After two similar discussions the past week, it would be wise to address how a short sale should be priced. After all, if the offer submitted to the lender is subject to approval and therefore not a certainty, all the more that the asking price is also a hypothesis.
It is. But, as educated guesses go, a good short sale broker’s list price is pretty educated. It takes into account comparable sales, competing listings, and, sometimes, the gut sense of a seasoned professional. You have to skate a nuanced line in some cases between what will get the phone to ring and what the lender will sign off on.
I have blogged before on the stress that a short sale can put on a home seller. They are typically in default, getting collection calls and letters from the bank, facing the steps up to a foreclosure, and often overwhelmed with distress. When one is under stress, it is natural to instinctively move to eliminate the source of the stress, so often sellers want to lower the price to get moving, and dramatically so. The problem is that if you lower the price to be the lowest asking price the neighborhood has seen in 5 years, you can foster too much skepticism from the lender and the offers you get might not be enough for the bank accept.
For example, if comparable sales put your homes estimated value at $400,000, it is irresponsible to whack the price to $320,000 just to get an offer and be done with it. You have to balance between what the buying public will respond to and what the lender will accept. And few homes sell in 10 or 20 days. It takes some time. Not all short sales tale a long time to find a buyer, but some can, and too many reductions too soon can sabotage your efforts.
The best (and really only) approach is to price the home aggressively based on comparable sales, and then review and reduce every 30 days unless market activity indicates something faster. But it is market activity, and not nerves or stress, that should source the price strategy.
J. Philip Faranda
New York Short Sale Team 
This is true! I don’t do short sales myself but I do a ton of BPOs. When you look at the history of a sold short sale, this is the strategy used – most of the time!
Hi Philip, I agree that it is irresponsible to low ball the price. It frustrates selling agents and their buyers. An usually in the end results in a counter offer from the short sale bank much higher than the original offer and closer to market value. One thing I have found that works well is in meeting the appraiser or agent working the BPO and bringing them comps to review. We as the local short sale agents, usually know the area better than an appraiser who comes in and is going to spend less than 10 minutes at the property. I wrote a similar article that i think compliments yours. http://www.scvshortsalecenter.com/valencia-short-sale-pricing-strategies/
Starting at a price point that is at the top of market value and making frequent price drops every few weeks is the worst way to get a short sale sold. Recently, I’ve discovered pricing at the low market value with price drops every 30-45 days seems to get more activity at each price reduction. Thanks for sharing.
Frank J. Helderle
St Louis, MO