Unless you’ve gotten your client involved in one of those pre-approved short sale programs where they bank has already given you a pre-approved purchase price, the selection of a listing price for your new short sale listing is a bit of a gamble. Not quite like going to Vegas, but still a bit of a risky venture.
When an agent lists a short sale, generally the agent does not know the price that the bank will approve. The only thing that the agent knows is the general value of homes in the area. An agent should carefully consider recently closed transactions in order to ascertain the value of the short sale listing. (Recently closed is generally defined by the three month period preceding the list date, or a six month period in slow markets.) A good agent will review those closed sales and select a list price for the property based on those comparables.
However, and here’s the rub: if there is no activity on the property and the seller is facing imminent foreclosure, the listing agent will likely need to lower the listing price in order to generate activity and, hopefully, an offer.
What Happens When the Bank Reviews the Short Sale Package?
When the bank finally reviews the short sale package and the buyer’s offer, they often counter the buyer. I’ve frequently heard buyer’s agents utter comments such as, “Why would you list for x if the bank actually wants y?” This question reflects a general lack of comprehension of the short sale process. Remember that the listing agent and the seller do not know what the bank will accept and that list prices advertised on the MLS for short sales are often the agent’s or the seller’s best guess as to what the bank might accept based on their knowledge of the market value, the area, and the recent comparables.
For exactly this reason, it is vital that buyer’s agents explain to their clients that short sale list prices are usually set in stone. Buyers of short sales must be flexible and accommodating if they have an exigent interest in the subject property.
While the short sale price may be something that can be calculated to a certain degree, there are many parts of the short sale transaction that are truly unknown. When will the bank actually find the time to review the short sale package? Well, I would not bet on that in Vegas.
Photo: flickr creative commons by stoneflower.