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Are You Ready To Become A Phoenix Short Sale Buyer?

By Gordon Baker

Real Estate Agent with Re/Max Alliance Group

October 02, 2009 01:59 PM

Short Sales are here to stay-for a while!

Short sales were once a rare and infrequent transaction that everyone tolerated. Now they make up a significant portion of the sales in the Phoenix market. .

Simply put, a short sale is when the proceeds from the sale are less than the amount owed and the sale is contingent upon an acceptable agreement between the seller and the seller’s creditor(s).

The Cromford Report chart to the right shows the percentage of distressed sales for each city for August 2009. The blue bars represent the portion of total sales that were short sales. As banks are increasingly reluctant to foreclose, short sales are on the rise. In Fountain Hills, the percentage of closed short sales in August matched the bank owned sales. And in Anthem, short sales accounted for more sales than bank-owned homes during August.

That's an incredible price!

Banks will not initiate the short sale process until they have a contract. To get the ball rolling, short sales may start out with an aggresive price or go through periodic price reductions very quickly. Buyers see this and are amazed that a house could sell for so little. The caveat is that the listing price has NOT been approved by the bank and that aggresive list price is the enticement to receive an offer that the listing agent can present. During the process, the bank requests an analysis of market value through a BPO (Broker Price Opinion) and then compares the offer price to the market value from the BPO. If it falls too far out of range, you can expect a counter offer after waiting for 2 – 3 months believing that you are getting the deal of the century.

Is it available or not?

A major point of frustration can be the mechanics of searching for a short sale. On sites such as Realtor.com the house may show as active, but in reality the short sale has an accepted offer that has been signed by the seller and forwarded to the bank for consideration. Once an offer is received on a short sale, the MLS status should be changed to AWC, Active With Contingency. The problem is that many real estate portals do not recognize the AWC status and continue to show the property as Active or available. The simple solution is to contact a Realtor to help you identify which properties are truly available. The good news is that some websites are beginning to identify short sales that have contingent offers.

Do You Have What It Take To Be A Short Sale Buyer?

Short sale buyers must go into the transaction with a great amount of patience and understand how frustrating and illogical the process will be. If you have a defined time table for finding a house, a short sale will most likely cause extreme stress, premature gray, potential marital strife, and frequent trips to Walgreens for extra Tylenol. I am not kidding! Yes, you will hear about the short sale that closed in a matter of weeks, but don’t count on that. You must be flexible on the closing and constantly updating the lender since you’ll wait for 3 – 4 months and then all of a sudden the bank will require you to close in 3 weeks.

Is It Worth All Of This?

You might wonder why anyone would pursue a short sale property. A good example is a house that closed 2 days ago that a family of four relocating from Wisconsin purchased in the east valley. After months of looking and a couple transactions that fell apart due to appraisals and unrealistic sellers, a short sale in south Gilbert caught their eye that could not be matched. Their patience paid off and they closed on the best house on the market in their opinion and mine after waiting over 3 months. Properly negotiated, short sales can offer significant savings to the patient and flexible buyer.