When pricing a short sale, you should account for any problems with the house to give you leverage in your negotiations with the lender. Problems to consider may be simply cosmetic, such as worn carpets and peeling paint, or structural, like foundation issues. Look for these types of issues when you first inspect the house, and also ask the owner about non-visible problems, such as slow-running drains, roof leaks, non-functioning sprinkler systems, broken faucets, or outlets that don’t work.
Once you have a list of the problems, get quotes for the repair costs. Many foundation companies, roofers, plumbers and other service contractors will give free quotes if you offer to provide the information to the buyer. The hope is that the buyer will choose their company to do the repairs after purchasing the home.
You can use the quotes for the repair costs to justify reducing the short sale price of the house below market value, which can help attract qualified buyers faster. For example, if the market value of the house is $130,000 but the house needs paint, new carpets, and a patch on the roof, those issues can be used to justify listing the home for $115,00 – $120,000.
Also be sure to note problems as they occur to help move the short sale along quickly. For example, in February 2011 when the Dallas-Fort Worth area had a lot of freezes, a pipe froze and broke in a vacant house belonging to one of our clients. Nobody noticed that the water was running for several days, causing significant damage to the home. We brought the issue to the bank’s attention, noting that there was standing water in the house and the possibility of mold. The bank was very quick to find a buyer and complete the short sale transaction. The last thing the lender wanted was to foreclose on the house and be stuck with a property that had a mold issue and needed substantial repairs.
Unlike a traditional sale, when homeowners are encouraged to make as many repairs to the house as possible prior to putting it on the market, cosmetic and structural problems can be an asset in a short sale. By taking the time to identify issues with the home – no matter how large or small – you can gain more leverage in your negotiations with the bank to find a buyer and complete the short sale quickly.