The very mention of a home listing being a SHORT SALE is enough to send many real estate agents running away screaming. Many agents advise their buyers to NOT buy a short sale listing or sometimes they say they will not even work with someone if they insist on offering on a short sale.
First, as a listing agent that takes a lot of short sale properties, sometimes the buyer's agent isn't in totally unfounded territory. MANY agents that take short sale listings are NOT short sale agents! I saw an agent that had over 20 short sale listings and yet a quick survey of that agent's closings over the last 3 years showed that he had not CLOSED even one short sale! That's one that even I would tell a buyer to stay away from as it has virtually ZERO chance of ever closing! However, if the agent knows what they are doing, a short sale can and DOES close (I've closed a lot of short sales and have failed to get a short sale listing closed only once in the last 5 years!)
That's really not where I wanted to go with this post though. I got to thinking about short sales, foreclosures and how it is percieved by the agents showing the houses!
1. Because of the slow processing time of most banks for sellers requesting short sales, showings are often limited...This limited amount of showing exposure leads to less competitive offers or fewer people wanting the home while it is a short sale.
2. A short sale buyer will often pay MORE for a short sale than they will for a FORECLOSURE. WHY? Because most buyer's and buyer's agents are aware that there is a home seller involved in the short sale process. For instance, the short sale that I was unable to get bank approval on was listed at $130,000. We had an offer for $125,000 and the bank rejected the offer over $2400. The property was forclosed and listed for $119,000. So the bank rejected an offer and have it LISTED for sale $3600 less than they would have gotten by accepting the short sale offer. In addition, the bank has to pay holding costs for an additional 5 months, totalling just over $2500 (that's additional taxes and HOA dues that won't go away). They also had to pay for the cost of going through the foreclosure process...with attorney fees et al, that's usually in the $15,000 range. So, because the offer was $2400 short of what the bank wanted, they will sell the house at approximately $18,000 less than the short sale offer.
In another example recently, We had an offer on a property at $220,000. The bank insisted after multiple BPO's that the value was $260,000 and would not budge from that number...the buyer's walked away and the bank foreclosed. List price after foreclosure? $199,000 when we had an offer on the table for 220,000! OUCH!
3. When the bank forecloses on the property, the house has been marketed already for 3-6 months as a short sale. When ANY home sits for 3-6 months on the market, what do most buyers assume about the house? "THERE IS SOMETHING WRONG WITH THAT HOUSE OR IT WOULD HAVE SOLD". Yeah, we talk to sellers all the time about how overpricing can lead to lengthy times on the market and "STIGMA" that goes with just sitting. It may not be a REAL stigma but it is certainly perceived!
4. Banks get a reputation for being "difficult to deal with". One doesn't need to talk to many short sale agents to hear that Bank of America is at the bottom of the list of banks we want to deal with. BOA went to the Equator system and things seemed to have gotten worse! In the meantime, many agents see that terrible turn around time extend even to foreclosure properties making that many more potential buyers hesitant to put offers in. Lately I have been SHOCKED by a Wells Fargo Short sale that was approved in 48 hours and they also pre-approved the LIST price!
5. Decreased showings as a short sale OR as a foreclosure HURT the bank trying to sell the home. It costs them at the bottom line because less competition HURTS their market. The more people that see a house, the more that MAY potentially want the house...the opposite is true as well.
I know many agents that will not take a short sale listing. Me? I'm ok with them but know that each one is going to be a battle. It doesn't have to be that way if the bank would look at the process as something that can actually BENEFIT them rather than the way many of the negotiators I have talked with look at it, as if they are doing the seller or buyer a favor. If it's all about "the bottom line" as many negotiators have told, they would be wise to not only look at the bottom line but the "big picture" as well!