Buying a Short Sale Is Not the Same as Shopping at the 99 Cents Only Store

Real Estate Broker Owner with Broadpoint Properties Cal BRE #01324959

Buying a Short Sale

Buying a Short SaleI love the 99¢ Only Store. Have you ever been there? I guess that they have them all over. When I was in Mexico in June, I even saw that they have their own version of the store. I love the fact that you can fill up your shopping cart with things that you may need (and you may not need) and the whole thing will never cost more than about forty dollars. When my kids were a little bit younger, I would take them there for a special treat and tell them that they could select three things-anything that they wanted (rated G, of course). Wow! Am I ever a big spender!

You can always get a deal at the 99¢ Only Store. But, can you always get a good deal when buying a short sale? The answer is, quite simply, no.

In 2007, the market took a huge dive. Banks were nowhere near prepared to deal with the sheer number of borrowers who were underwater and unable to make their payments. Loss mitigation departments had few employees. There were limited short sale submission procedures, and investor note holders did not have guidelines and procedures in place. Perhaps, at that time, you could make a low offer on a distressed property and get the banks to accept it and provide short sale approval.

Now, however, when buying a short sale, I am not seeing the banks accept lower offers with any regularity. Mortgage servicers hire individuals to provide the BPO on the distressed property and then are required by their investors to take a net amount equivalent to a certain percentage of the BPO value. And, this percentage is not 50 cents on the dollar.

I know that there are a lot of investors out there who want to buy up these properties for cents on the dollar. I know that many want to buy in bulk and then flip the properties for a profit. Most of the mortgage servicers, however, seem to now be looking for a retail buyer.

Many servicers have even improved the quality of their loss mitigation departments in order to deal with the volume. Bank of America and GMAC now use the Equator system to streamline their short sales. Wachovia has a great program available in certain cities. And, plans are under way for some additional short sale efficiency programs.

So, will the bank accept your 99 cent offer on a distressed property a few blocks away? They might... but you may be better offer filling your cart with bargains at the local 99¢ Only Store than getting an awesome deal when buying a short sale.


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Comments 16 New Comment

Mary Douglas
REALTOR, Red Feather Lakes, Colorado
United Country Ponderosa Realty

Hi Melissa, I thought everything was more expensive in California -- but I've only seen Dollar Stores here - 99cents? Wow :)

September 02, 2010 10:43 PM
Chris Olsen
Broker Owner Cleveland Ohio Real Estate
Olsen Ziegler Realty

I find that many consumers/buyers are under this impression and also feel that even when foreclosure asking prices are so incredibly low, that they can even then lowball the lowball price already.  Education and knowing your local market are critical.

September 02, 2010 11:30 PM
Carla Muss-Jacobs, Principal Broker/Owner
Buyer Focused ~ Buyer Results | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time

Flippers are going to run into the 99cent shopper too.  Just because they bought it for 99cents, in this market, doesn't mean then can sell it for any more.  Great analogy and nice post Melissa.

September 03, 2010 12:12 AM
Missy Caulk
Realtor - Ann Arbor Real Estate
Missy Caulk TEAM

I enjoyed this post in many ways, Melissa.

If the short sale is priced right, and the offer is close to that then no worries on the BPO.

If it is too low, you are waisting your time, the buyers time and everyone involved in the transactions time.


September 03, 2010 08:59 AM
Mindy Sylvester
Naples Fl Real Estate
MVP Realty

Reading this at first, I thought "is this really necessary?" but you wound up nailing it. Thinking back on recent months, there have definitely been a few interactions with prospects that left my head spinning...people who really seemed think there was a huge inventory of "nearly free" homes I was sitting on, or some secret list I had access to. Something off the books, some huge archive where all the "real" deals were. 

I never realized until today they were all symptoms of the same problem.

September 03, 2010 11:50 AM

Melissa Zavala

Broker, Escondido Real Estate, San Diego County
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