Marie Episale, REALTOR, ePRO at Century 21 Crest Real Estate in Pompton Plains, NJ. I recently responded to a thread in a Real Estate Forum (Real Talk/RealTown) regarding the obvious under pricing of Short Sales by Licensed Realtors. There is enough confusion out there with Short Sales, Pre Foreclosures and Foreclosures, Bank owned properties, and other distressed properties. It is not OK to under price a listing. It is just not honest. The only exception that might exist is a sheriff sale date that is imminent, and a contract must be obtained to stop the sheriff sale. Pricing a home far below it's value is just plain wrong and misleading. It doesn't surprise me that the general public continues to think Realtors are dishonest. If a consumer sees a list price on a property, there is a reasonable expectation that the price is the range of value.
I believe listing a short sale at a price that is obviously way lower than any appraisal or BPO would come in at, is unfair to the buyers who are looking for homes. It is our professional obligation to do an accurate CMA and give a realistic range of value, and to list the property in that range. It is difficult enough for buyers to navigate through the available properties promoted on the internet for sale. When a buyer sees a list price on a short sale, they have a reasonable expectation that it is the price the seller (in this case subject to bank approval) should accept. How does this look to the general public? How do we explain to them with any accuracy why the home has that list price on it. Buyers get emotionally involved with thinking they can buy a house that they may not even be qualified to purchase. We are not helping the situation by pricing the property FAR BELOW market value, and I would hope we are capable of determining market value!
A recent example: A 5 Bedroom 3 Bath 2 Car Garage Colonial in northern NJ was/is listed for $99,000. That price is well over $100,000 lower than any BPO or appraisal would ever come in at, no matter how many repair problems there are. I am trying to help this family with 5 children find a home that can accommodate their large crew with a budget of $90,000 cash. The cash is from a settlement. It is all they have and they cannot get a mortgage at this time because of recent employment and credit problems. Seeing this particular home puts an "it's possible" picture in their mind of what they can have. It is not realistic. It is taking some real counseling and support on my part to help them get through the stages of "grief and loss" on not being able to have this home. Every home or listing they look at is compared mentally to this and other unrealistically priced homes (short sales). Their delayed recovery time before they purchase a realistically price home does not help them get happily moved and it does not help the general market recovery either.
In all fairness, I know that one of the reasons that Real Estate Agents do this is because they cannot get a price from the Bank/mortgage holder that would need to accept the short sale. The agent must submit a contract to the bank (along with other required paperwork) in order to "trigger" a a response from the Bank and get a price they will accept. It is only after a contract is submitted to the Bank that the bank will order a Broker Price Opinion (BPO) or an appraisal. Why is that? In my opinion, the bank should be required to evaluate their "asset" by determining market value through an appraisal or a BPO, and they should be required to do this "up front" as soon as the home owner is in default of their mortgage, and requests the banks cooperation with a short sale. Why is it that the mortgage holder does not want to give a value to their asset? It would be so much easier on the buying public and Real Estate Agents if house was listed at a price within the range suggested by the bank (with seller's approval, of course) - and that price range would be backed up by an appraisal or a BPO.
How can we, as Realtors, be part of the change to require Mortgage/ lien holders to provide the buying public with a realistic list price for the property? We are a strong group. How can we effect this change? In the meantime, I feel it is our professional obligation to be, at least, CLOSE to a reasonable market value when listing a property.
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