Short Sale Question

[JoeGermade]

In my market it is not as easy to sell a property offered as a "short sale". From my sales experience I know that short sales are a nightmare.

1) Sellers dont really want to sell - Major access issues. How can someone sell a property if they wont let anyone in?

2)The list prices are not approved by the bank 90% of the time - The buyer is super excited about the low price but doesnt realize most of the time his offer is a final offer and it will not be countered.

3) Multiple offers - some of these properties have multiple offers, does the bank take the highest? NO! they take the one that makes the most sense. I have seen all cash offers, large down payment offers, and people with stellar credit take a home over a $25K over asking price where the buyer wanted to do FHA financing.

4) Most of the realtors in my office try to avoid short sales with their regular buyers and will only entertain them to family members or an investor that have open minds and will try and understand what is going on. If you bring a newer buyer out looking for a deal they will hate you after you put them through a short sale and you wont hear from them again.

I submitted an offer on a short sale for my cousin and its been 2 months and the bank hasnt gotten back to anyone. He calls me for status everyday. Should he move on? Is it worth the discount?

I feel like its similar to buying a floor model plasma TV at best buy. Well take 20% off if you dont mind that its got a few nicks and dents. Warrantie? What warrantie? You give a lower offer... "the salesman says "let me check with my manager".

 

[CBBoston]

I'm not sure you can really view a short sale, or REO, as an arms length transaction. The seller is rarely a willing seller and may not have much control over the price the lender is willing to accept. Then there's the lenders motivation. Are they trying to get these loans off the books and take the accounting hit now or are they still trying to somehow hide these, most likely nonperforming loans, from regulators and investors. Then there's the problem that most of these loans are in MBSs. For these reasons I don't think shorts are arms length.

However that said, shorts and REO sales might be the only ones out there and do constitute the "market" and become the benchmark. Only when all these distressed properties clear the market will we know the "true" market prices.

 

[Joyce Potts]

I'm not sure you can really view a short sale, or REO, as an arms length transaction. The seller is rarely a willing seller and may not have much control over the price the lender is willing to accept. Then there's the lenders motivation. Are they trying to get these loans off the books and take the accounting hit now or are they still trying to somehow hide these, most likely nonperforming loans, from regulators and investors. Then there's the problem that most of these loans are in MBSs. For these reasons I don't think shorts are arms length.

However that said, shorts and REO sales might be the only ones out there and do constitute the "market" and become the benchmark. Only when all these distressed properties clear the market will we know the "true" market prices.

I totally disagree. Often it's the so called 'short sales' that have tested and tested and tested and tested (you get the picture) at higher prices, that have been consistently reduced over a more than adequate market exposure time that illustrates just where the pricing has to be before someone makes an offer.

To my knowledge, there aren't too many properties out there that don't have some kind of third-party financing on them. What makes a short seller any more or less motivated than a typical seller that's being relocated, or lost their job, or is undergoing health issues, etc? In fact, I've encountered many short sellers that simply refused to take offers they felt were extremely low.

For all who agree with the original poster, I'd like the term 'market value' explained to me. Why is it when something sells below someone's or 'typical' market expectations, it's automatically look upon as 'distressed' and should be elminated from the data pool?

Yet when something sells above typical market levels, it's Comp #1!

If you have a market full of 'distressed' , typical properties, too many properties, I would argue that they are having a significant impact on property values and can NOT be ignored.

 

[Steve G]

We do have another significant problem in my market. It is not unusual for the tax assessment to be more than the comps sales price and the subjects sales price. this area is significantly over assessed.

My market is declining. Tax assessed values reflect sales from 2007 and 2006 and current values have gone down since then. Your area may be over assessed compared to current values, but tax assessments will never reflect current values until you are in an extended period of market stability.

 

[Couch Potato]

I think it is telling that the people not viewing the short sale as representing market value are not located in Florida, but those that do are in Florida (like the original poster.) I've been out of Florida for a year, but from what I recall I'd bet most sales of properties purchased or refinanced after 2003 are likely to be short sales. Likely this is just the first time the poster was aware it was a short sale, not the first time it was a short sale.

If I were in Florida, I would be sticking with Joyce's advice on the matter.

 

[Bama Bayou]

I have my 1st short sale appraisal order. Forgive me if my question sounds stupid, but when doing a short sale or foreclosure, are you supposed to use short sale or foreclosure comps? And if so, what if there are none in the development. Do you look outside the development as usual? OR, are we still supposed to try to find arms length sales if any?

For a second I thought my eyesight had miraculously improved after being in the field all day.

 

[Bama Bayou]

I totally disagree. Often it's the so called 'short sales' that have tested and tested and tested and tested (you get the picture) at higher prices, that have been consistently reduced over a more than adequate market exposure time that illustrates just where the pricing has to be before someone makes an offer.

To my knowledge, there aren't too many properties out there that don't have some kind of third-party financing on them. What makes a short seller any more or less motivated than a typical seller that's being relocated, or lost their job, or is undergoing health issues, etc? In fact, I've encountered many short sellers that simply refused to take offers they felt were extremely low.

For all who agree with the original poster, I'd like the term 'market value' explained to me. Why is it when something sells below someone's or 'typical' market expectations, it's automatically look upon as 'distressed' and should be elminated from the data pool?

Yet when something sells above typical market levels, it's Comp #1!

If you have a market full of 'distressed' , typical properties, too many properties, I would argue that they are having a significant impact on property values and can NOT be ignored.

This is so true. In a distressed market every seller is highly motivated relative to the boom years. If they are not they might as well take their property off the market. What was typical buyer/seller motivation three years ago is not typical now. We need to look at what is typical motivation as of the date of the appraisal.

Is the OP's property a bank ordered short sale appraisal or is it an approved bank short sale to a buyer?

 

[Bama Bayou]

I think it is telling that the people not viewing the short sale as representing market value are not located in Florida, but those that do are in Florida (like the original poster.) I've been out of Florida for a year, but from what I recall I'd bet most sales of properties purchased or refinanced after 2003 are likely to be short sales. Likely this is just the first time the poster was aware it was a short sale, not the first time it was a short sale.

If I were in Florida, I would be sticking with Joyce's advice on the matter.

Joyce's advice is probably good for any coastal properties along the Gulf of Mexico.

 

[Joyce Potts]

Joyce's advice is probably good for any coastal properties along the Gulf of Mexico.

That's odd. I've never appraised any coastal properties along the Gulf of Mexico.

 

[Bama Bayou]

That's odd. I've never appraised any coastal properties along the Gulf of Mexico.

I thought the whole state of Florida was coastal.
At least the insurance companies do.