More on Short Sales!

Hi Everyone!

Well the short sale market is in session and there are a lot of buyers getting very frustrated. It seems no matter what I say, people are still listening to the media telling them to buy foreclosures or shortsales.

My goal is not to tell you to avoid shortsales like the plague, but to make sure you understand the negatives to the short sale.

First, based on last month sales, short sales are only about 3%-5% lower than regular sales. They are not really much of a bargain. Basically they are selling at market rate. Based on the amount of time involved and the frustration, that savings can quickly be lost.

So why am I so down on Short Sales. The biggest issue is that they are an unknown. I will point out the issues below:

1. In most cases the soonest you will hear if your offer was accepted is 45 days or more.

2. The listing price has nothing to do with the actual price that the bank will accept. The bank does not give Realtors a price that they will accept when the Realtor accepts the listing. The Bank will not give out a price until they have received offers.

3. Many people are offering the bank much lower than the listed price. The reality is, the bank will be selling that home at very close to market rate. They will do an appraisal on the property prior to accepting any offer.

4. While you are waiting for an answer on your offer, the listing remains active and the bank is usually receiving multiple offers.

5. When the bank finally does come back with an answer, there usually is no chance for a counter offer, they usually accept the best offer. (that is if any are acceptable at all)

6. The bank will usually turn down most offers that are asking them to pay anything toward closing costs.

7. The bank will usually not do any repairs on the property...they are mostly "as is" contracts.

8. The bank still may require the seller to sign a promissory note to pay the difference. So after all this time and even potentially at the closing table (read last months blog), the seller walked away from the deal and it fell apart after almost 6 months.

I don't know about you, but this is no way to buy a home!

Before I run off to a Real Estate Board of Directors meeting, I wanted to share a short sale experience from the selling side. An Agent in the office recently took a short sale listing. We talked with the bank and submitted all the sellers paperwork to the lender and then we waited. After a week and a half we finally got hold of someone at the bank and they told us it would be at least another month before it was assigned to a loan negotiator. Once assigned, it would most likely be another month or so before we are contacted by that loan negotiator. They also threw in that if we didn't answer the phone when they called, it could be another month before they got back to us. We are not allowed to contact the loan negotiator. By the way, this is just to see if the bank will accept the sellers request to do a short sale. Meanwhile, the property is listed and when we get offers, the buyers will be waiting several months to see if they will accept the seller doing a short sale, and then the buyers offer.

Point of this story. Short sales aren't just bad for buyers, they are also quite the pain for the seller. Ok, I have to run but please remember this information when you are out with your Realtor. Be prepared for the long haul if you want to buy a home through short sale. I have seen so many buyers get emotionally beat up over these things and I really feel bad, but there isn't anything I can do if you don't listen to me.

As always, if there is anything I can do for you, please don't hesitate to call or email me. My email is mitch@mitchrealty.com.

Have a great day!

Mitch