initial offer based on the figures i stated before, and then wait till the new one comes in. if your right and the new B.P.O. is lower then maybe they will exept your offer, always takes some time. Jeb.[ Edited by ZinOrganization on Date 08/23/2004 ]
Thanks for your replies
I just spoke with the mortgage company (Option One Mortgage for Wells Fargo). They told me that they would need to have a full appraisal done before accepting any offer, but they would not order the full appraisal until they had a reasonable offer in the form of a contract between me and the seller. My initial offer cannot come even close to the 120k BPO. The lady told me she wouldn't even consider an offer less than 110k. I feel stuck.
Based on comps in the area, FMV of the house in fixup condition is 120k. I estimate it would take between 15 to 20k of contracted repairs to bring the house to FMV of 120k. The owner has a pending bankrupcy so I would think that it would be at least a year before the house went to auction costing them 10k more. If they wont let the house go cheap at auction they will have to fix it up and list it with a realtor at 6% which would be 8k.
120k FMV
- 15k Fix up
- 10k Interest till foreclosure
- 8k Realtor commision
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87k
This makes sense to me. Am I missing something? I would think that this would be a starting point for negotiations. How do I make the bank understand this?
Thanks
Brian