Rule of 88: The net proceeds to get a deal done

by Marty Macisso, Realtor, Regency Realty Group

There is a common misconception that you can buy bank owned properties and short sales for HUGE discounts.

This is not true…in most cases.

When a mortgage goes into default and the bank has 2 options:

1. Foreclose on the seller or,

2. Approve a Short Sale

In both cases, the bank is asking a Real Estate Agent to list the house for sale at CURRENT FAIR MARKET VALUE in AS-IS condition.

Translation, the bank wants to sell the house in its current condition and recoup their losses. In either case, the bank does in internal review of all offers submitted on these distressed properties and determines the Cost benefit of accepting.

They usually want around 88% of the Current Market Value in their pockets as net proceeds.

Example: Short Sale is under contract for $100,000. The lien holding bank, will usually approve the short sale as long as they get $88,000 in Net Proceeds after all other expenses are taken from the sale to pay for Realtor Commission, Seller closing costs, Relocation Expenes, etc…

Point being, a bank will not approve an offer that is way below market value.

…but in a market that is declining – you need a Realtor who knows a way around this!

Tune in for the next article.


Marty Macisso is a Sales Agent at Regency Realty Group specializing in short sales, bank owned property and HUD homes.

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