It all looked so easy back in 2009 when the real estate market first went into the tank. If you had a property where the homeowner was late and either facing foreclosure or starting the short sale process, a solid cash offer with a quick closing would give you a good chance at negotiating the price you wanted. Lenders quickly caught on as investors flooded their offices with lowball offers hoping to catch lightning in a bottle. Fast forward to 2014 and the short sale market has cooled off significantly, but there are still some good deals to be had if you know how to make the right offer and have ammunition to back it up. In other words, having an offer you can justify will increase your odds of landing a deal.
You make money in real estate by buying at the right price or doing the right amount of work and adding value. One of the ways to get your price is by showing the seller that their property may not be as highly valued as they may think. This works whether you are buying from a homeowner or a bank, but will have a much greater impact when buying from a bank. Since they are not in your local area, they do not have a feel for the neighborhood or any trends in the area. You can use this to your advantage when you make your offer.
All lenders will have an appraisal or a CMA on the property before selling. Your first task should be to meet the appraiser at the property armed with some comparables that you have pulled along with some work estimates. If you can develop a rapport with them, you may be able to get them to see your version of the property and have them use your comps. These comps, in theory, will suppress the value and give you the best chance at getting your offer accepted. Most appraisers will do their own homework and use the comps they pull on their own, but there are cases where you can make a good case to use yours and they do just that.
Getting a low appraisal is one thing, but you also need to validate it in your offer. When you make your offer, you need to supply these work estimates with your contract. If you can add pictures with these estimates, it will give the lender a real feel of exactly what the property is. If the work is bad enough, they will know that it will eliminate FHA buyers from the buying pool and it could leave them to look for the best cash offer that comes in. If your contract has minimal inspections, a quick closing and a proof of funds letter along with your estimates, you stand a good chance at getting the property.
Every current short sale and foreclosure in this market takes a lot of work, even with your offer perfectly constructed and submitted. Short sale deals are still getting closed, even at reduced prices, but now more than ever you need to show the lender exactly what they are selling. Even the best offers are not getting accepted, but if you want to give yourself the best possible opportunity, you need to do everything you can to justify you offer.