Short Sales - A Misnomer AND a Marketing Ploy

By
Real Estate Agent with Solutions Real Estate CalBRE Lic #01490977

For sale signsShort sales continue on, with no end in sight.

Buyers continue to inquire about them, ask to see them (sometimes they have no choice in their price range) and to view them as potential deals.

Short sale REALLY is a misnomer, as we all understand. Nothing could be further from the truth, but some folks still do not understand what short sale actually means.

The complexity and frustrations around short sales continues to be readily apparent. Witness the on-going stories that still pop up almost daily on my blog post Buying a Short Sale, written back in January 2007. I have yet to find a buyer who found a great deal and who was not totally frustrated by the process (and I have had offers in on at least 10 of these properties with no resolution - but there ARE exceptions).

Perhaps there should be a contest to find the longest short sale transaction from time of offer until closing. Or the one with the greatest number of offers.

Is there humor in short sales?When they first became the stuff of media headlines, and buyers were all hot to get hold of them, the word short sale in the MLS or an ad seemed to be a huge draw. The lure of a potential great deal, and the possibility for buyers, who felt they had been taken advantage of by sellers in the past, to finally get their due. How exciting.

Hah. Well, we quickly learned how that is a fallacy. Short sales have continued to dominate many markets, and are used by the media as a barometer of housing market conditions. But I wonder how much progress is really being made in terms of getting these to closing, versus going through the foreclosure process to completion.

Short sale is now a marketing ploy of a different color. Instead of a lure to capture the interest of deal-hunting buyers, “NOT A SHORT SALE” has become the mantra of many listing agents, who gleefully declare THEIR listing is not one of these, especially in those areas where short sales are prevalent. Or “NOT A SHORT SALE BUT PRICED LIKE ONE,” perhaps equally popular and alluring.

There now seem to be as many listings with this sort of declarative as there are those who bemoan the fact that this IS a short sale, subject to approval of the lender, yada yada…

What will the next sea change be?

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Rainmaker
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Bryant Tutas
Bryant Tutas-Tutas Towne Realty, Inc - Poinciana, FL
Broker/REALTOR, Tutas Towne Realty, Inc

Jeff, OK I admit..I do place NOT A SHORT SALE in the marketing remarks of my listings. Why? Because short sales are not getting showings in my market anymore. The REALTORS(R) and consumers have lost interest. They are a thing of the past.

The hot commodities now are banked owned properties. My market is saturated with these. In fact, about 80% of the closings are now REOs. So why deal with a short sale? Wait for the foreclosure and purchase when it's easier for the same or less money.

By the way, the tide shifting from short sales to REOs is a sign of the bottom being near. So it's a good thing.

Apr 23, 2008 03:40 PM #3
Rainmaker
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Bryant Tutas
Bryant Tutas-Tutas Towne Realty, Inc - Poinciana, FL
Broker/REALTOR, Tutas Towne Realty, Inc
Oops!! I forgot about the contest. 6 months on a $200,000 offer. The lender rejected it..... and foreclosed on the porperty. 3 months later it was on the market as an REO at.............$139,000, where it still sits. Go figure.
Apr 23, 2008 03:45 PM #4
Rainmaker
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Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services
It seems that short sales are short only when it comes time to give notice to close -- then the lender wants the closing yesterday!  It is not for every buyer and seller -- that is for sure.
Apr 23, 2008 03:56 PM #5
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Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Realtor - Ann Arbor Real Estate

Jeff, I heard on 22% of short sales even close. Do you know if this is true? We still have so many in Ann Arbor, but they are so frustrating, we have been waiting on one for 3 months. I tear down lake house that if falling apart. The bank wouldn't respond, it went to forclosure, now with a different real estate company. As soon as they get their paper work we will know.

The listing agent had not even seen the house? Ask us what type of condition it was in..............oh brother. We told her it is dangerous and a complete tear down, but our clients mother lives 2 doors down so we have been willing to wait..

Oh yea, we offered 10K over the pay off. Now does this make sense? The original listing agent had to over night the package twice they kept loosing it.

 

Apr 23, 2008 04:00 PM #6
Rainmaker
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David Saks
The Real Estate Mart of Tennessee, Inc. - Memphis, TN
Memphis, Tennessee

The popularity of the short sale is the product of an ingenuine market.
The National Association of Realtors' housing affordability index showed that almost anyone could buy a house somewhere in America between 2002 and 2006, because borrowed money was practically free. It's no wonder that home prices soared. According to the Office of Federal Housing Enterprise Oversight, the national index of home values rose 46.9% in the five years ending Sept. 30, 2007. That's an annualized appreciation rate of 8% -- enough to make us all think owning a home was way better than the stock market or gold. Home investors began to believe that they wouldn't have to work for a living anymore. Buying a home has always been nothing more than a cheap thrill for a few unscrupulous consumers. Sadly, the lenders would pass up good short sale offers and take their chances on the court house steps at the foreclosure proceedings. I witnessed, first hand, representing a motivated seller because of divorce and illness, how slime ball loss mitigation personnel could ruin a family by playing roulette with their home, banking on market reversals. One investor backed out of a short sale, 75 thousand below market, which was accepted by the lender, after the liar had committed to bailing the poor family out. Lot's of stories like these out there today. Thanks, Jeff.

Apr 23, 2008 04:18 PM #7
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William Johnson
RE/MAX Associates - San Diego, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE
You are so right about this. Why any Buyer would even want to go through the ordeal is beyond me. They believe they will buy for less than market. Certainly they will buy for less than the Sellers did, but the agents seem to be pricing them below market to drive the price as high as they can with competitive bidding. It all takes so much time and most all the participants are disappointed. The Loss Mitigation departments are not adequately staffed , they don't have many decision makers and the whole ordeal ( for me at least) is not worth the effort. REO's  are at least  more straight forward. If the Banks really did want selling short to work, they should be far more communicative about their interest. Weeks, dare I say months can by and no one even knows if the Banks are willing to sell or just plan to foreclose. Some agents seem to handle these better than others.
Apr 23, 2008 04:25 PM #9
Rainer
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Leigh Bates
Atlantic & Pacific Real Estate - Flower Mound, TX
The Trinity Group

We are averaging about 5-6 months from contract to close. Most of the time we go through 3-4 buyers, because no matter how many times we tell them, they seem to not hear the 5-6 month timeframe we tell them up front.

In our market which is just beginning to slow, short sales are the only homes getting shown.

Apr 23, 2008 05:32 PM #10
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Good point, Eric. And then the banks seem to just be taking of the sellers when they don;t move ahead on offers and ultimately foreclose.

Jeff    

Apr 23, 2008 05:39 PM #11
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Peter - wish I knew the answer but I don't. Anyone have any thoughts on this question?

Jeff 

Apr 23, 2008 05:40 PM #12
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Bryant - I, too, will use NOT A SHORT SALE in my marketing. I am not implying it is a problem just a shift in emphasis. And we are seeing more of the emphasis on REOs here too, but we are not in the same situation as your market. I have had a number of buyers who refuse to even consider a short sale...also a shift.

Jeff 

Apr 23, 2008 05:42 PM #13
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Yikes, BB, that may be a winner. Pretty scary.

Jeff 

Apr 23, 2008 05:43 PM #14
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Joan - that is so true.Interesting how they can take their sweet time but then all of a sudden switch into fast gear. I have found that the response time for REOs, in contrast, is pretty fast, 24 hours in one case.

Jeff 

Apr 23, 2008 05:45 PM #15
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Missy - wow, now that's a story. Sounds like others I have heard. And I have seen a few really scary properties. Not sure about the 22% but I can't imagine it is much higher given what we see here. Good luck!

Jeff 

Apr 23, 2008 05:48 PM #16
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Thanks, David. I think we don't even know the real extent of the dark side of these supposed deals. We keep hearing the banks are overloaded but I'm not buying. It may be true for some but ..

Jeff 

Apr 23, 2008 05:50 PM #17
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Can't disagree with a thing you said, William. I shudder when I get a requesst to see a home and it is a short sale. I guess if I had had some luck with at least one I would feel more enthusiastic. But some properties ARE pretty well priced and they are selling, just in small numbers.

Jeff 

Apr 23, 2008 06:11 PM #18
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Leigh - well your time frame is much like what Bryant shared. In some markets here buyers have no choice but to look at short sales in some price ranges, especially $450K and under. What is so frustrating is that you really do NOT know what will happen no how long it will take.

Jeff 

Apr 23, 2008 06:13 PM #19
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
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Jeff I am working on a loan for a short sale right that has been going on for more than three months.  It is a good thing that it is a CHFA Loan and it has a 120 day rate lock period.  I can't believe these buyers are hanging in there this long.
Apr 23, 2008 09:46 PM #20
Rainer
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Abacus Properties, Inc. DBA Apple Dream Homes
Abacus Properties Inc. - San Diego, CA
Jeff, great observation and funny. Wonder what the next trend would be in listing verbish here in san diego!
Apr 23, 2008 10:22 PM #21
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

George - and I have heard that kind of time frame several times. I would not have the patience if I were the buyer.

Jeff 

Apr 25, 2008 09:01 AM #22
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Thanks, Kathy. Who knows? But you know something will change.

Jeff 

Apr 25, 2008 09:02 AM #23
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