I ran across this article in Inman News today. It really helps explain our predicament as buyer’s agents with so many buyers wanting and expecting great deals in this market. I hope everyone will read this and understand a bit more about the short sale process.
There’s one BIG change that would make the recovery faster, smoother, and more vigorous. All short sales should be at pre-approved prices. They shouldn’t be allowed to go into the multiple listing service until the banks have agreed to the price, terms, and conditionsâ€”including and especially how deficiencies and seller contributions will be handled.
Why? Because we have too many willing and able buyers who get their hopes up and then are trapped in a short-sale contract, with slim chances of successfully owning the house. Unless the buyer is in contract on multiple houses, they’re out of the market waiting for something that probably won’t happen.
Having multiple contracts hurts the sellers, as these buyers are going to drop out as soon as one of their “deals” comes together. Massive time and energy is being spent by real estate agents, with little chance of success.
The strategic default problem would be reduced if the sellers knew that they’d be foreclosed on quickly. They’re taking advantage of the prospect of making out better by doing a short sale. They’re the most likely to have the banks requesting funds from the seller, or refusal to waive deficiency judgmentâ€”terms that the seller will probably turn down, anyway.
If we knew in advance that the seller was truly qualified for a short sale, that the bank didn’t have some other agenda, and was motivated to not get the property back in foreclosure, then I’d be happy to bring my strongest buyers to the short-sale deal. Meanwhile, the real buyers are fighting over the REOs (bank-owned properties), flips, and equity transactions, of which there are actually too few.
Prices keep falling because the short-sale agents are listing at 5 to 10 percent below comps in order to try to get an offer, and often are accepting offers at even less. The banks come back at a higher price, and then the buyer walks. The downward momentum has been coming from the short sales, not from the REO listings.
It would be nice if the banks would just do as I suggested, or the government forces them to do it. The reality is that the real estate community is going to have to tell the banks that we’re not going to facilitate their craziness any longer.
We’ll take the listings, we’ll process the short sale to approval or denial, but we won’t put it on the MLS or tie up a buyer, or spend money to advertise and promote it until we know there’s actually a huge chance that a closing could take place.
That was the premise, and the promise of the Home Affordable Foreclosure Alternatives program (HAFA), but HAFA has been just as big of a joke as the way we do it now.
Let’s only sell houses that can actually, really, truly be bought. If the banks can dictate to us that they won’t even consider a short sale till there’s an offer, then we ought to be able to dictate to them that we won’t look for an offer without a pre-approval of the sale.”
There is also legislation introduced that would limit the maximum amount of time for a bank to respond to a short sale offer to 45 days. We can only hope that gets passed. For more information click here.
I’m here to answer your questions.