One thing that has been irritating to me is that many homes that have been foreclosed and returned to the lender have been put back on the MLS but not priced to sell quickly. So these homes sat on the market for months, did not sell, then got pulled entirely off the market. Some of these then went to the private auctions. So that is what I mean by some of the auctioned properties already went through an MLS cycle.
Hopefully now as more homes get foreclosed they will be put on the MLS with a more aggressive price strategy.
Short sales are a pain… well the problem is that you have two parties you negotiate with, the seller and the lender. When you purchase a short sale you are at the mercy of the lender. So imagine Joe homeowner who is selling his home for 500k but owes 600k on it. So you submit the 500k offer and Joe says yes but you need to hear back from Joes lender as well. If both do not agree to the sales price then your offer cannot be accepted. Also the lender tends to take their own sweet time. For instance I have a seller who is selling his home short. The lender has already told me it will take 2-3 WEEKS to respond to any offer. Some lenders work faster then others but this is an example that is true to life.
In your example I was a little confused. If the property is an REO then the bank already owns it. You submit your offer directly to whoever is representing the bank. (Banks usually enlist brokers or realtors to sell the home) so you can offer whatever you want to offer. However if the property is an REO there is no outstanding loan on the property.
If the home is still owned by the homeowner and they owe 500k and you offer 400k and the seller CANNOT make up the 100k difference then the seller needs to work with the lender to see if the lender will ACCEPT a short sale. It is not a matter of the seller just saying “hey lender this is a short sale”. The seller must provide documentation and proof that there is a hardship situation. It is a pain in the butt paperwork wise. The entire documentation package includes tax returns, letter of hardship, salary verification, statements of net worth, etc…If the lender believes the documentation then they may grant a short sale if they believe they cannot get a better price through foreclosure and selling it themselves.
