Buyer: “The price on that house is so low, and the house looks so good! Is that price in the MLS for real?!”
ThePhoenixAgents: “Probably not.”
We’re noticing an astounding number of short sale listings in the MLS that are listed for prices that seem too good to be true. Remember what your dear old Mother taught you about things that sound too good to be true: they usually are.
It’s been said here and elsewhere a dozen time before: short sales are not short and they’re rarely sales. It’s estimated that something like 3% of short sales actually ever close.
Here’s a few salient points on short sales. Those in bold are the ones I think make short sales a silly-stupid idea for buyers.
- The sellers’ lender has not seen the list price before it hit the market.
- In fact the sellers’ lender(s) will not talk about value of the home, or discuss completing a short sale until the homeowner sends his/her lender(s) a buyer’s purchase offer.
- For that reason, there is no guarantee that the seller’s lender will accept your offer - even if you offer full list price. Or more than list price.
- The sellers’ lender(s) will probably take about 2 to 4 months to make a decision about the deal. They’re not reviewing the buyer, they’re reviewing the seller.
- Meanwhile the market value of that property is fluctuating. Metro Phoenix is in the middle of the worst price decline in it’s history. What are the chances the value of the property in the short sale is going up?
The points above are those I can easily put a monetary value on. Those below are a little more squishy, touchy-feely sorts of aggravation pile-on’s.
- Buyers’ loan approvals are only good for a few months, so you’ll probably have to re-qualify if the deal is ever approved. Aggravation factor = minor.
- The seller is financially unable to do any repairs to the house. Don’t even think about the sellers’ lender making repairs. They’re writing off a ton of bad debt, so they’re not going to spend money on repairs. Aggravation factor = minor, if you’re getting a really great price. But see point 5 above.
- On the other hand, some sellers are choosing not to pay their mortgage even though they’re financially able. If the sellers’ lender(s) get wind of that, how likely are they going to be to approve a huge writeoff? Not! Aggravation factor = major, because it’s 100% out of your control.
- Sometimes sellers are angry or openly hostile about letting you in for showings or inspections. They are losing their house after all and even if that’s due to their own poor planning, people tend to feel mighty entitled when it comes to their house. Aggravation factor = major, because you’re just trying to look at a house for sale, and you’re being given attitude?!
These are the cold hard fact of short sales: even if you offer more than list price there’s no guarantee the sellers’ lender(s) will accept the deal, because they never agreed to the list price in the first place. While they dither, the property you offered on is losing value daily.
Sounds stupid? It is. That’s why – unless our buyer clients insist on looking at short sales – we prefer not to show our buyers these fake listings.