Short Sale Experts!
Question: How much would you offer on this hypothetical house
resale after fix up = $200,000
first = 120,000
penalties =10,000
fixup = 20,000
second = 60,000
Total net equity to investor = -10,000
So, how much of a discount can (should)you ask for on the second.
Obviously you would not do it for a $10,000 discount, as you woul break even.
Obviously you can not get all $60,000 discounted.
So, working backwards, accounting for aditional bank expenses, what would you offer? how would you justify it to the bank?
Let's say you offer 10%/ 6k
That is a total of 156k. How do you explain the other 44k? My profit?
It depends on the lender. How many homes are they holding and how bad they need to move it. Is the home in a nice area where home move quickly? It's all a guess.
The BPO (Brokers Price Opinion) will determine the point the lender will start from.
Personally I would start at a max of 70% of the completed value and then deduct repair costs. (double check your repair costs......sometimes what you see is only part of the problem)
The closer the home is to the sale date the more motivated the 2nd will be to deal. I would offer no more than 10% max. I have had 2nds willing to settle for 1%.....again it's a best guess situation. Also a title search would be a very good idea to make sure that there is not a skeleton in the closet that you are not aware of.
Back up all your repair costs with paperwork, photos, comps and any other paperwork that will confirm your numbers.
Make sure you meet with the person doing the BPO and give them a copy of your paper work on the repairs and other costs you have uncovered.
You can only do so much and the rest is up to the lender. Give it your best shot and you may be pleasantly surprised on the out come.
Best of luck!
Based on the hypothetical, you would consider 200k x .7 - 20k = 120k
Does that mean you would simply pass on the above deal?
Is the first or second lien holder foreclosing? You can likely discount the first if they are the foreclosing party. You'll not get a lot of discount but maybe 80%. I am by no means an expert. However 80% is still good for them which would bring you to $102k for the property. Some people strongly belive in the 70% ARV - fixup = purch price model but I work on more of an 80% ARV value. That may be that I like to sell under market value and I use my selling price as ARV. Appraised value comes in much higher at times.
I agree that you can discount the first, but that woul usually entail not being able to discount the second by more that 1k. I am not sure what you are proposing. You still owe the second.
My question is still the same. What would you offer on the second, and how would you justify your profit in the offer. Example:
120k first
10k fix
12k 20% pmt on second
10k back pay
10k selling exp
162k total expense
comps 200k
38k profit
Would you explain that you inten to make a 38k profit?
please only answer this question if you have experience in short sales.
I have experience in Sub2, but now want to include homes with little equity in my daily searches.
a key number missing from all the words posted above is the property's as-is, fair market value..... only then can you begin to prequalify the 'deal' as having short sale potential.
Back to basics, folks.
I considered the fair market value "as is"
200k - 20k fixup= 180k
However, perhaps your point is that 20k fix up yields a 40k return? thus fair market value "as is" would be 160k
Let us then assume that is what you meant. So, for the case above 160k will be the fair market value. 40k is an arbitrary number I decided on.
OK, so you aren't too sure. Maybe $160,000 maybe not.
The foundation to all short sale proposals is to be able to identify, confirm, and defend your conclusion as to the subject's as-is, fair market value.
Loose definition: The as-is, fair market value is the highest price an informed Buyer would pay for the subject property in it's as-is condition.
Once that number has been identified, then you can ascertain lienholders' exposure to risk and prepare your Proposal.
For example, the first mortgagee has virtually no risk, so they have no incenbtive to discount. They certainly won't if the second is getting a nickel.
The second's position may be at risk... or at least partial risk.
Upon presentayion of a compelling Proposal, they should consider discounting an amount equal to their risk of loss, and their cost to pursue their recovery.[ Edited by TheShortSalePro on Date 01/02/2004 ]
Thank you!
the last 3 lines of your post is what I am looking for.
Can you please tell me the things that you, as an investor, consider in assessing their costs/opportunity costs of selling you the property. eg
Time savings
agents
etc.
Can you put a number on the total in terms of % that is generally a ball park solid offer, or is it just impossible to generalize. I have heard 10% of the 2nd note value, but that does not seem to be a good method to me. A discount from fair market value seems to be the reasonable approach, I woul just like to put a number on the percentage if is possible.
FMV 160k
offer 128k ? 80% ?
120k first + 10k back pay
130k total....maybe just offer very minimal on 2nd?...3k? total= 133k...very close to 128k?
any thoughts.
Perhaps it would be easier for you to just ouline a deal that you have had excepted recently, and how you justified your offer to the lender.
I think that you should purchase the revised A Short Sale Primer in it's print version which includes a handful of inserts, as well as an hour of E-Support with your short sale proposal. I've only got a few left and it will not be reprinted.
shortsalepro
so are you no longer going to sell your products any longer ???
whats the story??
amynewbie
I don't think I need your book. I thought I was asking a simple question, an it wasn't originally directed to you. So, if you don't want to answer a question, no response is sufficient. It is understandable if you want to pass on a question. I thought it woul be helpful to others as well. Perhaps I can take from this thread and figure out a better question to ask. Feel free not to respond. Thanks any ways.
nisecor, you asked ME to tell you what I do to determine costs, etc., and suggested that I outline my most recent deal for you to better illustrate my response and facilitate your understanding.
To me, it seemed like a request for an education. Sorry.
I do not have anything against you, as any info you give is voluntary. Thus, I thank you for what you did give me. However, I did not ask for an education. The only question I ever asked is "what would you offer?" Anything else was simply an effort to get that answer. I understand that a premise that does not give sufficient information for you to offer a conclusion can be frustrating. That is why I thought it might be best if you offered your own premise and conclusion. I have my own answer to the question, but if I found out that my offers were higher than they needed to be, it would be silly to repeat that mistake when the remedy was asking a simple question. Thanks any ways...no hard feelings here.