SHORT SALE DEAL OR NO DEAL

[Geoffery Hewlett Jr]

$ 289,788 Mortgage Balance

$ -31,627 Est. Equity

Comps:

$180K

$216K

$270K

$176K

$145K

= 987K divided by 5 = 197.4 (ARV)

.65% x ARV = 128.31

128.31 - Repairs (25K) = 103.31

103.31 - Profit (10K) = 93.31 (Offer for seller)

I’m new and never done a short sale. Do my numbers look accurate? 93K seems FAR off from 320K. Seller waiting on my number. Would really appreciate someone with more knowledge or help please and thank you!!

[Dan Maciejewski]

You shouldn't use that method to get an ARV. With that spread, there's no way those houses are in similar condition, size, level of improvement or age.

I'm not sure where you are getting the $320k or the $258k estimated equity.  If the ARV was truly $197, then they have -$101k equity.

You will run comps to get the ARV by finding recent (45 days) similar sales in similar neighborhoods. Go out farther in distance if you have to but keep your time frame as tight as possible. Similar means level of improvement, bedrooms, age (+- 10 years, 1978 is a break because of lead paint and those darn Zinsco electric panels), location, square footage (+- 10%), etc. If you are rehabbing everything, look at recent flips -- if there aren't many in the area, ask yourself why not.

Also, as a short sale, is the seller going to owe the difference to the bank?  Do they know yet?  

What are you taking 65% off and then another $10k in profit?  AND including repairs?  Most rehabbers in my area would probably want more than $10,000 profit for that risk.  

Not knowing anything at all about this deal, I'm going to guess that, if this house sits in the middles of those comps, and you replace everything, it might sell for 240.  If that's right, I would estimate $30k in rehab, then $30k in profit, then 3% cost of acquisition and 9% cost of sale.  

240-9% (21k)-30-30=159-3%=$154,000  So that would be my max number.  Again, not knowing anything but making the above assumptions.  That's a $143k bath the bank has to take.  SO, your number does look like a good initial offer, and I would be willing to go higher than your up to mine.  

The seller has to accept and then go to the bank and get them to accept.  Is this just a distressed deal, or is it actually on market?  If it's on market, then the listing agent may know some more info about how likely the bank is to accept -- then again nobody knows what banks decide to do.

Good Luck!