Short Sales can be misleading...

By
Real Estate Agent with HomeSmart Real Estate

It is easy to get exited when one is looking for homes and sees a 3400 sq/ft home in a new urban area like Gilbert, Arizona built in 2004 listed at $299,000 with a huge yard and pool.  Keep in mind, this house originally sold for $575k.  You read the description and think it sounds perfect...it's advertised as a short sale, but surely you can put up with a little extra work and inconvenience if it will net you a smoking deal right?  My Grandmother, and probably yours too, used to say, "If it sounds too good to be true, then it probably is"....and once again my Grandmother is right.

Some agents are advertising short sales well below what is reasonable and what a bank will accept trying to create a bidding atmosphere.  They have no intention of getting an approval at the advertised price.  Most often these properties either sell for well over the advertised price or they end up at auction or as an approved bank-owned foreclosure. 

One year I got a two-paged typed Christmas list from my then nine year old.  Getting that good of a deal is pretty much the same idea...wishful thinking!

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Comments (8)

Paul Kaplan
The Paul Kaplan Group, Inc - Palm Springs, CA
Mid Century/Modern homes in Palm Springs - www.Pau

Very good point.  So many buyers waste so much time chasing after that pot at the end of the rainbow, called Short Sales.  We mostly concentrate on REOs/Bank Owned properties and don't deal with short sales because of your points mentioned above.  REOs still have their challenges, but I think the light at the end of the tunnel on an REO deal is a little brighter then a Short Sale.

www.RepoCaravan.net

Mar 07, 2008 11:29 AM
Jackie Cross
Real Living All Florida Realty - Port St Lucie, FL
How right you are.  unfortunately there seems to be no guidelines in our rules to stop this abuse.  One must depend on the personal ethics of the agent.
Mar 07, 2008 11:29 AM
Sheryl Kempfert
Stone Cottage Realty - Farmington, MN
I am so confused on how the local MLS boards allow that.  We have that happening here to and I know it is a violation of our MLS.  Would that not also fall under misrepresentation.  Sure sounds unethical to me.  Where are the real estate police???????
Mar 07, 2008 11:30 AM
Paul Kaplan
The Paul Kaplan Group, Inc - Palm Springs, CA
Mid Century/Modern homes in Palm Springs - www.Pau

Maybe its something the NAR needs to get involved with.  Basically, it is false advertising.  In the process it lowers neighborhood comps and appraisals unjustifiably.

 

Mar 07, 2008 11:36 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Tiffany,

I agree with you. People do stupid things either because they do not know better, or they are trying to play the system.  And if they do, their clients would suffer. However, what bothers me are some of the comments.

Why is such a need for a police, whether Real Estate, or any other? You get a situation where the house can't be  sold for what would allow the reapyment of the loan. So, with some other conditions there, you may try to help your clients by going the short sale route.

You do it to help your clients with their lives, not for your rules, appraisals, or any other statistical purposes. And, by the way, it does not really screw the apprasals, as the price is reduced in increments until the offer comes. Isn't it how the fair market is established? How far would you go to hurt your client in order to have  pinkier apprasals?

Why is that some of us can't live without nannies?

Mar 07, 2008 11:59 AM
Paul Kaplan
The Paul Kaplan Group, Inc - Palm Springs, CA
Mid Century/Modern homes in Palm Springs - www.Pau

Wow, Jon, you seem to miss the point.  It messes up an appraisal, because the appraiser looks at all active sales in the neighborhood.  If someone has priced their property ridiculously low as a short sale in order to stir up unjustifiable activity and an unrealistic price, then that is how it screws up an appraisal. 

How are short sales helping a seller by pricing a property at a price that a lender will never accept?  I think that only give them false hope.  It seems unethical to me. And that is why we do need governing agencies to police unethical practices that hurt the industry in general.

Mar 07, 2008 12:04 PM
Tiffany Cloud
HomeSmart Real Estate - Gilbert, AZ
I am not sure how you can police such a thing myself...I hope that as REALTORS we educate our buyers and sellers of all that is involved.  From a seller's perspective is there any benefit is selling short versus going into foreclosure?  As a buyer, we need to make them aware of the realities involved in working with banks.  Personally I would much rather work on a foreclosure than a short. 
Mar 07, 2008 02:20 PM
Anonymous
Mary

I used to sell Real Estate.  I'm currently trying to purchase a home and what I'm seeing is clearly unethical.  You have banks sitting on a lions share of real estate.  There are tons of it just sitting. Realty Trac said that 70% of foreclosed homes have not even hit the open market.   Of the bank owned properties that are out there, they are trickling it out, not even enough to meet demand.  At least not enough appropriately priced real estate in Mass.  

I just looked at a bank owned house.  It was like pulling teeth to look at it.  The listing agent, who works for an agency that has a majority of bank owned properties in this state, exaggerated the condition of the home to be uninhabitable.  Upon looking at this we discovered that to be untrue.   She called several developers to look at the property at the same time.  She reluctantly set up an appt with us and had no other showings with anyone but miraculously a slew of her developer clients trailed in behind us. 

When I put in a full price offer, mine was the only one on the table, she dragged her feet on submitting it and then told us she had multiple offers.  Then we had to put in best and highest driving up the price.  When I went on Realtor.com I noticed after I put my offer in she posted on the listing Put in your best and highest by 5pm 4/13.  An advertisement for more offers.  I'm sorry but this is clearly a matter of the bank controlling inventory by holding it back, Just like the oil companies are doing,  while realtors are manipulating market conditions using a full price offer as a spring board to create a feeding frenzy.  This is highly unethical and is most definitely contributes to overinflated real estate markets.

It needs to be heavily regulated because unfortunately neither the banks or the realtors have the ethics to keep things in check.  It is one of the major factors in the down fall of this economy.  I'm not saying all realtors are unethical but I will say in the office that I worked for, your looking at a solid 75%, and that is much too high.

Apr 15, 2010 04:05 AM
#8