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So You Still Think Short Sales are the Way to Go....REALLY!???

As my old Quantitative Methods of Analysis professor at Towson University, Doc Slevin, used to tell us, "Numbers will NOT lie!" The methods we use to analyze the data can be twisted and contorted to our liking and perspective - just look at any Politician campaigning about the economy. They will spit out figures as though they told the entire story. We ALL know that's not true.

Having said that, however, I am finding a really hard time coming to any conclusion but that Short Sales are NOT what you, the consumer, may have assumed them to be. After analyzing the data, they are not the "chance of a lifetime" or "golden deal" many home buyers today seem to think they are. Without making mention of the many, many pitfalls that plague any short sale transaction, how about just looking at the numbers and drawing your own conclusions.

I had decided to analyze one zip code in Prince William County (22193 - Dale City, Woodbridge) to see how many homes had sold as Foreclosure, REO Property, or HUD Owned homes since September 1, 2008. Keeping in mind that this list isn't inclusive of all foreclosure sales because not all listing agents enter the data appropriately in our MRIS system (MLS), we will use the same criteria for short sales or potential short sales.

Here is what I found:

Of the 90 Homes Sold in Foreclosure since September 1, 2008 in Zip Code 22193, 43% or 39 were previous Short Sales. That simply means that 57% of the previous owners of these foreclosure listings took no preventative measures to avoid foreclosure.

Of the previous Short Sales, the Average Low List Price for a Short Sale was 33.1% MORE than Actual Net Sold Price for the Foreclosure!

Of the Short Sales that were listed, ZERO sold in the same time frame...in fact, ZERO sold in Zip Code 22193 in ALL OF 2008!

So, are you still sure a short sale is the way to go? Numbers don't lie!

Irene Morales Ward, Northern Virginia Real Estate

Posted by Irene Morales Ward, Realtor, ABR, e-Pro Northern Virginia Real Estate on 10/22/2008 10:18 AM

Comments (16)

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16 Comments on So You Still Think Short Sales are the Way to Go....REALLY!???

OCT

2008

Irene - We are seeing the same "statistics" across the river in Montgomery County. The Short Sale mantra is almost turning into an "Urban Legand".

Everybody has a friend or relative or coworker that got a great deal , but I don't know what Realtors were conducting the transaction. They didn't come from my office !

Laura - That's TOO funny! :-) I think they are a figment of "someone's" very vivid imagination!

Well this is interesting. There is an agent in my office who listed and closed one in 22193. He labels his as pre-foreclosure instead of short sale. Isn't finding data in the MLS so much fun? I did list and close one in Dumfries :-)

Irene- I just commented on another post about the evil short sales. I believe they are nothing but a headache and I try to advise clients to wait it out until the property goes into foreclosure. The short sales in my area just don't materialize into solds.

Short sales are SUCH A HASSLE.

Interesting! I would greatly prefer to work with a foreclosure than a short sale. I have had good luck getting repairs made on foreclosures; short sales are a greater hassle and the chance of getting repairs are pretty much nonexistent.

Irene - Short sales were the topic of my lunch conversation today... NO ONE LIKES THEM! We did a survey in our office only 17% of the short sales that the agents have been involved in have closed... I'm sorry that just bites!

I would be with the buyers waiting on the sidelines until the possible short sale rolls into the banks vault as a foreclosure. I'm with you! I do not see what most agents see in them. I will not list one, and I will not sell one unless I have a guarantee of reasonable compensation.

Cindy - My disclaimer in the blog specifies listing agent probability of error. I used REO Property, HUD Owned, or Foreclosure for the foreclosure list (in Current Financing) and then went a step further with the Short Sales and used Subject to Potential Short Sale in Disclosures, Subject to 3rd Party Approval in Contract Info, Preforeclosure in Current Financing and even went as far as to add specific language found on a regular basis in remarks - short sale, 50/50, third party, 3rd party, etc. Nothing came up but then you know how reliable some of the agent input is. I still think it's not even close to worth the hassle when you consider that the foreclosure price will ultimately be lower. Just my opinion, though.

Lori - I watch the markets carefully and I haven't seen them close consistently or in a timely fashion. I watch those that go under contract with a 3 or 4 month contingency for Lender Approval...What the heck is that!?

Erica - That's putting it mildly!

Susan - Amen to that! If i'm going to even consider showing a short sale there better be only one bank and the house better be in near perfect condition. Not to mention, the seller and listing agent better have all their ducks in a row or my client and I will go next door to the foreclosure that needs a little work and buy that one for 20% less!

Debbie - That was my guestimate - about 15% with 20% being on the high side. If it's more than that, then show me the data people!

Jim - The "reasonable compensation" is a source of contention with me. But my biggest gripe is the length of time my clients would have to wait in a typical scenario - and no one EVER knows until they get into it how long it will actually take. It just doesn't make good sense to me.

OCT

2008

I wrote an offer on a SS July 4th. We're still waiting to hear. They keep saying "we need other 30 days"

Erica - why am I not surprised?! Are your buyers looking for other properties and have they invested any money into the deal (EMD, inspections, etc)?

OCT

2008

Okay today was THE DEADLINE. Buyer gave several extensions. Seller signed his offer immediately. It's been in bank review since July. Today was the absolute deadline for Countrywide to reply. They did: at 4:54 pm. I am not kidding.

1. Doesn't that seem ridiculous? Come on.

2. They made a good, solid offer based on the market and what's valid NOW, not what's owed.

3. Countrywide made them start the title work process so we could provide a HUD-1! Buyer has invested money in this. Not much, but some.

We did make inspection period determinable on the bank's acceptance of the offer so no inspections were paid for thank god.

What a joke.

I've done short sales. I know how to do them. But these banks are just ridiculous.

Erica - Holy cow! That makes no sense and precisely why the banks do it - I'm convinced!

Even though short sales appear to be a useful, alternative form of a bailout for the distressed seller, the loss mitigators play roulette with the house like they're waiting for market correction.

OCT

2008

David - It sounds like you've been the victim of the power play going on with the loss mitigators handling WAY too many cases. This is a ridiculously long time for the market to take to adjust to the needs of the banking industry to increase staff and streamline these cases.

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