Phoenix Short Sale Listings – Unattractive? Maybe. Unethical? Probably not

Jonathan Dalton, Phoenix Real Estate AgentIf you’ve read this blog for any length of time you know I’m not a fan of short sales for my buyers.

The combination of an imaginary list price, fairly minimal motivation on the part of the bank and the extended response periods that can result in unforeseen opportunity costs tend to make a short sale – a home where the owner owes the bank more than the house is worth – unattractive as a possible purchase. This is especially for someone looking for an owner-occupied home and a set time frame for moving.

Short sale listings are an exercise in frustration primarily because they clog the MLS and can confuse consumers looking at third-party websites at prices they believe are real who are unaware of the strings attached.  When running comparables for a home coming to the market I ignore the short sales as they don’t represent true competition. I believe most agents know this.

Yesterday it was suggested to me by one buyer that agents who list short sales are acting unethically. And that’s where I have to disagree.

We as listing agents don’t set the list price. The homeowner does. And a homeowner has the right to market their home at whatever price they choose. There’s no law that requires them to sell at that marketed price even if a full-price, non-contingent offer is received. Unless it’s signed it’s not binding. This applies not just to short sales but to all listings.

There are no MLS rules prohibiting homes from being advertised at prices that haven’t been approved by the bank. The seller initially has to accept an offer at whatever price is submitted and even signs the contract, contingent upon bank approval. If a buyer is unaware of the extra caveat in the beginning, they’re made aware as part of the offer acceptance.

I can see where some buyers are frustrated by the short sales, just as many of us agents are, because they aren’t aware up front that the list price may not be approved by the bank. That’s part of the issue with searching for real estate online. There’s an immense amount of information available but not all of it’s complete.

This may seem like an agent-driven issue but it’s not. The same thing can and probably does happen in craigslist. It probably happens on Zillow when homeowners enter their own home for sale. It happens on any of the For Sale By Owner sites that unrepresented sellers tend to prefer.

And simply labeling a property as a short sale isn’t sufficient as not everyone knows what the term means. And disclosure without explanation is next to useless.

Short sales can be unattractive. They can be irritating. But unethical? No way.

[tags]Phoenix real estate, short sales[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

0 Comments

  • Chris Butterworth 10 years ago

    Good points all the way around.

    When listing a property in a Short Sale scenario, we try to find out from the bank what an acceptable price would be. Their typical answer is “we can’t tell you. Come talk to us when you have an offer on the table.” And we all know the best way to get an offer on the table is by asking a lower price. Even though most of the time we don’t know whether or not the bank will say yes, we have to play the game by the banks’ rules.

    When working with Buyers or Sellers of non-short-sale properties, we explain the rules of the short-sale game, but then we do our best to ignore these “fake listings”, much as you described.

    It’s a catch-22, double-edged sword, damned if you do – damned if you don’t, kinda times right now.

  • Irene Hammond 10 years ago

    The challenge is when you are representing a buyer, and have to let your buyers know that a ‘full priced offer’ may not be accepted by the bank. I can see where people think they are unethical, and with the seller not getting a 1099 for the amount the bank is being shorted, they really don’t care what the house sells for. So the agreement on list price ,being determined by the seller, is not truly representative of what the property is likely to sell for. Only the bank can tell you that amount and they are not usually around for determining price.

  • Jonathan Dalton 10 years ago

    I think that’s where my main issues with the whole concept come from. If the banks were even slightly cooperative then it would be a different deal.

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