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How to Make a Short Sale Offer

Top 10 Offer Tips for Buying a Short Sale

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Handing over house keys in front of house

There's more than price involved in making a short sale offer.

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I have had months in which I've received more than a 100 short sale offers on my Sacramento short sale listings. I help my sellers decide which offer to select. So when I represent a short sale buyer, I know from experience on the listing side how that listing agent and seller will interpret the offer. This is probably why my buyers make short sale offers that get accepted.

Agents who are not versed in making short sale offers often write purchase offers in such a way that they inadvertently cause their buyers to lose the deal. Following are methods that I use to ensure acceptance.

Make a Short Sale Offer With a Strong Earnest Money Deposit

Many first-time home buyers put down an earnest money deposit of $1,000, but an amount between 1% and 3% of the sales price speaks volumes. It says the buyer is serious. The minimum down payment for FHA loans is 3.5% of the purchase price, and the earnest money is part of that down payment.

Agree to Put Your Deposit Into a Trust Account

Some real estate contracts call for the earnest money deposit to be placed into a trust account upon short sale approval. Sellers like to see that buyers are ready to put their money where their mouths are, because it shows that those buyers are committed to the transaction.

Check the Comparable Sales

Some short sale listings are deliberately priced under market value to attract eager buyers, but it doesn't mean the home will sell at that price. However, many banks will approve a short sale that is priced between 5% and 10% under market.

Call the Short Sale Listing Agent Before Making an Offer

If the agent has already received a number of offers, your offer may need to be priced much higher than list price. If the seller has already accepted an offer and sent that offer to the bank, you may be wasting your time trying to buy that home.

Don't Ask the Seller to Pay for Special Reports or Make Repairs

Any inspection you ask the seller to pay for will lower the bank's bottom line on the HUD-1. The lowest offers are rarely accepted. The time to negotiate major repairs is not at offer inception. Do not ask for seller-paid pest inspections, roof certifications or home warranty plans. Buy the home in "as is" condition.

Give the Bank a Reasonable Amount of Time for Short Sale Approval

Although it is possible to receive short sale approval within 3 to 4 weeks, many banks take at least 6 to 8 weeks, and sometimes longer, to approve or reject short sales. My buyers agree to wait 120 days and are prepared to immediately act if approval arrives earlier. If you ask for approval in 30 days, your offer may get chucked.

Assure the Seller You Will Wait For Short Sale Approval

The biggest problem short sale listing agents and their sellers face is buyers who walk away. Some buyers write offers on dozens of homes, hoping to take the first offer that sticks, which is generally against the law unless the buyer can afford to buy all those homes. No short sale listing agent wants to work on a transaction for several months only to find out the buyer whose offer was accepted has vanished upon short sale approval.

When You Make a Short Sale Offer, Agree to Pay a Seller Fee

Another mistake some buyers make is to ask the seller to pay fees that are customarily paid for by the buyer. After all, it is not the seller who is actually paying those fees on a short sale, it's the bank. If there are certain closing costs that the seller typically pays, the bank will most likely pay those fees. However, if you agree to pay part of those fees, even if the bank receives an offer identical to yours, your offer will net the bank more money.

Provide a Strong Preapproval Letter

Little stands out among a sea of prequalification letters than a lender preapproval letter, which specifies the buyer is actually preapproved -- run through underwriting. A big question on the short sale seller's mind is whether the buyer is financially capable of closing the transaction. When you make a short sale offer, you want those pieces of paper to convey strength.

Shorten Your Inspection Period

In California, for example, standard purchase contracts give the buyer 17 days to conduct inspections. That means the home is basically off the market while the buyer does due diligence, and the sale is not considered solid until that contingency period has been removed. If you can do your home inspections within 10 to 14 days, your offer will hold greater appeal.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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