We need Short Sale Help

[Danna Gramme]

A real estate agent called me regarding a short sale he has listed. He is working with the Bank's negotiator. The property is listed at $380K. The seller owes $385K. The property is in fairly bad shape:

The roof needs repaired or replaced, no flooring in the house- needs carpet or other. The kitchen needs repairs. Needs new appliances, walls are patched in some places - needs paint throughout the house. Overgrown landscape. This list is what go got by viewing pics and doing a driveby.

Can't determine if windows are okay nor how bad the interior really is due to limited pics. Based on the above, we are trying to determine a ballpark figure to start from before going to visit the property. We feel comfortable having a base starting point.

This house will be a rental. We are considering the 30% rule. $380K x .70 = $266,000. The comps in the area slim ranging from $350K and $425K all renovated. Considering the loan amount and when we see the inside of the property is $266K too low. We'll probably have to put in $35K to $40 in reno. My husband's brother is the contractor - so we can get the work done. Thanks for your help!

[Kevin Sobilo]

@Danna Gramme, don't second guess yourself based on what other investors are or aren't doing. Many people (investors included) shy away from short sales because they can take a long and indeterminate time to close. They might close in 2 months or 8 months. If you have locked in a good deal, the reward can be worth the wait.

I would not base any thinking on the asking price or amount owed. Those are irrelevant to you. The asking price is often set initially to something at or near what the break even point is and then lowered from there. The lender will usually not give too much guidance on price reductions. So, the asking price is just irrelevant from what I have seen.

I would base my offer on what I think a similar home in similarly distressed condition will go for.

With a lender a clean deal might have some appeal. If you can pay cash that is ideal. Also, if your brother in law is a contractor you may feel comfortable skipping a home inspection. Those kinds of terms could be appealing to the lender.

Good luck!