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Should You Fix Up a House that is being Sold as a Short Sale?

By
Real Estate Agent

I've been working on a particular short sale for about 9 months. The house is all brick, has a big yard, and is in a good neighborhood.  It should be an easy sale, but that hasn't been the case.  When I first took the listing, the owner lived there and it looked pretty good, inside and out.  It's been vacant with the power off for over 6 months and now looks distressed.  The owner took out her furniture and did some cleaning, but there are garbage bags full of trash in the driveway and misc. junk left in several rooms. The carpets are filthy and a professional cleaning would work wonders.

The house is listed at $130K, which seems to be a fair price based on condition of the property and comps.  The bank's appraisal came in at $148K and was based on comps that had sold almost a year earlier (not much activity since) and were in excellent condition when they sold. There have been lots of showings and several offers, some of them very close to the listing price, all turned down by the bank who held out for $148K.

After months of submitting evidence indicating that the bank's expectations were too high, they finally approved the last offer, four months after it was submitted, but now the buyer is in a tight monetary position and needs the extra cash for a family emergency and can't afford to fix the house up, so they walked. It's been shown several times in the last month, but everyone is turned off by what appears to be too much work. 

Dropping the price to compensate for the condition isn't a viable option, so it appears that the best bet is to get it cleaned up. The seller doesn't have money to hire it out and I think that I need to try to convince her to do the work that's needed if she wants to get it sold and avoid foreclosure.   

2520 Hastings front of house

Comments(10)

Neal Bloom
Brokered by eXp Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate

If the owner can spend minimal money just get it cleaned...the owners don't want to put any extra money into these properties as most time they just want out...I have a few of them right now...two finally short sale approved prices but the buyers could not get qualified at the last minute...all that work for nothing and now we have to hope we have time to do it all over again.

Dec 08, 2008 10:51 PM
Martin E. Kalisker, Esq.
Natick, MA
Real Estate Law From A Practical Perspective

Wow, 9 months and they are still paying the mortgage and/or it hasn't gone to foreclosure?  It really is in your client's best interest to get the house sold while it is still a short sale - from a credit standpoint and from a neighborhood valuation standpoint.  Obviously, the sale would help you.  Have you taken photos of the condition of the property for the bank? They need to understand that the value is less than the original appraisal, not only because of the deteriorating condition, but just like any property, the price needs to follow the market.

How much of your commission would it cost to get it cleaned up?  If it's just trash and carpets, it can't be that much and would definitely make your job that much easier.  See if the bank will let you get reimbursed at closing.

Dec 08, 2008 11:18 PM
Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

Interesting post. It is too bad there is not a way they can refi or stay in the home. Good luck

Dec 08, 2008 11:26 PM
Retired Notworking
Tallahassee, FL

Thanks for your comments. I'm not sure the bank would reimburse me for having it cleaned. I've been tempted to have it done, but wonder if it will end up being an investment that doesn't pay off. No foreclosure date set yet, thank goodness.

Dec 09, 2008 03:07 AM
Richard Riley
RE/MAX Properties SW - Orlando, FL
CDPE, I.R.E.S.

I never cease to be amazed by the number of ways lenders demonstrate lack of common sense in pursueing their own financial interest.  Maybe we could change the child labor laws so fifth graders could be employed as loss mitigators and "home retention" specialists.

Dec 09, 2008 12:31 PM
Amy Gooden
Allen Tate - Charlotte, NC

All of the short sales we have done have all been in need of atleast a little work. I find the best thing to do is get all of the junk out and have the house cleaned professional including the carpets and washing down the walls.

None of our short sale sellers have been able to invest much for the a few hundred for the cleaning, but I think this little bit makes all the difference. Sometimes the clean smell makes buyers feel like less work is required.

When we have a tricky one like this, we usually lower the price to attract a lot of interest fast. We have had short sale listings with 5-10 showings in a day. When a buyer and their agent pull up to the house and have to wait for the previous buyer to leave and are greeted by the next buyer on their way out, they quickly offer more money. We have come out with an offer above asking price everytime with this strategy.

Good luck!

Dec 11, 2008 11:53 AM
Derek Beatrice
Exit Realty Beatrice Associates - Middleton, MA

Keep dropping the price and send in comparable sales of other Short-Sales/REO's in the area... but don't spend your own money because the bank will no reinburse you. 

Drop...Drop...Drop... the price! When it's priced right you'll get offers.

Dec 11, 2008 12:38 PM
Retired Notworking
Tallahassee, FL

I agree that dropping the price would help, but have had a long fight to get the bank to approve the current price and am not sure I can get them to go lower.

Dec 11, 2008 01:15 PM
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

I appredciate your post as I've listed my first short sale and need all the information I can get. Has your short sale sold yet? Let me know. Happy Holidays and best wishes for a VERY prosperous New Year!

Dec 25, 2008 11:39 PM
Retired Notworking
Tallahassee, FL

There is no foreclosure date set yet (after a year!) thank goodness, but the house isn't sold and there aren't any current offers, although it is still being shown about once every two weeks. 

Dec 26, 2008 12:09 AM