Who sets the listing price on a Short Sale and why does the bank want more money than the asking price in the MLS?
It is common for a bank to ask the buyer to pay more than the listing price and this is why.
The listing price is established by the owner of the home and the listing agent. In most cases, the asking price is below market value because the owner wants to have multiple offers to choose from. The lower the price, the more offers that will be received, and the more likely they are to find a buyer willing to wait out the short sale process.
Once the owner has accepted an offer from a prospective buyer, it is submitted to the bank, or banks, if they have a second mortgage or a line of credit, along with the owner’s personal paperwork required by the bank. The bank then reviews all the data, orders an independent Broker Price Opinion (BPO) or an appraisal, and runs the price through their valuation programs to determine the true market value.
If there are two different loans on the property, this process is repeated for the second loan as well.
Ultimately, the bank is assuring that they get fair market value for the home. If they find that the offer price is below market value, they will send a counter offer to the buyer at a higher price.
In Orange County, prices have continued to climb over the last 12 months for homes under $500k. So if an offer was written on a house 5 months ago, the bank’s valuation will probably come back higher than the offer because the market is improving. In that situation, one can certainly expect the bank to counter offer with a higher price.