A property needs a short sale when it is worth less then what is owed on the property. Simply said, if a property is worth 200k but the mortgage on it is 400k there are only 2 ways for the homeowner to sell their house.
The first way is for the homeowner to bring 200k to the table to sell the house for 200k, so that way they cover the difference in what is owed to the bank. This is usually very unlikely because homeowners don’t have that kind of money to lose. This being so the second way is what is usually done.
The second way to handle this sale is to do what is called a short sale. A short sale is when an attorney, realtor, or negotiator gets involved and talks to the bank and gets the bank to discount the money owed to them from 400k to 200k. Now this sounds great and all but why in the world would a bank do this?
Typically people that need a short sale done are also behind on payments. This being so the homeowners are losing their house and the banks would rather sell the house an cut their loses as long as they get to sell the house at the price they want.
So what is this so called price they want and how do they determine it? When you submit a offer to buy a short sale deal and once the banks received everything they need from the seller and the buyer, the bank would then order what is called a BPO or Apprsial. This is orderd so they could figure out what the house is worth. << This appraisal is where all the magic happens. Simply said… IF the apprasial comes out to be 100k, the bank wants 100k, if it comes out to be 150k, the bank wants 150k. <The magic of the short sale is not in knowing the negotiator or having a special attorney or person working on your deal. The magic of a short sale is all in the bank’s appraisal/bpo.
So if you want to submit a low offer great… Get the bank BPO/APprasial to come in low as well and BAM you get an instant approval! Think about it.. .the apprasial is the banks eyes and ears.. If it comes in below what you offer don’t you think the bank would give you an instant approval???
Your now asking me but I don’t want the approval to be base on the appraisal. Well reality is you do. What you need to realize is that FMV is fair market value. Say the fair market value is 200k.. and the bank appraisal came out to be 100k.. you’ll get your 100k offer approved instantly. So the question is more.. how do you get the bank appraisal to come in lower then FMV or better yet as far as possible from ARV.
Want to know more on how to get this appraisal to come in low.. get the 101 Pre-Foreclosure video. << In this video I also talk about how to flip short sales..