Many of my Orange County clients ask me how to negotiate the price of a house, particularly when it comes to a short sale (when a person’s mortgage balance is greater than the market value of the home). However, buying an Orange County home that is listed as a short sale is a whole different game and one needs to understand a few factors; including:

  • how the listing price may be set,
  • how the bank will approve the listing price, and
  • strategies for making an acceptable offer

As Orange County home prices have dropped and are unlikely to return to 2006 inflationary prices, there are many sellers who are underwater on their mortgages and owe the bank more than their home is worth. However, having a home that is no longer valued at pre-inflation prices is not enough to qualify for a short sale.  The bank to which one owes the money must approve the short sale and the bank looks at all of the seller’s financial statements in an attempt to determine whether the person should really be able to get off without paying the difference and what he or she truly owes.

The bank will look to see if it should help the sellers out by accepting a payoff that is less than what the bank is owed. There are many reasons that Orange County sellers are eager to short sell their homes, including that it gets the seller out of the home and helps them avoid costly foreclosure proceedings which affect one’s credit for years. However, the bank review process can be lengthy and stressful, so be patient.

So if you are approved to short sell your Orange County home, who sets the sale price? Most often, the listing price is determined by the seller and their real estate agent with no bank involvement. However, the bank has final say in sale price by only accepting an offer it wants. Additionally, a bank can accept a new offer at any point in the home selling process, even already accepted another offer.

While many Orange County real estate agent and home sellers want to price the home at or above market value in an attempt to stay in the house without paying the mortgage for as long as possible, this is usually unwise. The banks are wise to these maneuvers and while they can delay foreclosure proceedings, it will only be for so long.

As one who has assisted many Orange County clients in short selling their home, I advise that we price the home based on the best estimate of the price that the bank is likely to approve. As touched on above, banks have a process for determining what sale price they will or will not approve on a short sale. You want your Orange County realtor to understand this process and price the property realistically and within a range that is likely to be accepted.

For a bank to accept a payoff of less than they are owed, it wants to make sure that it is not being taken advantage of by someone who just doesn’t want to pay their bills. The bank will look to see if it can achieve a better sale price through foreclosure and if it can, will likely not approve a low short sale price.
Many Orange County residents think that a short sale is a simple process that means they no longer have to pay their mortgage. While this is in part true (the bank cannot force the home owner to pay the monthly mortgage during the short sale), there are other taxes and costs associated with your home that you still must pay. Talk to an experienced Orange County realtor to learn more.

For more Orange County real estate news and happenings, follow Cheryl on Twitter @CherylSellsOC or check her on Facebook at CherylSellsOrangeCounty.

Cheryl Marquis has been an active and successful real estate agent in South Orange County, California for more than 25 years. As a TOP PRODUCER in her company, Cheryl has received the specific accreditation of a Certified Relocation Specialist (CRS) and Accredited Buyers Agent (ABR) and is a member of the Who’s Who of Luxury Real Estate, a select network of the world’s leading luxury home agents. Cheryl is a member of C.A.R. (California Association of Realtors), N.A.R. (National Association of Realtors) and O.C.A.R. (Orange County Association of Realtors). To talk to Cheryl about buying or selling a home in Orange County, call her at 949.683.1501 or visit her online at