Real Estate Short Sale Purchase Offers Minnesota

The word "short sale" has certainly been a buzz word in a distressed real estate market. However many realtors and investors are still unclear on how to determine a real estate short sale offer that is acceptable to the lender.

The following steps are to be used as a basic guideline on determining what to offer the lender for a short sale acceptance.

1. Determine Fair Market Value (FMV). The FMV can be determined by evaluating sold, comparable properties in a similar or close proximity to the subject short sale property. A realtor will have access to the MLS (Multiple Listing Service) and can create a CMA (Comparative Market Analysis) for the subject property. This analysis will identify sold comparable properties with same square footage, bedrooms, baths, garage and other similar characteristics as subject property. Request the realtors use a sold time frame within 6-12 months when pulling properties in the immediate or surrounding areas. Usually the short sale lender will not consider any sold comparables that are older than 12 months and that are further away than 2 miles from the location of the subject property.
2. Evaluating sold comps systematically. Contrary to popular and often misguided belief, you can use a formulaic system to work in your favor when determining what to offer on the short sale property. This system has been around for years, but for some reason you may have not heard of it mentioned dealing with real estate. Here is the system. You will use the law of averaging. The way this works is like this.

   Let's say you have eight sold comparables that are all similar in size, square feet, bedrooms etc. Here is how you apply the formula. You would take out the two highest comps and the two lowest ones and average the rest.

   EXAMPLE:

   You have a property you think is worth $145,000.

   You have a realtor pull a CMA and you find eight sold comparable properties that match the criteria above.

   The MLS shows the following:

   $159,000
   $154,000
   $153,000
   $161,000
   $148,000
   $143,000
   $146,000
   $151,500

   Using our formulaic approach you would take out the two highest sold comparables ($159,000 and $161,000). Then take out the two lowest sold comparables ($143,000 and $146,000). This would leave four other sold comparables.

   $154,000
   $153,000
   $148,000
   $151,500
   -----------

   You would then take an average by simply adding up the sum of all the sold comparables and dividing them by the total number of properties left. In this case, that number would be four.

   Total: $606,500 divided by 4 = $151,625

   You can reasonably justify the house may sell for $151,625 instead of the $145,00 you originally estimated.

   ...

Click here to read the rest of the article at HowToDoThings.com

Author: Cory Boatright