Short Sale's and Offers and Value of Properties

[Dan NA]

Hi all,

Currently we are looking at a house that is up for short sale in NJ. The original loan amount was 405k and the listing price for the house now is 340k. I went this weekend to look at the house and it needs work. Things ranging from foundation cracks, water damage on front porch, broken plaster walls, door frames etc. Honestly, we are thinking of submitting an offer around 300k.

I have been reading up on the forums that short sales can be a massive pain in the tail because the bank has to approve etc. Our agent said that he thinks the bank would consider something like 320k or even 300k. Are the banks aware of the condition of the properties up for short sale? For example, have they sent out an appraiser to see all the work that needs to be done. Personally I would have never purchased the house for 405k back in 2005 (its peak price) just because of the sheer amount of work that needs to be done so I can't quite understand how the house could have even sold for that much.