I’m writing this post in response to an article I read called Short Sales – What They Aren’t Telling You I found while surfing around the Internet the other day.  The post’s main objective is to separate myth from reality on the following topics: Price, Broker Price Options (BPOs), and Motivation/Expectation of the Buyer.

The information in this post is very good. I’d also recommend realtors and investors alike to consider the buyer’s exit strategy for the property before making offers. There are properties that lend themselves to successful short sale and properties that don’t. As a principal in over 100 transactions, I prefer to work with sellers where there is a first and second (and even a third mortgage). Seconds and thirds tend to get wiped out if a property goes all the way to the foreclosure or sheriff sale. They know this and will usually take very steep discounts whereas, the first mortgage holder is in the safest position and accordingly the least flexible position. That said, by discounting seconds and thirds you may not even have to deal with the first to get your buyer a satisfactory price.

With regard to BPO’s I’ve had success in requesting a second/interior BPO. If the deal is strong enough, I may even offer to pay for it. We look for houses that will be difficult for the banks to sell, either because of structural damage, issues in a neighborhood as escalating crime or the prospect of local economic problems such as plant closings or other factors that affect employment. The writer’s observation that the loss mitigator (bank rep) is clueless about the market where the property is located couldn’t be more correct so we like to paint as clear a picture as possible and provide them comps, articles, and days on market as a starting point. Then I like to ask them the question… If you complete the foreclosure action, take back the property, secure it, repair it and maintain it for the next 6 months, what do you think your company will actually net (especially when considering the impact of their loan loss reserve requirement)? This can help bring the lender back to reality. If not, we can always buy it as a REO!

Want to know more about short sales?  Check out this article I found on the Internet.

How to Buy a Short Sale
As loans default, banks become more willing to sell the properties to investors for less than what is required to satisfy the loan. In some cases, banks will let a property go for 50% of value.