A Short Sale is worth less than any other house in the same neighborhood.
It may sound like a bold statement but its simple supply and demand economics
What is a short sale? A short sale is an attempt by a seller to get
the bank/lien-holder to accept less than they owe on the home and
still settle the mortgage. Its a simple idea. I owe $100K but my house
is only worth $75. I ask the bank to take the $75 now instead of
spending $10K – $30K Foreclosing on me. The bank saves a ton of money
and time. The bad loan is off their books quickly and everyone is a
But there are problems. And they are so big it’s like the house is
marked with a Scarlet S! – Most banks make the short sale process so difficult and time
consuming that a buyer wont stick around to close.
If there is more than one bank involved it multiplies the issues. A
SHORT short sale process is 3 months. Many go on for 9 or more months.
Usually in that time the buyer finds a Bigger Better Deal and moves on
– They get little buyer traffic. Realtors don’t like to show their
clients short sales. They hate them because they usually spend months
on a deal without getting paid a dime. Then their buyer finds
something else and they start all over again. – Most sellers are having financial problems so there have been months
or years of neglect. They do not have the money to pay their mortgage
so they are not not having their HVAC serviced or the Roof maintained.
Expect to pay for repairs and cleanup. Many banks will not lend on a
distressed home until some repairs are made. That means you may have
to come out of pocket before closing.
– Finally, many Realtors list Short Sale homes at unrealistically low
prices to elicit an offer. But the bank rarely agrees to the initial
list price. This is becoming more common because the banks wont tell
the owner what they will agree to so they just throw a low price out
there to stir up an offer. I have one client that offered over list
price on a Short Sale. Waited three months and then was told the bank
wanted $35K more than list. Ultimately this just frustrates the buyer
and most wont look at another short sale. Here is the real deal…
Because of the hassle factor, uncertainty of closing, long time lines,
lack of maintenance short sales are worth less than an identical home
on the general market.
There is a high supply and the headaches of the process push prices down.
Short sales are not for every buyer- but if you have cash and are
patient you can get a great deal! Barry Bevis, Broker/Realtor