San Diego’s real short sale story
September 30th, 2008 Categories: Real Estate News, San Diego County Community News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– This weekend, assisstant professor of economics at USD, Ryan Ratcliff wrote a U/T piece about his experience buying a home in the current market. His experiences mirror what I have been telling clients, both buyers and sellers, for months.
First, the adage for buyers that “if your offer doesn’t insult the seller, it’s not low enough” is not a good way to start negotiations. Ryan’s attitude going in to the home search was,”that I would have sellers falling at my feet begging for the opportunity to sell me their home” (San Diego Union Tribune 9/28/2008 *) but what he found out was that there is plenty of competition for competitive priced homes, especially REO or bank owned homes. During the process he was outbid on four homes they submitted offers on and states that those homes sold 10–15% higher than the list price.
Secondly for buyers, short sales are not what they seem. While they currently make up a large portion of the active listing market, very few are closing. Additionally, those that are closing are selling for more than the asking price. From January 1 through September 12 there were 5,744 short sales listed with only 1,381 closing. The median active list price of these homes was $299,000 while the median closed price was $328,000.*
I am working with numerous buyers who see a home that comes in to their price range, but fits the “if it’s to good to be true” adage. While you do need to consider short sales, it is important that you look at all the information regarding the current market value of the home and the owners loan position in the house. These things still matter as they are exactly what the asset manager will be considering and remember less than 25% of short sales are closing.
An example of a good short sale would one where the purchase price is no more than 15% less than the loan value, not the last sold price, and if there is a first and second, at the least the first will be getting close to if not all their money back. Many times if they are in this position, they will kick some money over to the second in order to close the transaction. If you have to work with only one lender the odds greatly improve.
An example of a bad short sale is a listing at $525,000 for a home that sold for $700,000+ and the owner has two loans at 95% of the original purchase price. Additionally the last sold comparable home in the last 90 days sold for $610,000 and is a true comparable property. If this home falls in to your not more than $500,000 budget and you think they will come down some, I would suggest moving on.
Again, short sales need to be considered, but do not get blinded by the asking price.
For seller’s, if you are in the position where you need to sale your home and you are going to be short there are a few important things you need to consider.
First, you should look at this as a real sale that you need to participate in. Treat it as if you stood to make money by making your home show its best and make it easy for potential buyers to view it. Yes, I know the situation is usually a bad one and it is hard to get motivated to help sale a home your essentially losing, but remember the bank is usually the one losing ten of thousands of dollars. The real reason for this however is the better the package you can present to the asset manager, read decision maker, the better your chances of getting your short sale approved and this is the goal!!!
If you need motivation, consider the credit score you spent so much time building. You will still need that to rent, buy a car and more, so you need to protect it. When necessary, I work closely with two short sale negotiating specialists and we insert clauses in to the contract to do everything possible to protect your credit. Remember, the better the buyer package the better the chances of avoiding foreclosure and getting short sale approval.
Secondly, the author notes the short sale “illusion”. You need to be realistic with what you are trying to do or you will be wasting your time and everyone elses and time is precious.
In several cases during my shopping this summer, an attractively priced short-sale with multiple offers would just sit, eventually being repossessed, only to be listed for a higher price as an REO a few weeks later.
The difference: you can actually buy the house at this higher price, where the short-sale listing and its attractive price were essentially just an illusion.*
I have lost listings where I approached the sellers with accurate and factual information and treated them with respect and honsety. The problem has been that I see bad financial situation and suggest a realistic short sale. Unfortunately, their goal is to try to breakeven or possibly make a few thousand and they find a real estate agent that affirms their thoughts but the whole time banking on the fact that the sellers will eventually give in and go for the short sale. The problem as I see it, is it is less than honest and in many cases the clock is running. The sellers waste precious time getting nowhere and they become discouraged. It’s a wear down and wasteful tactic and you should avoid it.
There is not a single stategy to short sale success whether you are a buyer or a seller. There are well recognized paths that when combined with the right agent can increase the chance of success. If you’re real estate agent is not putting real money into marketing your home, you need a new agent and quite possibly a new strategy.
Call me with any questions. I promise honest straight forward answers and if I can not provide them to you I promise to do everything I can to find the answer or the resource. The short sale battle is against you as a seller, but as I have said, the right agent and the right stategy can help change those odds.
But the short-sale component of inventory defies this logic: A desperate would-be short seller could list a house for 30 percent below comparable properties, but the combination of red tape, overwhelmed and understaffed loss mitigation departments at the lenders, and misconceptions about what’s needed to get the sale approved mean the house doesn’t sell any faster, if it sells at all.*
I am new to concept of short sales, The information here is very easy to understand and helpful. thanks. Hope this trend doesn’t hit our community!
Leave your response!
Really Simple SyndicationCategories
Clubs
San Diego Happenings
Triathlon Related Shops
San Diego Neighborhoods
Charities
San Diego Dining
Coaching Links
Real Estate
V.I.B.s
Archives