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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Eddie it sounds like you are an investor making 'rediculas offers'. Yes, those offers will have an extremely low approval rate and you will send almost all your sellers INTO FORECLOSURE. If you are listing and selling the properties at close to market value .. you will have an 80-90% closing rate.
Eddie...most short sale agents have a close ratio much higher than yours. You've received the answer to your question several times in this forum, but you're not really listening to what's being said. For instance, I'm also a BPO agent. I do MANY interior BPO's for lenders in short sale situations. The comps that I use are SIMILAR to the subject property in age, size, style, condition, and functionality. The comps that I choose are normally within 20% GLA of the subject property, 10+- years in age, within a mile from the subject (or 3 miles, if suburban area, 5-10 miles in rural areas), and have closed within the past six months. After making price adjustments for characteristic variances, I will compute an estimated market sale price after placing most emphasis on either the currently active listings, pending listings, or most recently sold comps with the fewer adjustments (depending upon whether the market is rapidly declining or not). These are generally acceptable "across the board" guidelines for pulling BPO comps. If the comps that you choose when you meet the BPO agent at the property are not similar in any of these areas, then you appear to be a money hungry investor trying to pull a fast one on the lender (not saying that you are....)
Eddie and All -
Most of you hit the nail on the head, but didn't hammer it in.
Eddie, your sellers are working with you to try to save what credit they have left and walk from their homes with some dignity. 80% of the time you are preventing them from doing that solely for your own gain. So forget the "I'm helping people" stuff. You are trying to help one person - yourself. I wonder if you are working with realtors or just seeking out unlisted properties? A knowledgeable agent should advise their seller client to reject offers that have little or no chance of success. Agents need to remember that they don't have to accept every offer made on a short sale! I agree with Smitty's analysis that you need to be (on the low side) within 80 to 90 percent (depending on the lender and other micro market factors) of the range of the expected BPO.
My guess is that you are working the "theoretical" formula that many of the "get rich with short sale" seminars tout - but you have failed to bring reality to bear on that formula.
Yep, I'm trying to help myself, number one, and so are you if you're being honest (but the politically correct version does sound good). If I can help somebody out in the process, I'm all for it. I'm just making an offer, trying to get a good deal on a property. I'm not trying to save the world like most of the rest of you folks on this forum. Jeeezzzz, I think I'm in the wrong place here, for sure.
I sure don't want to tell you what I just paid for the 80k value property that I just bought. Somebody will come and burn a cross in my yard...............but the owner was happy to get it sold, and thanked me for closing quickly.
Eddie you came and asked about closing a higher %. I think we have tried to give you the answer. I'm all for anyone who can make a profit in this market, but we are trying to give you realistic answers. If you can pick up a short sale cheap and no one is harmed, GREAT. I don't think anyone would begrudge that. We have a responsibility to the homeowner to make sure they get the best terms for them. Wasting time on offers we know don't have any possible shot in being approved, is not really protecting the homeowner. I'm not going to submit an offer on a property for $100,000 that FMV = $200,000, but realistically I would submit the $172,000, and prep the buyer they MAY need to go higher if the lender counters. It's not rocket science but math. Nor do I think every short sale is going to be approved every single time at 80-90% of the value. I've seen short sales in which the lender wanted the EXACT listing price or higher. It depends on the investor of the note, and if you want to be a good short sale investor you find those things out and make sure it's worth your while to submit an offer on a property. I would also align yourself with good realtors that know about the process and see if you can learn a bit more before even making an offer.
The offer price to listing price percentage really has nothing to do with anything. It's the offer as a percentage of market value that matters. Arriving at market value is a really simple process and should be something that buyer's agents are doing for their buyer. We always counsel our buyers to make offers based on the market value. We could not care less how the property is priced.
The reality is that 40% of list price could be an awesome deal and 40% less than list price could be a terrible deal. The only way to get a deal in real estate is to know the value of the property then make your offer accordingly. Basing offers on list price only is a sure way top fail.
OMG! Amen! Bryant. So many listings are overpriced right now. Some agents with no short sale experience are listing properties for what the borrower owes. On a few occasions I asked the agent why is their listing priced so much more than the others and they tell me "Well that's how much the seller owes on their loan." I said "really!". Then I referred them to this website. I hope they logged in.
Sorry to be the bearer of bad new, but it's YOU.
Eddie,
I think you'll like this blog post by Attorney Ron Ballard
http://shortsalesuperstars.com/profiles/blogs/freddie-mac-and-flipp...
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