Improve Your Short Sale Success Ratio

In Pinellas County last month, the MLS reported that there were 12,035 properties listed for sale. Of those, 2,624 were classified as "Distressed Properties" -- that is, they are in pre-foreclosure, a short sale, bank owned, or are a foreclosed property.

Of those distressed properties, 346 managed to get sold in October.

Perhaps you were not among the lucky buyers who managed to have your offer accepted on a distressed property. Too bad. Those distressed properties generally are bargain priced right from the start.

What I'm hearing from many real estate agents is that inexperienced buyers seem to think they can get distressed properties at prices substantially lower than the asking price. So, they write up an offer for considerably less than the asking price thinking "seller desperation" will help them buy the property for an even lower price.

Many times those offers are simply not accepted because the "third party" (usually a mortgage company or bank) simply refuses to sell the property for that much of a loss or because somebody else made a higher offer that was more appealing to the bankers.

So, if buyers want to upgrade their chances of having an offer accepted on distressed property, pay careful attention to the following factoids:

• In October, 2009, pre-foreclosure and short sale properties in Pinellas County sold for an average of 94% of their asking price.
• In October, 2009, bank owned properties that were in foreclosure sold for an average of 98% of their asking price.

This info comes from the Pinellas Realtor Organization who keeps track of these kind of statistics.

So, now we know where the offer has to be if you want to be successful in buying short sales and other kinds of distressed properties. Those percentages put a little different slant on the ol' offering strategy, right?

Buyers and their agents need to realize that the discount is already in the asking price of a distressed property. Your best bet is probably to cozy-up to that asking price and make an offer that's within the success percentages described above. Most likely that $125,000 offer a buyer was planning to make on that $200,000 short sale isn't going to make the cut when the mortgage bankers sit around and decide whose offer they are going to accept -- at least, that's what the percentages seem to indicate.

Oh, here's another little tip I've heard recently about buying distress property: Make it an all-cash offer. Cash gives the mortgage bankers a warm, fuzzy feeling even if the offer is a little less than the guy who has to find a mortgage to complete the sale. The buyer with good credit can put a mortgage on it sometime after the sale is closed.

Hey, it's just a little strategy lesson.

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