A Short Sale Story – How To Get The Bank To Look At Your Package Even Without An Offer In Hand Yet

What has been your experience with going into a Short Sale with the bank without having a buyer’s purchase offer in hand?
It is commonly said that short sales need to be accompanied with an offer to purchase the home, otherwise banks will not give it a second glance. Is this true or are there exceptions to this rule?
Jennifer currently has a short sale that she’s working on where the lender requires an offer before even looking at the short sale package. The property has been on the market for several months now and it looks like she is just chasing the market price downward. In the depressed housing market, she tried to get some leads generated by lowering the asking price several times since the time she got the listing, yet there haven’t been any bites.
It seems there’s no way to beat the game. While Jennifer is waiting for an offer, she can’t start the lengthy short sale approval process with the bank, however, once the offer finally comes in, she runs the chance of losing the buyer waiting for the bank to approve. The process of obtaining a short sale approval from the bank usually takes anywhere from 30 days to several months. During this time anything can change—the buyer can decide to cancel because the process is taking too long, interest rates could go up so the buyer backs out, the buyer may think that the seller is playing a game and holding out for a higher offer, the buyer may have already locked in a particular interest rate for their home purchase and would lose out on it due to the delays in waiting for final approval from the bank.
Are there any suggestions to expedite the process and get around this lengthy approval period? Is it possible to obtain a SHORT SALE approval without waiting out for a buyer?
There is little debate that the banks stipulate that an offer is needed when turning in short sale packages. You will not be able to start the short sale process until the buyer signs a formal purchase contract. You can`t even deal with the "Loss Mitigation" department until you have an offer. The reason for this is that the banks will not negotiate against themselves by giving you upfront the reduced price they are willing to sell for. They want to know that they are negotiating with a buyer on the other end and that when the figures are approved, the process shoots directly into escrow with a quick closing.
What to do?
Just like there are more than one way to eat a banana, there’s more than one way of getting out of this ditch. One way is to take drastic action to generate some quick leads. Drop the price to "turn some heads" so you can get an offer in. Do a little research and find out how the price of other available homes and strategically price yours to stand out from the crowd. You have to keep dropping the price until you get interest. Once you have the offer, submit everything to the bank. If the offer looks too low, the bank will counter and you will know where they stand and then readjust the price with the buyer from there. You can try changing the price every 2-3 weeks. Your goal is to get it sold, not to get the most money. Regardless of your list price, the bank is going to rely on their appraisals and broker’s price opinion (BPO) for their ultimate value of the property. So how you price the property at this time doesn’t really matter as long as you generate interest enough to get an offer.
A little known strategy to get the short sale moving is to keep a list of real estate people in your area who buy properties at a discount who will submit offers that are low, but reasonable, just to get the bank talking. These investors usually are looking to get a good deal on a property so their offers will tend to be on the lower end, yet they are professionals at what they do and so when they turn in an offer to purchase, they have reviewed the home and know that it is something they will profit from when escrow closes.
With the investor offer in hand, you can at least get the short sale negotiations started. Your job is to justify the price in the offer to the bank. With the offer, you can also get the appraisal, or BPO, started on the home to get the process rolling. These investor offers can be considered what I would describe as "surrogate offers" to start the process until another offer arrives. Then if you later locate a non-investor buyer who is willing to offer more for the home, you at least have not lost much time since you’ve already started working on the file with the bank.
This use of the substitute offer from the investor can be very useful when, in the course of your work, you come across preforeclosure cases where time is running out and the trustee sale is imminent. At that stage, you want to do everything you can to try to postpone the sale so you can get a short sale pulled together.