Improving the Odds of a Successful Short Sale Offer

[David Beard]

I have a prop mgr/agent who assists me in purchasing properties. She sort of frowns on the unapproved short sale listings, no doubt since they take a lot of work with highly uncertain outcome. I sent her a note today asking her to try to find out the following on short sale listings on the MLS for properties that appear attractive. I thought this might help to determine the likelihood of my bid having success. Do you think these are reasonable to ask the LA, or do you have other info you like to obtain?

• Who is the lender or servicer that the short sale package is submitted to? Is this a HAFA short sale, FHA, or just a standard short sale?
• Is there a SS negotiator involved, or just the listing agent handling the negotiation? If just the agent, how many SS's have they successfully closed? If a negotiator, how many?
• Are there secondary liens on the property which also need to be settled? If there is more than one secondary lien, I'd probably pass, as negotiations are too difficult.
• Has a short sale package been submitted to the lender yet? Or is the agent waiting to get an offer before they submit?
• Have any other offers been submitted to the lender yet?
• Has the lender ordered a BPO or appraisal yet? If so, can we find out the amount, or ask if our estimated value is in the ballpark?

Additionally, I have these questions for the Pattersons or others with alot of SS expertise (buy or list side):

• Do lenders always require SS's to go on to the MLS, in order to maximize exposure?
• If an investor locates an underwater borrower, can they prepare the SS package, including the offer from themselves, and submit to the lender?
• Is the LA or SS negotiator normally privy to the value assigned by the BPO agent or appraiser retained by the lender?
• What is the typical discount a lender will permit below the BPO price (assuming standard closing fees, agent commissions, and negotiation fees are being assessed)? As stated, there HAS to be a discount to induce a buyer to put up with the uncertainty of this process. Is it 10%? 15%?
• Presumably an investor/agent could waive his portion and enjoy an advantage, just like with an REO, by yielding a higher "net" to the lender. Correct?
• Is the listing always "pended" when the seller signs an offer? Even if pended, is there a way for the LA to communicate to other buyers' agents that "yes, there is an offer but it's very low and probably won't fly. Get your backup offer in and you'll have a great shot." If that happens, I assume the LA is obligated to submit all such higher offers to the lender?
• If $500 or $1,000 EMD is collected, is escrow always "opened", or is there some sort of short-cut process for holding the funds, given the uncertainty of the transaction closing. (I've read that only 20-25% of SS's close, versus 80% for conventional transactions).
• What is the typical fee collected by a 3rd party negotiator? In many cases, a skilled agent will handle this, correct? If so, how much above the commission might the agent include for "negotiation" fees? Are banks more reluctant to pay this to an agent vs a 3rd party firm?
• If a buyer makes an offer that will net the lender less than their minimum, will they counter with their minimum (like HUD)? Or will they typically counter above the minimum to try to negotiate a larger amount if possible? Obviously, it's not in the best interest of the bank to play with the buyer too much and cause the SS to fail, if they can in fact get the minimum, especially considering the foreclosure clock that is ticking.
• Is there a dollar amount (or % amount) that the SS needs to be better than a foreclosure price for the lender to approve the SS? IOW, how much might a lender assume a foreclosure will "cost" in terms of legal fees, carrying costs of a vacant property, potential vandalism, etc?

If you have the time to tackle these questions, would be much appreciated!