A short sale listing should be listed for sale at fair market value or slightly below. The price can be lowered every three to four weeks if there is not enough interest from buyers.
It is futile to list a property too high. Some agents and sellers list the property at a ridiculously high price that would theoretically pay off the entire mortgage balance and all other closing costs. Buyers will not accidentally pay too much for a property. They typically will not even look at a property that is listed well above market value. Listing at too high a price is a waste of time.
Some agents and sellers think that the mortgage lender dictates the list price. In certain short sale programs, like the HAFA program or the FHA Preforeclosure Sale program, the mortgage lender does determine the list price. Some cooperative short sale programs also entail the lender choosing the list price. In traditional short sales, which comprise the majority of all short sales, the seller determines the asking price after consulting with their agent.
Some agents list short sales well below fair market value, hoping to attract a multitude of buyers. Some agents may simply use the short sale listing to attract buyers who they will divert to other listings. The challenge with listing a property too low is that the seller’s lender may be unlikely to approve a sale price substantially below fair market value. The lender will send an agent to the property to conduct a Broker’s Price Opinion (BPO), or the lender might even hire an appraiser. If the lender’s valuation is much higher than the sale price in the Agreement of Sale, then the sale will probably not be approved at the low price.
On a national scale, according to Zillow.com in 2012, the average short sale sells for 20 percent below fair market value. The average foreclosed home sells for 40 percent below fair market value. Nevertheless, the ultimate market value of a short sale is dependent upon local market conditions and the condition of the property. If the house is in a desirable neighborhood and it is in good shape, then the property will likely sell close to fair market value.