Rules Of Bank Negotiating? Where Do I Start?
Looking into short sales and preforeclosures. My question is, what is the lowest amount I should start negotiating with the bank without them blowing me away? Like 40,50,60%?
Is there a maximum date I should consider before trying to shortsale? Example, if the house was just bought in 2002/2003? Should I go with homes that are a little more seasoned?
Thanks,
Dee 
i'll reply, however i'm far from an expert at this. i send one off today and already have the offer and supporting documentation and have 4 more to do before next week ends.
i say punch the numbers up and come up with a figure that you think would be easy for you to sell at. i started with my guess at FMV (based on comps, assessments, etc.), then took 65% of that, to be attractive to hard money lenders, then took $20k profit for myself, then took $10k in repair and holding costs and came to my number. This is what I won't pay more than - Maximum Allowable Offer. Actually I would gamble up to 70% if totally necessary, but not more than that.
I hope this helps, since no pros have responded to you yet.
Thanks jackman. That really helps.
Do not offer less than 40 and no more than 70%. Thats the comfort zone but each property has its own appeal to a number. If its in good shape than 60 to 70 % is just right but not less than that, ok.
Jackman, and all,
If, say, using ballpark figures, a house in pre-foreclosure is worth about $135,000, seller owes $131K (125K before missed payments with, at this time, ZERO listed for prepayment charge, reconveyance fee, demand fee, atty fee, recording/releasing) and I take 65%, minus even a low 10k profit, then offer the bank $75,750, then does not the seller get a 1099 for $55,850?
(also, what is reconveyance?)
Thanks,
Ann
Ann,
It doesnt really matter what you offer, the bottom line is that the negotiations start from the amount of the BPO.
EX.
$130,000 ARV
$100,000 (BPO)
If your short sale offer to the bank was $50,000, your chances of buying that property are riduclously low! There are circumstances that the example could happen, but they are rare, rare, rare!
If you are serious about buying these via short sale, make the bank an offer that is just tasty enough, that they just might take it. If you want to complete the deals, a good number to work with is roughtly 70% of what you feel that you can get the BPO down to.
EXCEPTION TO THE RULE!
If you are trying to discount 2nd mortgages, you can generally discount them for 10% - 40%. So if the 2nd were $20,000, it is very common to get it discounted to $2,000!
As to your question about the 1099, the seller will, could, should, or may have tax consequences on the amount of the forigven debt. If they owed $100,000, and you bought the home via short sale for $70,000, they would be responsible for the taxable amount of $30,000.
Hope this helps and Best of Success!
BAMZ