The Topsy Turvy World of Short Sales

The real estate world in the last year or two has had several buzz words. They jump out at you from the headlines, they are the topic of conversation at cocktail parties, and everyone has an opinion about them…and a prediction.

Bubble certainly is one of them. Mortgage crisis is perhaps another. Buyer’s market comes to mind as well. But short sale, along with foreclosure, seem to be the words of the day, every day. It’s hard to find a buyer who does not ask about them, or does not express a desire to buy one. And in many markets, and particularly certain price ranges (below $500,000 in a number of towns in my area), you are hard pressed to find many homes for sale that are NOT short sales. The stories, the rumors, the hopes and expectations, and the disappointments and shattered dreams surrounding short sales are a telling commentary on the state of housing today.

Many buyers, because of financial status and high prices, have no choice but to try and acquire a home through the short sale process. And often the perspective is that these represent the best deal in our market. Today’s buyers claim “I want a deal.” And their behavior reflects this desire. But what is the reality?

Are short sales a deal?

Are they worth it?

And for the uninitiated…what about the myth that short sales are “short?”

I wrote an article about buying a short sale well over a year ago. And the on-going comments still today are a poignant testimony to the complexity, the frustrations, and the rumors that shroud the short sale market. What is particularly interesting is that particular post is taking on a life of its own, and becoming a repository of consumer experiences, and a treasure trove of information that may help those who are, willingly or not, involved in the topsy turvy world of short sales. Stop by and read a bit – you’ll find it informative, I promise.

Here’s what we know:

• The short sale process is unlike the typical real estate transaction in more ways than we can count. The banks are in control, but that does not mean the process will move along quickly, or smoothly, or predictably. Deadline dates on offer acceptances mean nothing it seems.
• Just because a short sale is listed at a “great” price does not mean that’s what you can acquire it for. A lower listing price generates multiple offers. And the bank’s appraisal or BPO (Broker Price Opinion) may or may not have much bearing on the asking price.
• Short sales almost never have only 1 offer – you WILL have competition (I know of one where there were 22 offers). After all, everyone wants a deal, don’t they?
• Short sales will always take longer than you expect or want, sort of a Murphy’s Law of short sales. And many (I don’t have numbers) never are concluded and end up as foreclosures, and then REOs.
• Waiting to make an offer on a short sale that has been on the market for a very long time may be a big mistake. Just because a home has been sitting there for 4 months with multiple price reductions does NOT mean you can delay. There is more buyer activity right now and the home you like might disappear (I can give you multiple examples in the last few months, where buyers have lost the opportunity to make an offer on the house they wanted).
• If you think you won’t get impatient or frustrated, or that things will be different in YOUR case, you are fooling yourself. This is true for buyer, sellers and agents alike. Stories abound of buyers who give up and move on to other transactions after waiting for weeks for a response from the bank…the REAL seller. And many sellers “accept offers” only to wait weeks for their lender to reach a decision, while they potentially get further into debt.
• Not being able to provide reliable information to buyers, or to give them status updates, and so on is a big source of frustration for buyer agents.
• Most short sales are being sold AS IS – some are in pretty nice shape, many are disasters with lots of deferred maintenance, disrepair, nonfunctional appliances (or missing ones) and much more. But sometimes you can negotiate some repairs, or price.

Here’s what we DON’T know:

• How long a short sale will take, and WHY it takes so long
• What it will sell for
• When it will all end

Hmmm, wonder what the next buzz word will be. And when? Any thoughts?