The Foreclosure and Short Sale Debate

Bryant, I have finally made it back to you, but, you will have to wait until tomorrow.  For me to appropriately respond to your comment, requires too much energy, for this late at night.  I have a showing appointment in the morning and will hopefully get back to responding on this post, tomorrow in the late afternoon.  Thank you and everyone for your patience.  Best wishes always.

Bryant, I am sorry to have taken so long to respond.  However, I doubt that either of us has changed our position.  I have posted statistics at comment #49, which clearly show that our markets are not very similar, at all.  I will still run an analysis of MY MARKET AREA after finishing with the remaining comments. 

As I have alluded to, in my recent comment to Christine at #69, when it comes to the impact of Short Sales, there is more than meets the eye. 

Here is a portion of that comment:  There are additional Short Sale factors that influence the other properties.  I am making the point, that the most significant damage to property values are these "FAIRYTALE" prices.  Buyers, sellers and agents are exposed to and influenced by those prices.  Even if that house NEVER SELLS, everyone else has been harmed, by it's presence on the market, over an extended period of time.  Place two or more SHORT SALES in the same tract and they will start lowering their list price, based upon what the other SHORT SALE is offering.  SHORT SALES are dragging down ALL prices with them.

As you stated, "The bulk of those equity sales are investors reselling after purchasing the distressed property and rehabbing it."  Investors are definitely involved in South Orange County, but, they do not make up the bulk of equity sales.  I suspect that our higher prices may be thinning the ranks, of would be investors.   FYI: In MY MARKET AREA, currently for JUNE 2011, "Distressed Sales" that have SOLD, account for 67% of ALL Attached Properties and 48% of ALL Detached Properties. 

I like your Short Sale Superstars website.  I believe it offers good advice, training and you are available for consultation.  You also offer to refer individuals to a qualified agent that will serve them best.  You provide lots of FREE content and I suspect that the videos are loaded with even more valuable insights.  Can I watch your videos for free?  (2nd request) 

I have checked out some of your recent posts and found them to be helpful and informative:  Common Questions About Florida Short Sales - Answered.  Even Tutas Towne Realty offers assistance and provides good explanations.  I have read the advice that you give others and

YOU are telling people the right thing to do:  Here is some of your advice on how to keep the buyers on board for the entire Short Sale Process:

Here are a few things I highly recommend: 

1. Take a large non-refundable deposit.
2. Make sure the buyer and their agent are fully aware of the process.
3. Negotiate enough time in the contract to get the short sale approved. We use a 90 to 120 days short sale contingency.
4. Be sure the Buyer is fully qualified or has cash ready to close within 30 days of Short Sale approval.
5. Have the inspections done early in the process. 

If I needed Short Sale assistance for a client, relative or friend, you would certainly be someone that I would contact.  However, I have still not changed my opinion regarding the impact of Short Sales.

Thank you again for commenting and I will post MY MARKET AREA results, at the end of this debate.   

Teri (#50), Thank you for your support, admiration and respect.  I will do my very best to continue to earn it.  I likewise see the real value in the comments, left by others.  Your comments at #43 gave us a cold hard look at what it was like going through the process, and coming out on the other side.  You are still putting it all behind you, while moving forward.  Thank you for commenting and best wishes always.  

Connie (#52), It is nice to finally reach your comment.  I feel like I am writing a post with each response.  But, I would rather take the additional time required, and hopefully people will still check back for my response to their comment. 

Once an appraiser, always an appraiser, and I mean that as a high compliment.  How appropriate that the judge sided with you, BECAUSE YOUR VALUE WAS RIGHT.  It has been a long time since I have heard of appraisers having to justify a price, significantly higher than a sale price.  And, the guilty party was THE LENDER.  What was their motivation?  Just to get it off the books or what? 

I have been doing some recent reading on a Short Sale Site, and it was mentioned that some lenders are very negotiable and lax with Short Sales, while others are not. 

Your other example is equally insightful, because it introduces a new and interesting price gap, to our debate.  The sale price is reflected lower, but, the lender agreed to carry a note for the difference.  For example: A $250,000 Short Sale closes and is recorded as a $250,000 sale.  But, if the lender holds a Promissory Note for an additional $30,000, it is the equivalent of a $280,000 sale.  Right?  If it was recorded as a $280,000 sale, wouldn't that be much better for the next sale? 

Your closing question is very valid.  Will the lender actually be able to collect on that Promissory Note? Probably not.  Why?  Because a little Promissory Note is nothing compared to a hard hitting Trust Deed, with the threat of Default and Foreclosure, that were just nullified by a Short Sale.   

Juli (#53), Please add 2 cents, 4 cents or even a dollar.  Just don't make me think as hard as I did with your mind teaser question, earlier today.

I agree that the issue of whether a property is a SHORT SALE, Foreclosure or a Standard Sale becomes a non-issue at some point, for lenders, agents, buyers and sellers.  It is NOT always pointed out that there are distinctions between the various TYPES of transactions.

Bryant can respond to your 2nd paragraph, since it was directed toward him.

Thank you Juli, I had forgotten that I wrote a post that got this Debate started.  I appreciate the fact that you have read all of the comments, and can still see the possibility, that one of my original points, may actually be correct.  That WE, as agents, are a very significant contributing factor, in driving down property values.  IF, we did what we do in normal markets, our focus would be on marketing our listings and not focused on when the next price reduction can be done.  

Thank you for taking the time to participate in this debate and best wishes always.

Laurie (#60), Thank you for returning to comment again on The Foreclosure and Short Sale Debate. 

We both agree that correctly priced listings may require price reductions.  This has always been and will always be a part of our competitive real estate market. In fact, we have seen our share of over-priced listings too.  The difference is that an overpriced listing does the most harm to itself.  Unlike, severely undervalued properties that drag down other properties in the area. 

In South Orange County, REO properties frequently sell above list price, because they are receiving so many offers.  They might receive 15 offers on a single listing and only consider the best 5 offers. 

The short sales that DO NOT SELL, are probably doing more harm that anything else.  The ones that don't sell give the statistical impression that a house listed a very low price didn't sell.  That becomes a comparable expired listing.  If there is no due diligence to investigate the reason it did not sell, it will negatively influence new listings coming on the market.  If they couldn't sell at the last list price, maybe the new listing should be lower. 

Thank you again and best wishes always.

Gloria (#61), Thank you for taking the time to comment on The Foreclosure and Short Sale Debate.  Your comment about the down time for some people is valid and a very good point. 

According to my primary lender, many of those individuals hit by a Short Sale on their credit report, can be eligible to purchase with FHA financing within 2-3 years.  Even those that have a Foreclosure and/or a Bankruptcy may actually end up better off, than when they started, after being out of the housing market for the required amount of time.  They may be able to purchase a much less expensive house, with a lower interest rate and as you say, To Start Over.  Thank youi again and best wishes always.

Anne, It is always difficult to keep the players in their place, and doing what they should and should not be doing.  The LENDER can not accept or counter any offer, as they are not the home owner.  They can only agree or disagree to discount the loan amount, in order to allow a transaction to proceed and conclude.  There are many things that derail a Short Sale, but, probably nothing does more harm to value than not considering ANY AND ALL OFFERS. 

Since a Short Sale is NOT an agreed method to resolve a loan default ( as per the TRUST DEED), if the house does not sell prior to 120 days (normal time frame) given in the Foreclosure process, it becomes the property and concern of the lender.  That is what the note says will happen.  The house is the collateral for the loan.  

Only experienced agents should be representing sellers that are distressed and/or in default. That is why I feel that fewer agents should be involved with these types of transactions.  There are risks for the sellers, and many risks for the agents that are representing that type of seller.  An experienced agent would NOT be listing a distressed sale to get the "Highest Price".  Just "Fair Market Price" for that type of sale.  Listing any property at far below market value is going to cause harm to the surrounding homes, that are attempting to sell.  

All real estate activity is based upon locality.  We do not have a 4 year supply of homes in Orange County, CA.  If I were to select a specific area, in a particular price range (especially upper end), I can find long Days On Market results.  However, your market is different than my market.  Our opinions are based upon the activity in OUR MARKET. 

We often do what is required, not because we like what we must do.  I agree that a lot of damage is indeed being done and we are ALL affected in different ways.  You have presented some excellent points in this debate and I appreciate your participation.  Thank you and best wishes.

Juli, Your suggestion makes far too much sense, to ever be implemented.  It is like asking a car dealership to put the actual price on the windshield of a car.  What a crazy concept.  The car dealers could never do it, they get too much mileage from great lines like, "What can you afford?",  "How much do you want your payment to be?" and "What price would I have to give you, to get you to drive this car home today?".  But seriously, that would make it much better by saving time and a great deal of effort, by a lot of people working on something that will NEVER go together.

"Why do potential homebuyers think they should be able to "throw the numbers against the wall and hope it sticks", Because some agents, lenders, buyers and sellers add so much glue to the mess, that some of them actually do stick.  Then, they get thrown in to the mix and start bringing values down.

Thank you for returning to The Foreclosure and Short Sale Debate.  I appreciate each of your comments and best wishes always.

John, Thank you for commenting and I will look to seeing more of you, after you complete your Broker's exam.  As I have told you before, if I can do it, you can do it.  Best wishes always.

Aida, I am very glad that you are feeling better and I appreciate that you have RE-BLOGGED this post.  The fact that YOU, and so many others, do disagree is what adds value to The Foreclosure and Short Sale Debate.  I disagree with many of my friends on many issues, yet we continue to be friends.  If I did not seek and desire opposing opinions, I would never have called this a debate. 

I have seen your later comment and when you have written your related post to challenge my position taken on this post, I will be more than prepared to respond.  In fact, I am looking forward to responding and hope that you are able to generate as much interest in that post, as I have on this one.  Obviously, people have strong opinions about this topic and I am always interested in hearing the opinions of others.  I am even willing to change MY Opinion, if convinced by debate.  At this time, MY ORIGINAL OPINION is still the same.  Thank you again for everything and best wishes always.

Tim, Thank you for taking the time to comment on The Foreclosure and Short Sale Debate.  Best wishes always.

Chris, You have described the slippery slope and once a slide begins to gain momentum, our ability to slow it down and stop, becomes very, very difficult.  Thank you for commenting and best wishes always.

Aida,

You wrote:  "Even though that comment is well written...it's WRONG!"

Attaching my comments and saying they are wrong is not good enough.  YOU must demonstrate to me why they are wrong.  I am not easily convinced.

You wrote:  "Short sales are dragging down all prices"  WTH!... and foreclosures are not?"

Yes, Foreclosures are too.  But, I believe that Short Sales have had a negative influence, even on the pricing of Foreclosures.  Look at these results for YOUR MARKET that YOU recently posted:

I agree that the market has been correcting itself, and now, just like with our current loan status, we are over-correcting.  Because the qualifying guidelines were so loose before, now the lenders have much tighter standards for borrowers.  I am not so certain that WE can blame the lenders for driving up the prices, without holding ourselves and the sellers more responsible.  The lenders were accommodating the prices that WE marketed, by granting the loans.  There is plenty of blame to go around.  I agree with you, Lenders ARE GREEDY.

You make a good point about homes becoming ATMs.  When I got my license in 1986, a home was a home, not a source of cash.  I remember relocation buyers commenting about being happy by breaking even, when they sold their house.  Buyers do need to be realistic regarding the price of their home, if they want to sell.  I am only against obviously BELOW FAIR MARKET VALUE PRICING, based upon the condition of the house and circumstances of the seller.  This has previously been called "FAIRYTALE" prices by another member.   

You wrote: ..."the ideal way to market a property does NOT include rapid and major price reductions  Again....WTH!"

There is a big difference between MARKETING a property and DISPOSING of a property.  Price reductions have always been and will always be, an important an appropriate step in MARKETING a property.  When the marketing plan is to SYSTEMATICALLY, DRASTICALLY AND RAPIDLY DROP THE PRICE, without making the appropriate efforts to advertise, publicize and expose the property in the same manner as an equity seller, we are attempting to DISPOSE of the property.  These types of transactions are causing great harm to the property values of all other homeowners.

You wrote: "Don't get me wrong.....I hate short sales too....but I'm a Realtor who is providing a service to my client.  If my client needs to sell, whether it's a regular/standard or short sale or probate...I will provide that service.....I didn't make this market and I don't set the price....I PROVIDE A SERVICE FOR WHICH I GET PAID!"

As Real Estate Agents and Brokers, we are all professionals.  We do what is required to serve those clients that we agree to work with.  We do NOT have to do Short Sales, but many do, because it provides a good source of income, at a time, when income is harder to find.  When the market becomes upbeat, fewer agents will be doing Short Sales.  In the meantime, you are providing a service for clients with a specific need and I wish you the best of success.

What YOU and I have, is a difference of opinion, but,  I respect your opinion and appreciate that you were willing to state it with such passion.  The topic of Foreclosures and Short Sales is very serious and most people will have a strong opinion.  Not everyone is willing to talk about it and certainly not write about.  I appreciate your participation in The Foreclosure and Short Sale Debate and sincerely wish you continued success.  Thank you and best wishes always.

Virginia, Thank you for thinking of me for being a source of entertainment.  As you know, I usually am.  I appreciate how cleverly you placed yourself safely within both sides of this debate, and then smoothly asked, HOW Can That Be?

You explained it beautifully and accurately stated that, REAL ESTATE IS LOCAL.  We all operate under different conditions and the success and failure of our business is often determined by what we do and how we do it.  Doing the same thing, the same way, in two different places may not bring the same result.

No one expects you to dig up facts, during your break, to support your claim that Short Sales sell for less than Foreclosures, IN YOUR AREA.  I believe you.  In fact, it is very likely that many areas will find this to be the case.  Yet, in some areas, due to differing market conditions and the mix of transactions, it may be the opposite.  

In regards to your comment, "For the record:  In Nevada, a short sale transaction is a contract between buyer and seller, contingent upon the seller's lender's agreement to a short sale payoff and terms.  When a seller has an agreement with a buyer, a contract, the seller cannot send any other offers to his bank.  That would/could be considerered interference of contract.  The first buyer (in contract) could sue the seller, the seller's bank, the seller's agent for interference of contract.  You cannot submit ALL offers."  I appreciate that you have shared that information.  This type of restriction does not enhance our ability to bring forth the best offer, just an offer.  I have thoughts about how this could and should be done, but, no one has bothered to seek out my suggestion.

I appreciate your willingness to have me not respond to your comment, due to my delay in responding to others, as always, you are a giver.  I have therefore, shortened the length of this response.  Thank you for sharing and best wishes always. 

Mission Viejo Help (#85), Thank you for taking the time to comment on THE FORECLOSURE AND SHORT SALE DEBATE. Here is my response to your statements, comments and opinions:

"richard yates your a big fat turd. sorry but its true." 

This has been a respectful debate about a serious topic, which I fully expected would attract individuals, like you, that have strong emotional feelings.  However, YOU are the only person that has personally called me a big fat turd, or any rude or inappropriate name.  You are entitled to your opinion, however, I completely disagree.  Since this is a DEBATE, feel free to provide me with verifiable evidence of your claim, and I will be glad to respond to you assertion, that I am a BIG FAT TURD.     

"u want opinions ill give u opinions. " 

Yes, I have encouraged EVERYONE to share their opinions, no matter how different they are, to the opinions that I have presented on this post.  THIS IS A DEBATE.  MY FIRST DEBATE.  Without hearing opposing opinions, it would be a worthless DEBATE. 

"u DID recommend an adjustible loan and u DID try to profit. u wanted to make money off me and many others like me and my family." 

I don't know who you are.  I will assume that you are referring to me as a Real Estate Agent, in general.  Yes, many agents and lenders recommended adjustable rate loans.  In fact, I HAVE AN ADJUSTABLE RATE LOAN.  It was fixed for the first 5 years at 4.5%.  The first adjustment reduced my interest rate to 3.5% and lowered my payment by hundreds of dollars. The 2nd adjustment lowered my rate again, to 3% and lowered my payment.  I assume that you do not have the same adjustable rate loan that I do, or you would be glad that you have it.  As a Real Estate agent, I represent buyers and sellers.  I do not process loans or collect loan fees.  If you are suggesting that I want to make money off you and others by representing you, as your agent in a Real Estate Transaction, YES, that is exactly how WE make our money.

"u say u dont do short sales but u will make profit off a referral, yes???? and ur bio says u do short sales. how honest is that??? and u slam people in ur own office who do short sales. make up ur mind!!! r they good? r they bad? do u like them? do u not like them? do u make money off them?" 

At this time, I have not done a single SHORT SALE and I have been a Real Estate Agent since 1986.  I offer a Win/Win/Win Referral Program for all types of referrals.  If I connect with a prospect and complete the initial interview, advise them of their options, and WE determine that their best option is to do a SHORT SALE,  I will refer them to an agent that is qualified to do SHORT SALES. 

I have more confidence in MY ABILITY to listen, interview, explain and educate a prospect about ALL of their options, than any other agent.  If their best option is to attempt a SHORT SALE, I will refer them to an agent that I trust and has significant experience with the SHORT SALE PROCESS.  I attended a training class to receive my SHORT SALES & FORECLOSURE RESOURCE Certification (SFR), to become more knowledgeable, not for the purpose of doing SHORT SALES.  I believe that my bio (MY Profile) offers assistance, and provides a helpful link, Making Home Affordable, which allows anyone to check out their options.  If they require personal assistance, I ask them to contact me. If they contact me, I will interview them and WE will decide how to proceed.  If OUR determination is for them to try to complete a SHORT SALE, I will refer them and THEY will know it.  I do NOT slam anyone in my office for doing SHORT SALES, it is a personal choice.  I choose not to do SHORT SALES.  While SHORT SALES may help the individual, I personally believe that the overall impact of ALL SHORT SALES is detrimental to the property values of all other homes.  That is my opinion, and you are entitled to your opinion.  At this time, I have NOT made any money off of SHORT SALES.  Would I accept a referral fee from another agent that successfully completes a SHORT SALE, for a prospect that I referred?  YES.  Referrals are another way that Real Estate agents earn money.  

"u sure tried to take advantage before, didn't u? u give agents a slimy rep. maybe i should let karen fiddler help me. she said on her blog she helps people like me. but i dont know if anyone of u can be trusted. u realtors are always patting each other on the back on this site. what gives? such a turn off! get real sir! if ur honest, u wont delete this."

You have judged me, labeled me and slandered me, without knowing me.  Likewise, you question the trustworthiness of ALL Realtors.  When in fact, Realtors are the most trustworthy and well intentioned group of people that I know.  Those that pat each other on the back, are the ones that understand what it is like, to be a Realtor.  What may be a turn off to you, is a turn on for me and over 200,000+ members of Active Rain.  Not everything that we do is appreciated, and WE are often the first to be blamed.  Realtors support other Realtors because we understand the business, speak the same language, have common interests and have had similar experiences.  We need an occasional pat on the back and it is always appreciated.       

You can choose any agent that you wish to represent you, or choose to do it yourself. 

Although, your tone and accusations were unappreciated, I recognize that MY TONE and MY OPINIONS on The Foreclosure and Short Sale Debate, may not have been appreciated, by some people either. We can both do better, and improve upon how to better make our points and to present our arguments.  I will try to do better.  As you can see, I have not deleted your comment.  I wrote a post about it: What do you do when someone calls you a Big Fat Turd?  I Write A Post.  In fact, this response will also become a post. 

I appreciate that you have taken the time to read this post and have obviously checked me out on MY PROFILE.  Hopefully, you are a Subscriber and will find some of my other topics to be more enjoyable.  I write about a wide variety of topics, including a series called, FREE ADVICE, 50% OFF, TODAY ONLY.  BUT, be sure to read the "WARNING" paragraph, before reading the entire post.  As I mentioned, I really do write about a wide variety of different topics.   

Thank you again and BEST WISHES ALWAYS. 

Paul, In many ways, Short Sales and Foreclosures sound appealing to buyers, but, only a small percentage of agents can actually tolerate the pain and suffering, that may be required to complete the sale.  Thank you for commenting and best wishes.