Let's say a seller owes the bank $330,000, but the current market value is somewhere around $300,000. The seller will not get enough for the house to pay off the bank, so they ask the bank to write off the difference – a Short Sale. But the bank doesn't want to talk specifics with the seller until 2 conditions are met:- The seller must be behind on their mortgage payments. Being proactive, and responding to cash flow problems early doesn't do much good in the short sale world. Sellers need to be heading down the road towards foreclosure. This means that the clock is ticking, and they don't have time to sit on the market for months without an offer.
- The seller must bring an offer to the bank. The banks typically won't give a blanket approval for a short sale; they want to see a serious offer, in writing.
So how does a seller get a serious offer, in writing, in a short amount of time? By advertising an artificially low price! In the example above, with a $330,000 payoff and a $300,000 market value, I would expect to see this house listed in MLS for $250,000.
Banks have been reluctant to approve sales at very low prices, and buyers have been reluctant to pay market price for short sales – sort of a Catch-22. At the very least, these transactions are a lot of work. And many of them end up falling through the cracks.
Based on what I'm hearing and seeing in the marketplace, I think there's a backlash right now against Short Sales. The banks' unwillingness to play nice is starting to catch up with them.
Your part of the backlash Realtor,
Chris Butterworth
[tags] short sales, Fletcher Heights [/tags]
