Big Bear Real Estate: LISTEN UP SHORT SALE SELLERS! JAN 2010

Short sale sellers who don't price their homes appropriately are unlikely to receive viable offers. That's because pricing needs to appeal to more than the buyer to ensure a short sale transaction will close.

Pricing a short sale correctly involves choreographing a delicate dance between bringing in an offer and getting the bank to buy into that offer. Moreover, if a Notice of Default has been filed, time is of the essence. In that instance, there are only so many days left on the calendar before a short sale seller may lose the home to foreclosure.

Price it wrong, and the home goes to the bank. That's one of many reasons why it's important to hire an experienced short sale listing agent. The short sale price needs to be attractive to the following five parties:

• The Short Sale Bank.

Because short sales can take a minimum of 3 months to close from listing inception, the price should be based on pending sales, which will become the comps at closing. Banks will generally accept an offer priced within reason of comparable sales.

• The Buyer.

Short sale buyers want to buy under market; they want a good deal. Otherwise, buyers have little incentive to wait 90 days or more for a short sale to close. Sellers will catch a buyer's eye if the home is priced under the competition.

• The Buyer's Agent.

Short sales aren't high on the list of a buyer’s agent’s favorite transactions. Buyer's agents generally earn a lower commission on short sales, the deals take longer to close and sometimes they don't close at all. The listing verbiage needs to assure the buyer's agent it's worth the time invested.

• The Buyer's Lender

A buyer and seller can arrive at a mutually agreed price, but the buyer's lender will hire its own appraiser to determine market value. This means the home will need to appraise in line with the comparable sales. Pricing too low is rarely a problem. But if it's priced too high, it won't appraise, and either the buyer will need to foot the difference in cash or the pending sales will blow up.

• The Seller.

Some types of short sales are subject to deficiency judgments and mortgage debt forgiveness tax, which means sellers need to get the highest possible price. Attractive pricing will encourage multiple offers, and multiple offers tend to bid up the price.

Appealing to all five of these entities may seem impossible to do, but it is possible. There is an art to pricing a short sale. I can honestly report that all my short listings in Big Bear -- in our soft market -- receive multiple offers.