Basically, the short sale is a pre-foreclosure. The owners can’t pay the mortgage. A lot of people don’t know they have the option to short-sell their house, and so they wait for the bank to foreclose.
So knowing what’s left on the mortgage is sort of important, because the bank wants to break even instead of losing money, which is what a short sale typically means for them.
Basically, the asking price is not approved by the bank. We submit our offer to the seller. If the seller signs off on it, then it goes to the bank. In this state, they can not accept multiple contracts, and luckily, there is no contract already, so if the seller approves our offer, we will be the one and only contract. Then the offer goes to the bank. Because the bank has to assume all costs that the seller would normally pay for, they want to not only break even on the remainder of the mortgage, but also to cover those costs, and likely make some money too.
So… we know what the mortgage is. The seller’s asking price is about 7k more than they owe on the mortgage. Plus, we know that the bank will have to pay 3800 to bring the heating system up to standard, so that leaves 3200 left for the bank and all the remainder of the costs to close. Assuming the remaining costs aren’t more than that 3200, the bank should logically accept our offer, because they will break even. Otherwise, they could counter for more money. We are prepared to offer up to another 15k for this house (and even then it’s still 20k less than we are pre-approved to borrow). Also, since the seller owes 7k less than they’re asking, they really have no reason to decline the offer.
So, the odds are in our favor, it seems. The problem is with short sales and the fact that it’s pre-foreclosure means there are so many other aspects that a regular home sale doesn’t deal with.