I have been working short sale homes now for about 3 years, ranging in price ranges from 1 mil, down to 30k. During those 3 years, I've worked probably about 60-80 properties, and closed on only FOUR. Over those 3 years, I continually see people professing that they have an 80% closing ratio, and average 30k profit per deal. My average profit on the 4 success' was about 10k.........and that was on the higher end homes too. I had a 600k home that I made 10k, and a 30k home where I made 10k. Don't get me wrong, I'm happy that I closed on what I did, but are the numbers that I'm hearing out there from other people for real, or is it me? Marketing/exageration is out there, no doubt, and I don't have a clue if my figures are typical. Personally I feel like they're terrible, and why I continue to do this I don't know.

Here's a real life example of 95% of my deals: Home is 200k, my offer is 155k. We go thru all the short sale paperwork, then the BPO (and yes, I met them at the house with low comps, repair estimates, etc.) comes in at 195k. They turn down my offer, won't counter my offer, and the property ends up going to foreclosure............a waste of 2-4 months of dealing with the homeowner and the mortgage company.

Is this typical for most of you out here? Let me know. I appreciate any feedback.

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Sorry, I have to ask, are you a real estate agent or investor?  $10,000 profit on a house that costs $30,000 doesn't seem like a very bad commission at all.  It seems as if you are an investor.  If so, you'll need to start working with an EXPERIENCED short sale agent or negotiator.  I actually have a much higher closing ratio than 80% so it sounds as if you're not working with the right people. 

 

Are you rehabbing these properties?  Just because you show up with low comps, doesn't mean anything.  Are they ACTUAL comps?  Here is the thing, MOST short sale lenders will take 80-90% of FMV.  If you are throwing in a lowball offer, it's not going to work.  A home valued at $200,000 means at bare minimum the lender will want to NET $160,000 after all the costs have been deducted, so your offer was already low to start.  Assuming your offer was for $155,000 and then costs deducted on top of that, the lender NET was likely in the range of $135,000-$143,000 so you're at least $20,000-$30,000 off the mark, and keep in mind the 80-90% BPO price is a gauge. 

 

You'll have to do a much better job with your offers if you want them accepted.  You may have more flexibility on higher end homes, but no lender will accept a lowball offer.  You may want to rethink your strategy.

4 out of 60?  It's you, LOL!

Seriously, what qualifications do you have to negotiate short sales?

Good responses Smitty and Joseph.  The only thing that I will add is PLEASE stop harming sellers and Please stop trying to work short sales if you can only close 4 out of 60. 

amen Brother.

Totally agree - refer the listing to an agent who can get it done - and prevent the foreclosure.

Eddie. Probably not the best forum for you. As a listing broker I wouldn't let you anywhere near my sellers. We are here to help homeowners avoid foreclosure. You are in it to profit on others loss. That's a huge difference in mindset. Please make your money by helping folks. You'll find things a lot easier.

I agree your motivation should be to want to help people, I have only lost 4 to Fannie Mae or Freddie foreclosure and didn't get the listings until less than 20 days before the foreclosure date but I really tried hard to get those closed with reasonable offers:(  I felt so bad for the homeowners since I know I could have got them closed if they had listed earlier.  The homes sold for less than my offers, stupid lenders - have closed 21 in 9 months and have 6 closings scheduled for March:)

You should be able to close all your short sales with enough time and reasonable offers!

I'm making offers low, but not unreasonably low, thinking that they will not accept my first offer anyway, no matter what it is. Are you saying that I should start my 1st offer higher? That's just it..........I DO want to help the home owner, as well as make something for my efforts, but when the BPO agent comes in with a figure of 207k for a property that's listed for 195k, it's kind of tough to get an approval.

As far as my qualifications for negotiating short sales, I guess I have as much as anybody. I've been a real estate investor for over 20 years, and bought over 150 properties (it's what I do full time). Is an offer of 155k for a 195k property that ridiculious? It just doesn't seem like it to me. I've bought them straight out for less than that on non-short sale deals. I keep hearing and reading about some of the ss gurus getting approvals for 60k on 150k properties, and flipping them for 100k................how in the heck are they getting these kind of results, when I'm getting retail appraisals? Are they full of crap, or are they really getting deals like this.....and if so, what are they doing that I ain't??????????

I'm buying them to flip, not rehab.

if you are buying them to flip, that ship has sailed.  The loopholes have been closed. Deed restrictions are common. Lenders are wise to options, trusts, etc.  If you think you can A-B-C deals these days you are out of your mind.

The "Guru's" are teaching today what they did successfully 3 years ago.

Joseph is right on.  VERY few properties can be flipped these days.  Some of the smaller lenders don't have the restrictions that the secondary market does.  You have to REALLY know what you are doing to flip in this market and very few investors do.  If you haven't closed many, that tells me you really don't know how to do this the right way.  On top of that, I don't see how you losing all these properties is helping homeowners. 

 

I've worked with 3 successful flippers all who have scaled back in the last year.  They are not even doing 1/2 of the business they used to.  I would rethink your strategy, and start to rehab.  I gave you real examples of what a bank looks at for pricing.  A $155,000 offer on a $200,000 won't cut it. 

 

Oh, and stop listening to the GURUS.  They made their money on you.  No one is getting $60,000 home that's valued at $150,000....

I appreciate the feedback, but a couple of observations:

 

1) I'm not "harming sellers," I'm making an offer on their property that the lender is turning down. You can't get the price that you want if you don't ask for it, and if they want more, they can tell me so. I'm the only one who IS trying to help them, because I'm the only offer, in 95% of the situations. If I don't make an offer, they go to foreclosure.

2) I was exagerating about the 60k on the 150k home. But if a property has a repair or a mold issue, this is not out of the question.

3) Properties can still be flipped, you just have to have cash buyers, or use lenders who don't require title seasoning (the buyer has to have 20% down). I do this all the time on non-short sale homes, and it still works fine.....even today.

 

I do know some things about the real estate business, but I don't understand why lenders' don't accept 75% on short sale offers. Most all of the feedback doesn't really address that issue.

 

 

Eddie. The difference is that as agents we are negotiating a price that we know the lender will accept so the seller can avoid foreclosure and move on with their lives. You on the other hand are making a low offer hoping the lender will accept it so you can turn right around and sell it to the person who should have bought it to begin with. If you are not rehabbing and increasing the value of the property then you are truly just getting in the way and harming sellers.

I bought my first investment property over 30 years ago. Successful investors create value they don't siphon off existing value by taking advantage of one of the parties to the transaction. In your case you are harming the seller and the lender by bringing nothing of value to the table. Your method is 100% self serving.

Hopefully being a part of this community will show you a better way to do things.

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