When we look at Short Sales from a borrower's perspective, the borrower may wonder what is reasonable to expect a lender to support in terms of a sale.  We have published some general lender guidelines for people considering Short Sales.

 

                   Type of loan                      Threshold

 

                   Conventional loan             85 – 92%

 

                   FHA insured loan              82%

 

                   VA Guaranteed                 88-91%

 

The process in general use in Short Sales starts with the listed price for the property.  An agent will determine the value of the property based upon sold, like properties.  This has nothing to do with loans or other encumbrances presently on the property.  Once the value is established, the selling value is reduced by the threshold amount and the cost of sales is added in.  For example:

 

          Type of loan?                            FHA

         

          Current market value?              $150,000

 

          Lender threshold                       82%

 

          Real Estate Commission            3%

 

          Closing Costs                             2%

 

                                                Calculation

 

$150,000 X .82 = $123,000 / .92 = $133,696

 

There are more calculations and examples that can be used but this is a general idea of how lenders look at values.  In practice, offers much lower than the threshold amounts will be presented.   The process of dealing with the lenders is a long one (perhaps 60 days, or longer) before it is looked at by the lender so, it is in the best interest of all concerned to look at the general guidelines of the lender before an offer is presented to the lender.  If the subject property is in an area where prices are falling, these numbers should be adjusted to reflect the then, supported  current market.