I list and close short sales on a very regular basis and have been doing so for years now. On occasion, I run into a short sale listing that is OVERPRICED. I have never truly understood this strategy, so I am curious how this has worked for other agents out there in the trenches. I "get" the "strategy" behind it...that agents are trying to prove to the bank that a higher price cannot be obtained, but I guess my question is, does it really work and do the banks really care??
I personally feel that the overpriced short sale listing is doomed from the start. Most agents are used to pricing homes near the top of the market and then gradually stepping the price down over time until they get an offer. To me, it seems to be an old game that is simply archaic and DOES NOT WORK in this market. I don't see a better way to assure that you are pretty much going to be part of the 86% of those who end up failing in their short sale attempt.
My experience has shown that the bottom line to the bank is the offer price compared to their perceived value of the property, which is a direct result of the BPO (Broker Price Opinion or "mini" appraisal). I have rarely (if ever) had the negotiator request the sales/listing history.
So, I see one potentially positive but several VERY negative aspects to this "strategy".
1. It's simply confusing to the buyer. No one, and I mean NO ONE, wants to or is willing to over pay for a distressed property in this market.
2. No buyer wants to go see an overpriced listing, especially a short sale. If the buyer's agent doesn't understand or explain the strategy, the listing may never be shown unless the buyer is extremely educated on short sales or extremely ignorant regarding the values in the area.
3. The first 30-60 days on market for a listing are crucial, even for short sales. The longer time on market, the less interest buyers will have in the listing.
4. As a buyer's agent I might pass this listing by. Once a short sale listing has been on the market for awhile, as an agent I immediately question if the listing already has an offer on it even though the listing still shows as active.
5. The BPO! The List price is absolutely a HUGE influence on the BPO. I personally complete BPO's on a semi-regular basis, and often they are ordered by the bank for a listing that is under contract as a short sale. I can tell you that if I feel the value is significantly different than the list price, the BPO company usually kicks the BPO back! Not to mention that the BPO agent's job is to determine value but also to justify the list price. This particular neighborhood is a "master planned community". There are new construction comps and comps in the active adult portion of the neighborhood that net a higher sales price. If there are higher comps that support the list price, and the BPO agent doesn't know the neighborhood and floorplans, they will be influenced and more than likely will use the higher comps.
6. Short sales are enough of a challenge as it is. Why make it more difficult? It can be hard enough to get a good offer on a short sale listing that is priced according to market, let alone above market.
After showing an "overpriced" short sale listing recently, I thought that I would double check with the the listing agents and confirm that this was the "strategy" they were using. I asked why the list price was not reflective of the comps, and here is their response:
"It's easy. What we are doing is initially listing the property on the higher end trying to demonstrate through our listing history we tried to get as much as we could for the home. We have set price reductions which will be occurring soon (Writer NOTE: This listing has been on the market for 30 days and has only been reduced by $5k). So even though the list price is 139k bring us an offer and we too will be using reasonable comps such as what you have found to support what the actual sale price will end up being. Hope this makes sense. Just bring us that offer."
As much as I might like to think so, I know I am not always right, and I always can improve my craft. So, are they doing their clients a disservice? Is this "Short Sale Strategy" simply out of date, and one that was used years ago but is no longer effective in the "year of the Short Sale"? Or is this a strategy that I should be considering?
Do NOT be foreclosed on! Avoid foreclosure. The Bank Pays us to Short Sell your Home.
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Jessica Sulliman & Randy Curnutt
602-677-7977
www.ShortSaleMyPhoenixHome.com
About the Author...
This article was provided by Jessica Sulliman, a Nationally recognized Realtor and Certified Short Sale & REO Specialist. Jessica can be reached via e-mail at jessica.sulliman@ashbyrealty.com by cell phone or text message at 602-677-7977. Jessica has helped thousands of people buy and sell their home. For Arizona real estate and homes see www.sunshinespecialists.com or www.jessicasshortsales.com. For more info regarding short selling your home, please visit www.shortsalemyphoenixhome.com.
Specializing in the following Metro Phoenix areas in Arizona: Queen Creek, Gilbert, Chandler, Mesa, Scottsdale, Apache Junction, Gold Canyon, Tempe, Florence, San Tan Valley, Coolidge, Casa Grande, Eloy, Maricopa, Ahwatukee.
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