Why is your list price so low on 0000 Swell Street. Don't you realize it is not a fair market value and it is hurting the values in the neighborhood?
Sweet - cruising emails and I see that from what I'll assume is a resident in a community where we just listed a short sale. Bad timing as I'm not in the mood....so a little education was in order. My response...
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Thanks for the note, I appreciate that there is someone to make contact like this. Obviously I cannot go into the complete circumstance regarding the conditions of this sale but will address the overall situation and price issue.
I’m a FNMA foreclosure appraiser as well as a broker; this is all I’ve done since leaving the Army in ’89 so I’m entrenched in this business and the chaos it has become. In addition to the sales side, I do about 40 foreclosure appraisals for FNMA every month. While you seem to imply that I’m tossing a grenade into the neighborhood, understand that once a homeowner begins to fall behind damage is likely to occur not only to them but to the surrounding homes.
If an owner is upside down and unable to pay the mortgage, what options do they have? We see primarily two; foreclosure or short sale. The idea of loan mods is great for public consumption but it is highly restrictive and filled with stipulations; they’re infrequent at best. Remember the golden rule – no bank will lose money. If an owner is paying, why would a lender want to modify a loan and reduce their income and payoff? The only reason is pressure from above and that pressure has been more for show than anything. And, if Mr. A gets a loan mod, why not Mr. B and Mr. C and …..banks consider load mods the very worst option which is why they are infrequent despite the publicity about them.
So what are the real world options and those that I see working the entire Atlanta market on a daily basis? An owner can strategically default – walk away and let the bank deal with the home. The owner can just stop paying and the lender will begin the foreclosure process which is non-judicial in GA so it tends to be relatively quick. How will those options help your neighborhood? Owners taking this route tend to let their homes go, abandon them and in many cases strip them.
Owners can tread water, dance with the lender for a bit; delay the inevitable. The only issue here is that lenders tend to turn a deaf ear to owners that are current; again, why talk to someone that’s not in apparent trouble? How do they know that the owner is really having difficulty and not just trying to cut the balance, rate and payment? How do you think this usually turns out?
The short sale option is no cure all but it often provides the best option there is. It’s a punishing process and will ruin the owner’s credit. The paperwork and process can take months and if multiple lenders are involved it’s exponentially complicated. It’s not unusual for the lenders to reject an otherwise almost completed deal; they can blow up at any point along the way. If and when that happens, foreclosure is the most common result.
In this case, the home has remained occupied and I think you would agree, exceptionally well maintained. I’ve seen more distressed homes than most; this home is in move in condition and shows absolutely no ill effects from the current situation. Having been in the community several times, I would suggest there are others that would benefit from work to get to the standard of this home. He understands the situation and his responsibility; you don’t see a U-Haul filled with appliances, HVAC system, water heater…..the owner is taking the least damaging course for both himself and the community.
As far as “fair market value”, please tell me what that might be. I’ve attached a print out of sales in the community since ’04. Since ’11 you’ll note four sales with an average sale price of 129K; three of the four sales were foreclosures. There are six homes that have expired ranging in price from 151,680 to 194,999; four of those are either short sales or bank owned – but note they have not sold. Given the average price over the last two years and the list prices of the expired homes, it’s easy to see why. It’s also going to be something to watch; what will become of those homes as the owners continue to struggle?
I also attached an Altos Research median price chart for your zip code. Note for both the market viewed as a whole and for the specific price range, median values have dropped about 22% since 7/09; after plunging prior to that. Given the amount of “normal” inventory in the area along with the distressed and shadow inventory, new homes and building lots, this downward trend is expected to continue in the area. I have several other data sources that I use to evaluate homes, but you should get the point.
So given this, 139,900 is not fair market value? Note as well that we’re not doing a first come first served, the lender is going to do their own research and if they are not convinced that they are getting less than market value then they will reject the offer. We have an offer, over list price in fact and the owner is working with a firm that specializes in work outs. The coop agent is also well versed in the distressed sale environment which is a major reason this offer was endorsed. None of this guarantees success of course, as logic cannot be applied to anything when lenders are concerned. I would however tell you that the buyers are very excited about the prospect of moving here and the community will benefit.
This home is very well maintained and is to hopefully gain an enthusiastic new owner. You should be grateful that the owner is responsible and trying to do the right thing, this is a long and arduous process and he’s using pros at every step to try and make the best of a bad situation. You could be looking at a vacant, vandalized home that would sell below market and ultimately ends up in the hands of an investor. Visit the foreclosure video section of my site if you’re curious as to what those tend to look like.
So thanks for the email. I appreciate the concern for the community, however it’s always best to check the facts prior to touching base with a provocative one line bomb like you sent to me. Your energy might be better invested in contacting the owners and agents of the expired listings, ask them why they are overpricing those homes and stigmatizing the community. Maybe the data you are now armed with will come in handy.
If you have any other questions, just ask; you know where to find me.
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