Selling to Avoid Foreclosure in a Buyer's Market

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I need help to stop foreclosure on my home. I need to sell quickly? I am a couple months behind on my payments and want to sell now. I am not looking to make a profit just need to get what i owe.

Boy, did the sharks swarm over that one! There were at least a dozen offers to purchase before I saw it.

Anybody will buy your house for half the market value. The mere prospect of a seller who is desperate and doesn't know any better sends these folks into paroxysms of lust - lust for the profit they're going to make on the property.

Contact an agent about selling at quick sale prices. Offer 2% or 2.5% to the listing agent, 3% or whatever is average or slightly above in your area to the buyers agent. Even a quick sale price should get you at least 80% of value. Yes, that will cost you 5%. But you'll come out with 75% of value net, instead of the fifty you'll get doing business with the sharks. If your loan balance is anywhere under 75% of the value, this puts more money in your pocket. If your loan balance is more than that, it means you'll owe less in taxes when the lender hits you with a 1099. Not to mention that trying to sell a short payoff without a good agent is an exercise in futility.

Now this is not to say that you should list it for 80% of your most fevered imagination of what it is worth. You need to sell, as in have someone offer a price that they can actually pay you, and quickly. You need offers. Ideally, you want multiple offers fast. You do this by not over-pricing the market value of your property, so that you will attract people who want to look, and they think it's a good price so they make an offer. The offer will not be full asking price, and don't waste your time hoping that you will get such an offer. Once that Notice of Default hits, everybody knows that you need to sell. To use one example I'm going through with a buyer client right now, if your property is a two bedroom place that basically looks like wild animals have been living there, and your list price is 99% of the three bedroom down the street, you are not going to get it, and you have a deadline, while your prospective buyers do not. You need to figure out what it is really worth by sales of comparable property happening right now, and then you need to discount that price by enough to make a difference. How much? Depends upon what your local market is like. That's part of what good agents get paid for.

Toss any concept of "negotiating room" or "getting what the property is worth" out of your head. Get your attitude completely out of the seller's market we had a few years ago. In this situation, all of the power is in the hands of the prospective buyers. If you won't sell for what they offer, the one down the street who is a little bit smarter, or a little bit more desperate, will. Sellers have little enough power right now without the deadline of foreclosure. People who need to sell have only the power to say no, and what happens if they don't say yes to someone? I'll tell you what happens: You get nothing. The chances are better of flying to the moon by flapping your arms than of getting some of your equity back out of a foreclosed property, even in the strongest of markets. Since your best alternative is lose everything you have in the property, that's not a strong negotiating position. This buyer does not have to have your property. They can go find a more attractive property, cheaper, from someone else. Their best alternative in negotiations is that they go find some other seller who will sell for what they want to offer. Negotiating position: Very strong. Net result, the buyer offers what the property is worth to them. If you won't take it, they only need a bit of patience to find something else that will. If you didn't need to sell, you could just hold on to the property, of course, but we've already determined that you don't have that option, and time is not your friend. A very large proportion of agents still have their heads in seller's market mode. Indeed, most of the major chains are still telling their agents to think like it's a seller's market. This kind of thinking is of no use in the present market, as residential property owners are re-discovering in San Diego County now that the things that drove the feeding frenzy have cooled off. Even during that feeding frenzy, there were properties that didn't sell. which is a warning now that the market has cooled again. When you consider the time constraints of selling under pending foreclosure, it behooves you to understand your position.

The only power a seller in this situation can get is by pricing it attractively enough that there are multiple offers that a good agent who's willing to work hard and really negotiate with all of them can leverage into something reasonable. Playing them off one against another is all you've got - and please note that the buyer who is willing to give the most is still going to get a better deal than they would have otherwise, because the thing that attracts them is that the property is a distress sale.

The sharks who buy properties for cash won't match the prices you get by selling through the normal marketplace. Ever. But even the normal marketplace does not reward you for being in a situation where you must sell.

Caveat Emptor

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About this Entry

This page contains a single entry by Dan Melson published on October 17, 2020 7:00 AM.

The Difference Between Note Rate (APY) and APR was the previous entry in this blog.

The Ideal Listing Commission and its Structure: Performance Based is the next entry in this blog.

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