The Highest Offer is Not Always The Best Offer

There is a HUGE misconception in real estate that the highest offer on a short sale is always the best offer. That is not always the case.

When it comes to short sales, typically investors will ALWAYS make the lowest offers, but the smartest investors DON’T make LOWBALL offers. A smart investor knows that many lenders will take a percentage of the BPO price. Most lenders I’ve worked with will take between 80-90% of what the BPO came in at. (BPO is Broker Price Opinion which is ordered by the lender. It could also be an appraiser) Now this number CAN fluctuate. I’ve seen lower and higher numbers.

The numbers in the end have to make sense for the lender and there are MANY variables that affect that, such as PMI, a foreclosure date, how many payments the homeowner is behind, who the investor on the loan is, etc..

Short Sales are a different breed as there is negative equity affecting the seller’s judgment. With a short sale, sellers most often weigh the value of the offer vs. the quality of the offer. One of the biggest factors affecting this decision may be “time”. In a traditional fair market value sale, a seller has all the time in the world to sell or may not even need to sell. They can wait for the highest offer to be presented, or they could take the home off the market and sell it next year when the market is stronger. They have TIME to sell. They are not under pressure from debt collectors, lenders, over leveraged credit cards, death, divorce, etc. They can make a decision free of influence of hardship.

A seller considering a short sale with limited time to accept an offer may easily choose a $150,000 cash offer free of contingencies that can close in a short time frame as opposed to a $200,000 offer with no or low down payment, government backed, in which they have a stringent appraisal/inspection process and or have to even sell their primary residence. Keep in mind MANY lenders look at the same things when weighing the VALUE of an offer. Many lenders are happy to get a non-performing asset off their books in the quickest way possible.

It’s inaccurate to say highest is best. No two offers are alike and no two properties are alike. Lenders do not think alike. Some lenders approach waivers of deficiency with ease, and some lenders are much harder to convince and want to net more, then there are some that truly REVIEW a homeowner’s hardship and base their waiver on the homeowners current means. Again there are several variables that affect short sale approvals so we can’t look at every short sale the same way and ignorantly assume that HIGHEST is always BEST in a short sale situation.

Source: Massachusetts Short Sale (http://s.tt/12PmR)

Cynthia Brower

Cynthia Brower

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