How to Negotiate an Offer on an Approved Short Sale
You can often buy a short sale property at a price lower than the prevailing market price, but the purchase process carries some challenges. In a short sale, the distressed seller negotiates with the mortgage lender and gains the lender's permission to sell the property for less than the seller owes on his mortgage. Even if the lender has approved the seller's application for a short sale, the lender retains the right to approve or reject purchase offers on the property.
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Instructions
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Review the prices of similar properties in the vicinity of the property you want to buy. Find at least six properties -- three that are still on the market and three that have been sold within the last six months. These comparable properties should be located within 1 mile of the short sale property and have ages, room counts and conditions similar to the short sale property. This helps you determine the fair market value of the property. For a more accurate estimate, consult a professional appraiser or a realtor.
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Determine the discount on the fair market value of the property. The fair market value shows the value of the property if it were not a distressed sale. Short sale properties usually sell below the fair market value because of the extra effort and complications that come with the purchase process. According to Findwell Real Estate in Seattle, mortgage lenders usually will not accept lowball offers at 25 percent discounts or more. Price your offer as close to the fair market value as possible for a better chance of getting approved quickly. If you make a low offer, the bank might come back to you with a higher counteroffer.
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Seek information from the lender's representative if your offer is rejected or if the bank counters with a higher price. For example, find out how the lender determines the minimum price they will accept and what the fair market value is according to the lender. Consider whether you can afford to increase your price and submit a new offer until the lender accepts your offer.
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Tips & Warnings
Even if you carry out your negotiations perfectly and do everything the mortgage lender asks, you might not get the property. This is because the lender may have reasons that have nothing to do with your offer or negotiation skills. For example, the lender may receive payments from a mortgage insurance company. The seller also has to agree to the final short sale terms and might decide not to go through with the deal for reasons such as the lender demanding payment for the difference between the short sale amount and the outstanding mortgage balance.
