Short Sales

Posted by on Friday, January 29th, 2010 at 7:38pm.

Patience is the Secret to Short Sales

 

Do you know how a real estate Short Sale works? It happens to be the number one song on the real estate top 40 chart, but not everyone listens to real estate radio every day and so the topic of Short Sales is still new to many.

 

A Short Sale, in real estate, is when a property is worth less than what is owed to the bank. If the home is sold for current market value, then there will still be a debt owed to the bank, known as a deficiency after the sale. In order for the sale to proceed, the lender and all other lien holders will need to approve any offer that is made before the property can actually close. The work involved in getting approval for a short sale varies from bank to bank and from one bank rep to another, but it is always a substantial effort with the odds running against being successful.

 

For the seller, short sales can provide a substantial benefit. The seller’s credit report may read something like this: “Agreed settlement short of full payment,” which is much better than, “Property foreclosed.” However, for buyers the months of uncertainty are unbearable and many buyers will just walk away frustrated, usually to look at properties that are not tied to third party approval.

 

Because of this, I always discourage buyers from chasing Short Sales. I’ve heard the hype that a good Short Sale expert can find a buyer the deal of a lifetime. However, in truth this is rarely the case.  Trust me; banks are no more motivated to give you a good deal than any other seller. They don’t give properties away for less than they are worth – and the mere fact that a property is no longer worth what is owed does not qualify it as a bargain.

 

A loss to the bank also does not define a good deal for the buyer; it only means that the buyer probably paid market value on that property. That isn’t to say there are no good deals from Short Sales, but any property can be negotiated to be a good deal if the seller is willing and the buyer’s agent is skilled. It is much easier to work with a seller who is motivated to sell than it is working with a bank that is trying to hold down their loss.

 

The fact is, I’ve made creative deals for my buyer clients that rival any Short Sale out there. In most cases, there is simply too much good inventory to justify chasing a short sale. Too often they result in buyer clients that are bitter and unsatisfied after months of empty promises from overworked bank representatives.

 

Who needs that?


7 Responses to "Short Sales"

Jim Johnson,CRS wrote:
Great post Ken! I don't show short sales in the Bend Oregon real estate market. Too many good bank foreclosures for my clients to choose from.

Posted on Friday, March 26th, 2010 at 7:42am.

Ken Reetz wrote:
The new guidelines that take effect on April 5th show promise - knowing the lender's minimum price and the guaranteed acceptance within 10 days if the offer conforms.

I haven't studied this in depth and hope there aren't other factors to counter what appears to be, finally, a reasonable approach to get these properties off the inventory.

Do you know more about this?

Posted on Friday, March 26th, 2010 at 9:26am.

Maui Realtor wrote:
Unfortunately, too many buyers do not know what a short sale entails, yet they are convinced that it's the best way to get a good deal on a property. What I have found is that way too many buyers do not have the stomach to wait out the long process, the power of instant gratification is too great for many to resist. Great post.

Posted on Monday, April 5th, 2010 at 6:24pm.

Jim Johnson,CRS wrote:
I don't know a lot about the new guide lines but I think they are voluntary. I don't think it changes the fact that short sale lenders really don't have their act together. We'll see.

Posted on Monday, April 12th, 2010 at 8:09am.

Ken Reetz wrote:
Here is a link to explain more about the HAFA program:
http://www.realtor.org/government_affairs/short_sales_hafa

Signing on to the HAFA agreement is voluntary, but once under the agreement the guidelines are binding. The incentive to the lender is money offered to directly assist them in administration costs and to get rid of lesser lien holders.

Yes, lenders have been overwhelmed with short sales and are unable, or unwilling, to make the process go even relatively smooth. The "Equator" system is being implemented at B of A and it will be interesting to see how that helps. Equator gathers documents by direct upload instead of fax and keeps them organized - more about that here:
www.equator.com
www.dsnews.com/articles/equator-now-accepting-agent-initiated-short-sales-2010-01-28

We need to greatly reduce the short sale inventory and hopefully lenders will make it easier - up until now it's been a nightmare experience.

Thank you for contributing your thoughts.

Posted on Monday, April 12th, 2010 at 9:30am.

Brian Porter wrote:
I just had a rather frustrating experience with BOA and the Equator system. I found it to be very slow, and the buyer walked. A lot of work down the drain. On the other hand, I did close two short sale transactions in the past few months and they were both very good deals.

Posted on Monday, April 12th, 2010 at 5:11pm.

Ken Reetz wrote:
Guess I haven't been following this for over a year now. Short sales are getting easier - a lot easier. so much of that depends upon the listing agent and how prepared they are. At least the banks are moving things along at a better pace.

Posted on Monday, September 5th, 2011 at 9:22am.



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