Diane, I am sure you have a lot of experience in real estate so I am not going to try to "teach" anything regarding the practice of Short Sales to you. However, since you threw it out here, allow me to state my opinion on the matter.

I don't think an agent has any right to post in the MLS a price "subject to the approval" unless they have spoken to the mortgage companies and gotten a verbal agreement on their willingness to cooperate in the sale.

Next, I think you had either an acceptable number from the mortgage company or at a minimum three "similar" recent home sales to back up the number you think you can convince the bank to accept.

Having said that - I almost always try to steer the client away from the "short sales" dealings of other agents. Unethical? No, I think what some agents have been doing is unethical and against the "so called" Code of Ethics and should look at the Standard of Practice 1-3.

Finally, I will state that I am always surprised at what the mortgage company accepts and or rejects in the world of Short Sales.

Enjoy the video:  http://tinyurl.com/6lgcbu

Hello Diane,

I have found that the best way is to just do your regular comps for them and if your area is like others the square foot prices will show you were to go with the price. In our area we were at approx. $165.00 and now due to new Home prices and short sales we are down to around $128.00 in the sold comps. for the last 6 months. I am in a small town as well and we only show 6 sales.

The active listings are still all over the place but the time on the market is over 200 days on most of the higher per foot listings.

The bank will likely order a BPO from someone in the area and then decide if your offer when you receive one is acceptable to them.

Be sure to advise on your MLS that the commissions may vary as the lenders have a way of changing them late in the deal and you should notify other agents that you will split whatever is paid with them so you won't have problems with the commissions paid.

And for sure alert others that the sale could take up to six months to complete due to the problems getting things done. Hopefully it won't take that long but I have seen it happen so to avoid bad feelings with the buyers agent and the buyers themselves all parties need to be aware of the facts.

Hope this helps.

Do your due diligence on the property!  By that I mean you need to see if there are any back taxes owing.  Did someone else buy any back taxes?  Are there any liens or lis pendens against the house or the owners?  If there is a lawsuit, that will have to be settled before the property goes on the market or have a written agreement about the agreed upon settlement.  Once you have that information then is there a second lien from a lender on the title to the house?  Are they willing to waive?  

Next, when lenders agree to do a short sale in real estate that means that the lender is willing to accept less than the total amount due.  Not all lenders are willing to accept short sales or discounted payoffs, because it might make more sense to foreclose.  

Before you even think about pricing for the short sale and this is where I get a little irritated, know that there are loss mitigation companies out there that represent the banks.  You won't be dealing with the bank directly but a loss mitigator.  These companies know what the bank's bottom line is and then the loss mitigators take their chunk and add it to the bank's bottom price.  For instance I just represented a buyer where the loss mitigator's bottom net line was $285K.  The bank wanted $225K.  The total loan amount was $450K!  You run the math and figure out why Greg is a little heated about this and rightfully so.  What happened in this file was that the expenses were not properly figured out and the attorney representing the seller felt that a lien judgement against the seller for another property, didn't apply to anything else they owned!  Well, he was wrong and a substantial lien judgement was renegotiated between me, our attorney and the title company's attorney.  The seller's attorney - he left the closing.   He didn't think it could get done.  Wrong thing to say to me.  It did get done but it cost me 70% of my commission to get the file closed.  The lien holder for the judgment called me and wanted to know if he could have more money?!!!  I told him he had exactly 5 minutes to call the title company and accept or the file goes to foreclosure and he won't get a plug nickle.  His call.  

Now you want to know how to price a possible short sale?  Look at the condition of the property (as it will be sold "as is" and there will not be any time for a home inspection (but I would suggest they get one in there fast) but also know that the bank will not give any credits whatsoever to any repairs needed.  Then look at supply and demand.  Take the most recent three lowest sales in the neighborhood and place it close to those most recent sales - well, after you summize the condition, etc.  

Do a preliminary Net Sheet for the Bank that shows an estimated closing statement for the anticipated sales price, all the costs of the sale, the unpaid loan balances, oustanding payments and late fees.  Don't forget to include you real estate commission, if any.  If the bottom of the Net Sheet shows cash to the seller, then you may not qualify for a short sale.  It is not for you to guestimate what the bank will take, as only the bank knows.  You need to get a signed authorization letter from the sellers authorizing them to allow you to talk to the bank on their behalf.  Keep track of the names and all contact info along conversations.  It gets tricky but it can be done.  

Bottom is, it won't be easy and it is time consuming.  If you believe it might be over your head, run with you gut then and allow someone who has the experience to represent these sellers.  As far as the loss mitigator companies that act as the "go-betweens" for the banks, it irritates me because more monies could have gone back to the indebtedness to the bank and hence, we wouldn't have such high insurance premiums for "private mortgage insurance" and we wouldn't be in such a mess if our guidelines were more rigid, like they are now and should have been all along.  

Short Sale Consequences - it's dependent upon if you get a contract from a qualified buyer.  If you do not receive an offer, you will not qualify for a short sale.  If the seller has assets, the bank may not grant the short sale because they feel that the seller has the ability to pay the shorted difference by liquidating those assets.  

Not everything is carved out in stone.  I hope this helps you.

All the explanations are correct and to the point. Pricing is the tricky part because without an offer you don't know. If you can show the bank the price based on comparable sales you have a good chance of them accepting if there is only one lender involved. If they have a second mortgage it gets a lot more complicated and the odds are in favor of foreclosure v/s a short sale being sucessful. It again depends on the lenders and what they are willing to share with the second. If the second won't sign off, it is probably going to foreclosure and they will probably end up with nothing if you did the comps correctly. I always try to price it to the market for a sure sale. If homes are selling in 45 days at $300,000 and they are comparable, my price is $300,000. I look at it like having a seller that wants his home sold, so you mark to the market.

Greg does have a point, there are some agents that price way below market and get offers but don't close the sale because the bank won't accept. So it is a little more challenging than a routine sale but well within the competence of most good agents.  

Great question and good luck but plan on a long road because the banks are backed up and these sales take time.

Diane, everyone here gives great advice about the subject. I also like this resource for getting real estate information of "how to", I hope it helps you:  http://www.biggerpockets.com/realestateresources.html

You can type in "Short Sales" and get a lot of blog information for free.

Good Luck

Diane, I always contact the lender and ask for a shore sale package. This will give you everyting they require, commission they are willing to pay, fill it out, send it back with a CMA.  If they accept the short sale concept they will have their out appraisal done and you can discuss priceing the property. When an offer is submitted they will most likely have BPO done to confirm value.