As of this morning I’m washing my hands of short sales in the Phoenix real estate market.
The longer I have looked at short sales – sales where the value of the property is less than the current mortgage – the more convinced I have become the myths outweigh the reality.
Myth 1: Short sales are “deals.” Hardly. As Michelle Lind from AAR put it yesterday at the Arizona Real Estate Educators Association lunch, people think these “are deals when all it means is someone else paid too much for the property and you’re getting it at value.”
There are far better deals to be had involving real sellers, not sellers depending on a lender. But many buyers don’t see that because they believe …
Myth 2: List prices in the MLS mean something. My continuing favorite was the short sale listing that boasted “price reduced.” Given that the bank hadn’t even approved the original list price as a selling point, how does reducing the list price result in an actually reduced price? It doesn’t.
Just because a list price is in the MLS for one of these short sales doesn’t mean that’s what the lender will accept. More often than not, it’s not.
Myth #3: Lenders are motivated to accept a short sale rather than take the home into their inventory. Not whatsoever. Chris Butterworth recently documented the case of a lender who had an offer sitting on their desk when the trustee sale began. It had been there for weeks. The lender took no action and now owns the home. You’d think the cost to carry would be a deterrent for lenders but it isn’t.
I have a buyer who has been waiting for six weeks for an answer from the lender on his offer. The lender would end up short by a very, very small amount. The buyer’s watching exchange rates in flux and isn’t sure what he’ll do should we ever hear from the lender. The lender’s response to hearing my buyer may walk away? “Okay.”
This person at the lender has 90 foreclosure files on his desk. He will get to this file whenever he has the time to deal with it. Since there’s a sale coming up you’d think he’d hurry, but that’s not how these work.
Myth #4: Homes being sold via the short sale route are pristine properties distinguished only by a lower list price. Sure they are.
If you knew you weren’t getting a penny from your home and that the bank may take it, how inclined are you to be diligent in the upkeep? Or are you more likely to do what many sellers do and start taking out whatever you can.
Craigslist recently had an ad auctioning off everything in the house including the granite counters and the appliances. When it’s clear the house isn’t going to be theirs, most folks cease to care. There are exceptions but they’re very rare.
Myth #5: Two sellers this week have called asking me about “quick sales,” meaning short sales. As I just said, these are anything but short. They are long and arduous and are as likely to end up failing as succeeding.
Bottom line: if you’re looking to purchase real estate here in the Phoenix area and are looking for something priced to sell, let me show you what’s there. Don’t get married to the false hopes of a short sale because what you think you’re getting yourself into and what really will happen are two very, very different things.[tags]Phoenix real estate, short sales[/tags]