Short Sales are more damaging than foreclosures? Says who?!

Real Estate Agent with eXp Realty

Short Sales are more damaging than foreclosures? Says who?!

I recently read a commentary from a Real Estate professional who's take on Short Short Sales or Foreclosures - which damages market more?Sales differs vastly from mine where he thinks Short Sales are more damaging then Foreclosures are to our local Real Estate Markets. I will also point out that I have closed on substantially more Short Sales just so you know my level of experience.  So what was discussed about Short Sales?

Most of the complaints that were issued by this commentator/Real Estate professional about selling your home as a Short Sale and their effects on local markets were that his complaints against the Short Sale Seller should have actually been issued against the Short Sale Realtor, as the issues prevalent could be virtually non existent had a trusted, experienced, skilled Short Sale Realtor been representing the distressed Seller. Here's what was discussed:

  • Stating that the distressed Seller isn't concerned about getting top dollar. Well they should be, and any Short Sale Seller that I represent our goal is to get top dollar which is based on fair market value. If you know Short Sales as a Short Sale Specialist would, they're not going to set an unrealistic low offer as they're well aware of the fact that the majority of distressed Seller's Lender(s) are not going to approve a Buyer's offer that is way off of fair market value. The Short Sale can be priced just like a Traditional home sale would be priced which is determined based on closed sales, pending sales, expired sales and active sales and it's up to the Short Sale Realtor to know how to place the Short Sale Seller's home on the market to generate a Buyer's offer and quite possibly multiple offers that will even increase the selling price while gaining Short Sale approval. It's not about throwing a low price at the wall and seeing what sticks. All fees and costs of the Short Sale transaction are scrutinized being taken into consideration and will always be kept to a minimum if the distressed Seller is being represented correctly. We all know how low sales prices can depress a local market.
  • Stating that Short Sale Sellers are just looking for extending the time that they can live at their home without making a mortgage payment; a mortgage payment that most Short Sale Sellers can't afford. If a Short Sale Seller is not making their mortgage payment then the foreclosure process has likely reared it's ugly head. If they're looking to live longer in their home they sure aren't interested in doing a Short Sale as a Short Sale will only give them a set amount of time until a Buyer's offer would come and then get approved by their Lender(s). So if they're just looking to stay longer in their homes then I wouldn't recommend a Short Sale as a foreclosure would likely do a better job for them if their goal is living free for longer.
  • Stating that the if they're going to Short Sell their home, then they'll probably not want to fix their home up to be in good condition. Did you know that a great majority of Short Sale homes do not need to be fixed up as is not always the case with homes that have been foreclosed upon. I can count on one hand the number of Short Sale Listings of mine that needed a lot of fixing up. I recommend all of my Short Sale Sellers to get their homes "sell ready" which is neat and sparkling clean.  How many foreclosures have you been in that have been trashed from a very unhappy homeowner?
  • Short Sale Sellers just aren't willing to cooperate such as not wanting to let prospective Buyers in to show their home. I've had only 1 Seller who we had an issue with this as the distressed Sellers had a non paying Tenant in the home who made showings very difficult. This is not the norm. When I have an initial Short Sale consultation with a distressed Seller I know whether or not they are motivated to move forward and if they're not, then we don't represent them with a Short Sale. The unmotivated Short Sale Seller becomes a foreclosed upon homeowner.
  • Delays of a Short Sale make it hard to sell. A Short Sale is not hard to sell to if you know what you're doing, if you have a system. There are delays, yes, but as long as everybody on board knows, going in, that you need to anticipate a 30-90 time frame then all is well, understood and accepted. Recent guidelines effective June 1st, however have gotten a push in to Lenders to get them to reply sooner; a good thing. Overall, time frames can be kept to a minimum with a Short Sale Specialist who is on the side of a distressed Seller.
  • Buyers don't want to buy a Short Sale. This is true of some Buyers who do not like Short Sale due to the additional time frame yet if they find a home of their dreams and know that the Seller is being well represented they are willing to wait. It's all about a Buyers expectations up front; making sure that all is clear and understood. How many Buyers are excited about buying a foreclosure dealing with multiple bids and being beat out time and time again by a cash Buyer.
  • Lastly, the concern of fraud with Short Sale Listings. Where is the massive fraud with Short Sales? The fraud with Short Sales are the deceptive individuals who try to take advantage of the distressed Seller either getting them to pay extra fees or in their lack of being properly represented to get their home sold to avoid foreclosure.  We all know about the fraud with foreclosures; particularly with the robo signing and what it did to the Real Estate Market.

So again, tell me why Short Sales are more damaging than Foreclosures? Perhaps what is most damaging to the Real Estate market in Short Sales is who is handling the Short Sale and this is not the result of a Short Sale. Foreclosures should be a last resort after a loan modification didn't work and a Short Sale didn't work. How can a Foreclosure be better for the neighborhood. Is the vote in yet?

Call me with our questions at 954-464-1100 or email me at: and also be sure to visit my website at You'll find a lot of answers to your questions at my Short Sale Web site and you'll also be able to listen to my many YouTube Short Sale Videos by visiting my YouTube channel too at: Lynn Pineda's YouTube Video Channel

I reside in Coral Springs Florida and assist homeowners in the Broward, Palm Beach and Dade Counties. Plus, I have associates that can help you if you live outside my general servicing area.

Just not sure if a Short Sale is your answer? Call me or email me now for a confidential free consultation. Know that I'd be glad to help, promises delivered.

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Whether you're Selling your home in Coral Springs or Buying your home in Coral Springs or other Southeast Florida cities from Boca Raton south to Miramar, I promise to be on your side working hard for you as your Coral Springs Realtor and South Florida Realor. Helping homeowners with Coral Springs Real Estate and the Real Estate in surrounding cities such as Coral Springs, Coconut Creek, Parkland, Plantation, Pembroke Pines, Margate, Miramar, Tamarac and Sunrise in Broward county to the cities of Boca Raton, Delray Beach and Boynton Beach in Palm Beach county. 

 As your dedicated Coral Springs Realtor, Short Sale Specialist, Keller Williams South Florida Real Estate Agent, Coral Springs Short Sale Realtor, South Florida Short Sale Realtor and CDPE Certified Distressed Property Expert, I'm ready to work hard for you.

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Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Denver Broker / Author / Advocate/Short Sale

Thanks, Lynn for this posting.  Since short sales are about 60% of my business, I do a lot of them, and they are NOT as bad as the foreclosure in the neighborhood and values.  We keep pretty good stats of the short sale vs foreclosure values, and foreclosures may bring 6-10% more LOSS to the bank, thus that same loss of value to the market.

Jun 05, 2012 07:10 AM #1
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Dan,  I agree with you and I was just blown away when I read this article on how damaging Short Sales are to local markets compared to foreclosures.

Jun 05, 2012 12:16 PM #2
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Although my strategy is to go as low as possible, rather than high and best, I believe both are equally damaging to the community. It's a choice between two evils.

Point 1 - Both have people involved who try to undervalue the property and people who try to maximize value. Your philosophy is a prime example in a short sale as so is mine. The same can be said of REOs. One agent tries to maximize profit by listing high with gradual reductions, another sets the price low and creates a bidding war.

Point 2 - Again, my clients maximize their free stay and yours don't. If we were to go down the foreclosure path, I am willing to bet that by the time the property gets foreclosed on and the hold over tenants evicted, the property would be on market longer than the average short sale where the owner is trying to extend their free stay.

Point 3 - Since when do bank owned foreclosures fix up their properties? I am shocked when they paint and carpet the place. Also, in a short sale, usually fixtures and other important items stay. In a foreclosure, the property usually gets stripped down.

Point 4 - He wins that argument. However I don't see how that plays a factor.

Point 5 - He wins that argument as well. However, our delays are before the foreclosure time line where the REO response from an asset manager is AFTER the foreclosure time line.

Point 6 - I believe you nailed it. Both short sales and REOs have negative feelings from the average buyers. However, a short sale buyer's agent, that knows what they are doing, can get their buyer's offer accepted by the seller in a multiple offer scenario even if their buyer's offer terms are less favorable than other offers. In a REO scenario, I don't see how that is possible.

Point 7 - I wouldn't call it "fraud" unless there is actual fraud involved, but I believe he is referring to the flipping or undervalued approvals in short sales. The same goes with REOs. They even have a term called "burning" that describes the practice of an REO agents selling the property cheap to make an instant profit and usually selling to an associated 3rd party who will, in turn, list with the agent or share in the profits.

So I conclude you are both right. The real solution is deed in lieu. Homeowner, you are unable or unwilling to continue your contractual obligation, then please surrender your rights to title before the bank has to take action to gain title. ;)


Jun 06, 2012 05:49 AM #3
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Hi Satar, yes, I do agree that Short Sales are damaging to the market yet to say that they're more damaging I don't agree for the reasons I differed with the commentator.

I'm not sure I understand how your clients are able to stay longer than mine? Like I said, my Short Sale Sellers cooperate so I don't agree that most Short Sale Sellers don't cooperate as that is not the norm and we're talking about overall scenarios.

Jun 06, 2012 08:19 AM #4
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

I meant that I let the sellers stay as long as possible if that is their goal before I submit a short sale package. In my state, it takes 8 months to foreclose. So I submit the short sale package on month 7 if they are trying to stay in the home as long as possible. So, the first 5 - 6 months, showings are discouraged.

Jun 06, 2012 10:13 AM #5
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