Making the right bid is critical in short sales

Red home for sale sign on lawn

When you bid on a home, you usually open negotiations with a deliberately low offer.

Short sales are different.

Lenders must approve any deal that allows a home to be sold for less than what's owed on the mortgage, and it can take weeks or months for them to evaluate and approve (or reject) each offer.

That makes it tough to do a lot of dickering.

So your first bid needs to be a realistic offer with a good chance that it will be accepted.

Start by estimating the fair market value of the home using comps (values of comparable properties that have sold near the home in the past few months).

Take the condition of the home into account, and reduce your estimate if the home needs repairs.

Calculate 82% of the home's value, throw in a few thousand dollars to cover the lender's cost of doing a short sale (ask your agent what that typically is for your area), and you have a good starting point.

Now look at the quality of your comps.

If most of the homes weren't foreclosures and spent several months on the market, you've got a good bid.

If most of the homes were foreclosures and only spent a few weeks on the market, you'll have to offer more -- possibly up to full market value.

Click here to find more advice on how to take advantage of a short sale.

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