Can You Win at a Short Sale? Absolutely. Read On To Find Out How To Buy a Great Home, At An Even Greater Price

Short sales allow borrowers struggling to make their payments to put their homes on the market for less than they owe on the properties. When offers come in from buyers, the bank or mortgage company has to approve the deal. Lenders will only do that when a short sale costs less than foreclosing. What’s more, every bank or finance company with a lien on the property, including those who provided a home equity loan, must accept the terms or be paid off. That extra step, and the financial industry bureaucracy it involves, is why most buyers find short sales to be a long, aggravating effort. Here are four smart moves for navigating the process.

This type of home purchase is all about presenting the lender with a deal it can’t refuse. Banks and mortgage-servicing companies are most likely to approve buyers who: have a substantial downpayment, have been pre-approved for a loan, and place no contingencies on their contract, such as having to sell their current home before proceeding with the purchase.

Many banks have companies that manage their short sales. You need a pro of your own to match that experience and help you navigate the process. You should hire a realtor. A real estate agent who has done lots of short-sale transactions will know how much of a discount is common in your area, what you’ll need to do to get your bid accepted and when to walk away from a deal that’s not going your way. Any home that has spent several months on the market can indicate an unmotivated seller or an inexperienced listing agent.

Your agent should ask the seller’s agent if the bank has actually agreed to sell the home for less than is owed or if the seller is just hoping to do so. In the latter case, you could be wasting your time. Knowing how much to offer is key, but it’s not as straightforward as figuring your bid on an owner-occupied home or even a foreclosure.

Be aware that the listed price is only an estimate of what the seller and listing agent think the bank will accept. Oftentimes, listing agents market homes at a bargain price, only to have the final bank approval come in at a higher price.

Properties that have been listed for more than 30 days present an opportunity to negotiate with the seller. How much of a discount can you get? Location and condition make a big difference. Well-maintained properties in popular neighborhoods will have less of a discount than properties in poor shape in unpopular neighborhoods. For further reading, check out this useful article about Tips for Winning a Short Sale.

When Everyone In The Room Is Carrying Poker-Faces: How to Negotiate The Deal To Your Favor

After you finally get a buyer, the hardest part after that is negotiation; its hard for both the buyer and the seller. Buyers will usually expect a back-and-forth negotiation, their initial offer will be lower than what they are actually willing to pay and lower than your list price. Once this happens, many sellers counteroffer with a price below their asking price, because they are afraid to lose the sale. 

Human instinct says that they want to show they are flexible and willing to negotiate in order to close the deal. This strategy does indeed work in terms of getting the property sold, as thousands of sellers can attest, but it’s not necessarily the best way to get the most money for your house.

Instead of lowering the price to get closer to the buyer’s offer, you really should counter at your list price. Someone who really wants to buy will remain engaged and come back to you with a higher offer. Assuming that you’ve priced your property fairly to begin with, countering at your list price says that you know what your property is worth and you intend to get the money you deserve. See: Why Sellers Make Full-Price Counter Offers.

Buyers may be surprised by this strategy, and some will be turned off by your unwillingness to negotiate and walk away. But you’ll also avoid wasting time on buyers who only make lowball offers, and who aren’t so much interested in buying your property as they are in getting a bargain.

List the home on the market and make it available to be shown. Schedule an open house for a few days later. Refuse to entertain any offers until after the open house. Potential buyers will expect to be in competition and may place higher offers as a result. You might only get one offer, but the buyer won’t know that. On the other hand, if you get multiple offers, you can go back to the top bidders and ask for their highest and best offers.

When a buyer submits an offer that you don’t want to accept, you counter their offer. You’re then involved in a legally binding negotiation with that party, and you can’t accept a better offer if it comes along. In the interest of selling your home quickly, consider putting a short expiration time on your counter offer. This strategy compels the buyer to make a decision so you can either get your home under contract or move on.

Don’t make the deadline so short that the buyers are turned off, but consider making it shorter than the default timeframe in your state’s standard real estate contract. If the default expiration is three days, you might shorten it to one or two days.

When a buyer submits an offer and asks you to pay their closing costs, counter with your willingness to pay but at an increased purchase price, even if it means going above your list price. Buyers often don’t realize that when they ask the seller to pay their closing costs, they’re effectively lowering the home’s sale price. But as the seller, you’ll see the bottom line very clearly. For further reading, see: Home Negotiation Strategies – Zillow.