Factors that get you the biggest REO & short sale discounts

November 4th, 2008 . by Rob Swanson

The Loss Mitigation and Asset Management groups at most major lenders use certain criteria to determine how big of a discount they will approve beyond just the traditional ‘haircut’.

Whether you are a real estate investor negotiating on your behalf or are a real estate agent negotiating on behalf of your client, the list below will help you get more deals done quicker.

In order of biggest discount, the following list generally leads to the best deals and the quickest approvals.

1. Functional obsolescence – The property just does not function well, i.e. the electrical panel is too small to run the dishwasher, microwave and hair dryer at the same time.

2. Poor site & location – The property simply has an undesirable location for resale, i.e. 3 turns off of a major street is many times considered a poor location.

3. Structural problem – The property foundation, load bearing walls or roof are damaged causing difficulties in obtaining traditional lending.

4. Environmental problem – The property needs majore remediation due to an inherent health hazard such as mold, a former meth lab, etc.

5. Resale financing terms – Anything at or in the property, including Items 1 – 4 above, that limits the potential financing options of prospective future buyers.

When negotiating discounts with lenders, keep this list in mind and spend your time highlighting those things that will help you get the best deal and conform with the lenders protocol.