Short Sales what to offer the banks

When I first got started in short sales I wanted a magic formula to always use on my offer to the banks. I do not have a magic offer that you can use but I will give you some guidelines.

You need to make your offer or acceptance of the lenders counter offer based on what you are planning to do with the property. Here are your options:

1. Wholesale the property

2. Retail the property

3. Use property as rental or lease option

You can always use the same formula we use when flipping homes, here it is.

72% of ARV (After Repaired Value)

Subtract realtor fees to sell home

Subtract rehab cost

Subtract hard money cost

Here is how it works.

We have a house worth $100,000 (ARV) in great shape. We would plug this into our formula above.

$100,000 * 72% - $6000 realtor fees - $9000 rehab cost - 6 months hard money $5412 = you need to offer less then $51,588 to ensure a great profit margin. Rehabbing you should always try to make $15,000 or more, never less if you can. You can use 70% * ARV if you are new or want to make sure you have enough cushion.

Short sales you need to add your profit if you are wholesaling. The example above you would need to get the house discounted to $41,000 so you can resell at $51,588.

Critical: You must have a very accurate idea of what ARV is for the area you are short selling in. If your ARV is off a lot it could mean a loss or break even on that property.

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