Short Sales in the Phoenix Area
I had a chuckle when an acquaintance wanted to know if a Short Sale meant that the house would only be available for a "limited time". Realtors are used to the 'Lingo' but if you haven't been following the real estate market as a buyer or seller lately, this term may have escaped you too.
Short Sales are simply when the seller owes more on the property than a lender accepts for purchase.
For example, if a seller owes $200,000 on a property and receives an offer for $150,000, they can ask the bank to forgive the $50,000 that they would be 'short' in their loan payoff. The bank receives the $150,000 instead of foreclosing on them and the sellers get to walk away from the property.
In the Phoenix area, there are two communities that have a preponderance of Short Sale properties. Queen Creek and Maricopa are towns where many new home developments were built in a short period of time. Because they are considered further out and require a long (30-90 minute) commute to Phoenix, the prices on these homes were priced much lower than homes in say, Tempe or Chandler. At the height of the market, two-three years ago, buyers paid what they thought were great prices for these new homes. In the past year, prices in these two areas have plummeted. Thousands of homeowners now have mortgages that are significantly higher than what the house will sell for on today's market. Short sales are literally on every block. Some blocks have 4 -5 short sale properties.
Every town in the Phoenix area has it's share of short sales. They are just in a higher concentration in Maricopa and Queen Creek.
Advantages to buying a short sale?
1. The obvious advantage is that you can get a Smoking Deal on these properties.
2. You can obtain traditional financing AND inspect the property.
3. You can negotiate with the bank (unlike Foreclosures)
4. There is generally Less Competition for these properties (see Disadvantages)
Disadvantages?
1. You have to wait and wait and wait to get assigned a negotiator from the bank who will even look at the offer. The wait can be two months in some cases. So if you need to move by a certain date, this is not the route for you.
2. In many cases, even after the Seller agrees to your offer, the Listing Agent is instructed by the bank to continue to take offers. I worked with clients who had their offer accepted by the Seller and were naturally excited and making plans to move. The Listing Agent called two weeks later to say that a new offer had come in and was a little bit higher than my clients' offer. My clients wisely decided not to get into a bidding war for this property that needed lots of work. They are now set to close on a home that was sold traditionally. (The Listing Agent called me yesterday to see if my clients might still be interested in the Short Sale because the higher bidders backed out after they did a home inspection. Too bad!)
3. You cannot ask for the bank to make any repairs on a Short Sale. In fact, if you make an offer you are required to sign an "As Is Addendum" which states that you will take the property the way it is. No room for negotiations there.
So, if you want a great deal, are in no rush, and plan to have your new home repairs completed yourself, you may want to think about a Short Sale. If you are the impatient sort and don't have money to spare on surprise repairs, you may want to stick to a regular real estate transaction and avoid Short Sales altogether.
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