The main thing to know when negotiating a short sale is that it’s always going to be priced somewhat below market if for no other reason than the fact the seller is looking for a quick sale.
I recently had a home listed for $180,000 when all comparable homes in the neighborhood were priced at $210-$220,000. Now granted, this house needed new flooring throughout, but that plus some fresh paint wouldn’t even come close to approaching the $30-$40,000 margin built into my price. So for all intents, the house was priced very well.
But then along comes the buyer who, as part of his strategy for negotiating a short sale, tells me that in addition to flooring, he would want to rip out the entire kitchen and remodel as well as replace vanities in both baths… plus a more upscale front door, double pane’d windows, double crown molding throughout, and all new landscaping.
Now here’s what the buyer doesn’t seem to understand. I will be negotiating this short sale on behalf of my seller, with a third party negotiator who represents the lender – who, by the time this sale is done, will be taking a $50-$60,000 loss on this loan! The lender’s negotiator is trying to mitigate the lender’s losses, not give away houses. So part of my job in representing my seller is to justify why the list price of $180 is a reasonable and fair sale price.
But you can be sure that nowhere in my discussion with the bank’s negotiator, does he want to hear that the buyer wants to only pay $160,000 so he can completely remodel the house. Do you really think the lender will give a flip about the buyer’s upscale tastes? …and double crown molding?
So in closing, here is the point I am trying to make. Negotiating a short sale is based on the current condition of a house less 10%-15% to encourage a quick sale. The buyer is just kidding himself if he thinks a laundry list of upgrades will get the lender to lower the price. In short, the lender doesn’t care. He has no interest in helping to finance someone’s remodel project.