Pricing a short sale can be tricky business. On the one hand, you are trying to price the property low enough to ensure you can find a buyer quickly and move the short sale forward. On the other hand, the lender will want the price of the house to be in line with current market rates.
Often, the price can make or break a short sale. The following strategies can help you hit the mark and improve your chances of completing a successful short sale for your client:
Don’t involve the seller in determining the price. Although you can make the homeowner aware of the price, you should not let the seller have a say in the final listing price for the home. Sellers may not understand the short sale process, or they may get emotionally involved and want to ask more money than would be realistic for the house. Explain to the homeowner that the price of the house will be what the market will bear, and then do the necessary legwork to determine the appropriate figure for the home.
When you price the house, start high. After you have done your comps for the neighborhood, taking into account any repairs that are needed on the home, set the price a little higher than the average price of similar homes in the area. For example, if other comparable homes are in the $150,000 range, start about $10,000 higher than the average price, so the price of your short sale listing is medium-high. Then, watch your showings and feedback. If there are no showings or the feedback from prospective buyers is that the house is overpriced, start dropping the price by 3-4 percent (e.g., $5,000) every 7-14 days until you hit a point where there are many showings and offers are starting to come in. The benefit of this process is that you can show the bank your pricing history and demonstrate that you did try to sell the house at the highest price possible, but feedback showed that buyers were not interested at the higher price.
Recognize that the days of deeply discounted short sales are over. Broker Price Opinions (BPOs) have improved in the last couple of years, which will force you to be realistic on pricing the house for a short sale. For example, if you have a house with a market value of $150,000 and you’re submitting offers for $100,000 (i.e., 66 cents on the dollar), odds are the bank won’t agree to the short sale. Short sales will sell at a discount, but not a deep discount. Expect the final price to be around 10-20 percent below market value
In the end, pricing a short sale is more an art than a science. By setting appropriate expectations with the seller and using neighborhood comps as your guide, you can find the sweet spot for your short sale and negotiate a successful transaction for your client.