How the Northern Virginia Short Sale Market Has Changed from 2007-2013

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Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

How the Northern Virginia Short Sale Market Has Changed from 2007-2013

It's hard to believe that when agents in Northern Virginia started seeing Short Sales crop up in the MLS in 2007 that they thought they would be a short lived phenomenon.  It's been six years of Short Sales with no end in sight since they started to appear in our market.  And while they have decreased in overall market presence since 2007 to 2013, some other things have changed as well.

For starters, as a Short Sale Agent, I am here to tell you that banks are much easier to deal with than they were in 2007-2009.  Banks have beefed up their personnel and most, though not all, have streamlined their procedures for processing a Short Sale contract package for review.  It's still a tedious process in the fact that Sellers have to provide buckets of personal and financial information to the bank, but it's a lot less timely for the bank to review the contracts.

As the real estate market was depressed and overloaded with inventory at the outset of Short Sales in 2007, and for a few years after, the impression the general public had was that Short Sales and Foreclosures were killing market value.  It was market demand that was killing market value.  Too many homes listed and not enough buyers equals falling values.  So it felt like buyers were getting monster deals below market value because the banks were trying to unload their inventory.  Yes and no.  Market value BECAME what those buyers paid and it continued to fall until values started to stabilize in 2010.  And when it came to facing the harsh reality of falling market values, banks were much quicker to deal with it than home owners struggling to get every penny from their home.  The banks had no emotional attachment and were quick to lower prices and be among the first sold.

The last couple years have seen increased buyer demand and rising prices.  And Short Sale Banks are not letting that market pass them by.  While there are fewer properties to meet buyer demand, we often see Short Sale Banks countering low list prices from agents not well versed in exactly HOW a Short Sale Bank deems whether an offer is solid or not.  They have, and always will, look to their BPO or appraisal that shows current market value.  Not value of just Short Sales and Foreclosures, but the homes most like the one they have a contract to sell, be they regular sales or not.  And since market values are rising, so are the prices of Short Sales.

So if you see a deal on a Short Sale listing that seems to good to be true when compared with recent sales, it probably is.  The chances the bank will counter an unrealistically low list price that was chosen by the Seller and Listing Agent are high.  Just like any other sale, Short Sale Banks are not likely to leave any money on the table.

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Rainmaker
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Nancy Conner
Olympia, WA
Olympia/Thurston County WA

Isn't it amazing to think back about the first short sales that began appearing and then the contrast to what we are seeing now?  I remember the first ones in our market almost always failed because very few people had figured out quite how to deal with them successfully.  The sheer number of short sale listings here has declined dramatically - and now they actually do close the majority of the time!  (Still will be glad when they are super rare and equity sales are almost all we see).  And definitely anyone needing a short sale specialist in Northern Virginia will get great service from you!

Sep 13, 2013 06:51 AM #1
Rainmaker
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Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

Chris Ann, I am working on a short sale now and it takes patience but it does happen.

Sep 13, 2013 07:00 AM #2
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Nancy:  It is amazing to see how far we've come with Short Sales.  I think everyone will be relieved when they are a thing of the past though.

Barbara:  Patience, organization and a little bit of mind reading comes in handy too.

Sep 13, 2013 07:23 AM #3
Rainmaker
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Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

We've come a long way, haven't we, Chris Ann? Short sales are so common nature to some of us now that we can almost process them in our sleep. Banks are really easy to work with, too, because they've had to become easy to work with. That's not to say any old agent can do a short sale, though. They are still complicated.

Sep 13, 2013 07:37 AM #4
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Elizabeth:  Really complicated when they are priced like they are occurring when this first started.  Buyers have certain expectations when they see a low list price.  They don't know, like we do, that the bank is going to want an appraisal or BPO.   And not every List Agent knows the ins and outs of how to put a package together.

Sep 13, 2013 08:02 AM #5
Rainmaker
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Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Chris Ann, There are still those buyers and listing agents that will try to undercut the short sale lenders.  At the end of the day the lender will get a valuation via a BPO or full appraisal, and that is what they base the value on. Those values are often high, and they can be disputed, but it typically takes another appraisal.  Indeed, a lot has changed in the past 6 years.  

Sep 13, 2013 09:34 AM #6
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Kathleen:  In markets like Northern Virginia, we aren't seeing the super low Short Sales prices flying unless the home is in serious need of repair.  And the BPOs, for the most part (knock on wood) are right on target.

Sep 13, 2013 10:06 AM #7
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital
Chris Ann, this is a great analysis of what happened, especially in the suburban market. Because DC passed a moratorium on foreclosures, we saw very few short sales in the city.
Sep 14, 2013 08:16 AM #8
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Pat:  That's definitely something that would affect the Short Sale market in DC.

Sep 14, 2013 08:55 AM #9
Rainmaker
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AJ Heidmann ~ CRS
McEnearney Associates, Inc. - Alexandria, VA
YOUR Alexandria & Arlington, VA Real Estate Expert

Chris Ann - It still amazes me that a listing agent would use an "exceptionally" low list price to get an offer on a property, when with rising sales prices the bank will just make a strong counter and the buyer is likely to bail.  It doesn't benefit either principal, so price at market and work the sale from there.

Sep 14, 2013 09:06 AM #10
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

AJ:  You are absolutely correct.  List prices set an expectation for a buyer.  And if they are low, they aren't likely to go with a big counter from the bank.

Sep 14, 2013 09:27 AM #11
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Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

Chris Ann, the short sale market has changed, indeed.  Still not easy and definitely not for DIY sellers.

Thanks for posting to the Real Estate Questions & Answers Group, where it has been featured. 

Sep 26, 2013 06:40 AM #12
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