How Much Will Lenders Yield

There has been some talk that lenders are taking somewhat of a hardened stance when it comes to purchase prices in REO's and Short Sales... at least as of late.

With Short Sales specifically, is there a general feel or idea of how much ground a lender will give?

Lets say that there is only one lien, and the lender has knocked %10 off the outstanding principle with a newly listed property. Let us also assume that the outstanding principle is exactly the current market value of the property.

Is there any kind of blueprint or skeleton with which one can put a timetable to the softening of a lender (or trustee's) standards?

Some Realtors price their listings high in the market and others are more aggressive. What a bank is willing to take depends on the asset manager. Right now some banks are restructuring their defaulting ARMs to save face. In many instances I do not consider short-sales because the Asset Managers base their acceptance on BPOs without interior inspection. This tends to back up artificially high prices and few deals in the short-sale market are actually had.

A simple % off is just not a good strategy. Look at your market in more depth and see what the sold market is for in that specific neighborhood, account for damage and a small margin to save the bank the cost of foreclosure and that's how I determine price. A competent Realtor working with REO properties will help advise you on comparable sold listings so you can write an offer that represents the market. Also, if the property needs work I always like to prepare a PDF of photos and a repair detail to submit this with the offer.

[ Edited by ejparry on Date 04/22/2008 ]

[ Edited by ejparry on Date 04/22/2008 ]

A general rule of thumb is to offer slightly more than 50% of what is owed on the balance. Any lower and the file will get kicked up to a supervisor for review or deadfiled.

The goal is to submit a low offer to intiate the BPO. Yes, it must be an interior BPO, which is normally not a problem to get order; however, there are a few lenders that are difficult and will only order and exterior if they bother to order one at all -- you just need to learn who those lenders are.

Assuming the bank orders their interior BPO and gets a number, you now have a starting point. Hopefully, the BPO reflects what is currently going on in the market. For instance, my idea of Fair Market Value would be different than many agents. I want to see the number of REOs in the area, and what has sold recently, if anything. Likewise, I want to know what number I need to sell the house in three weeks since the bank has a timeline.

[addsig]

Find out your as is FMV (make sure your right) subtract 10% and that is your best guess to determine what the bpo will come in at (make sure you meet your bpo and influence them to bring it in low). Once you have that number offer 80% of your estimated bpo price. This is THE BEST formula to determine what to offer the bank unless you have an inside loss mit connection.

Banks generally don't care what the loan balance is. They may tell you that but they really don't. They only care about the FMV and what they'll recover. Their may be exceptions or manager 'approval' if it's substantial however, like I said they only care about what they can recover.

Interior BPO's or appraisals or both are the standard now days and 90% of the time you won't get your offer accepted untill one is done.