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Justin Baker's Blog

By Justin Baker | Agent in Phoenix, AZ

The TRUTH on Short Sales!

When looking for your new home in the Phoenix Metro area, chances are 40% of the homes you may want to look at are vacant.  Likewise, 30% or more of those are going to be short-sales, or what I have heard lately...long sales. 

First of all, what is a short-sale.  A short-sale is when a seller is selling his/her home for less than what the seller owes on the mortgages/notes for that specific home.  So, the note is being sold short.  Whether or not a seller can sell their home short is not at their dicretion.  Whomever holds the loan/note will decide on whether or not the seller can sell their home short.  This is where it now can become a 'long sale'.  Likewise, MOST of the short-sales on the market are listed for a much lower amount than what the bank or banks are willing to accept.  Listing agents do this to attract as many buyers to the property in hopes to bid up the sales price or to get a contract submitted to the bank to get the 'short sale' into the negotiations process.  The seller may have 1 or even 3 mortgages on the property.  That means 1 to 3 banks have to agree to the terms and conditions of the sale.  Mainly, 'how much will bank 1 get, and bank 2 and bank 3' if there are 3.  This process could take 1 month or 3 months or could fail completely.. 

With all of that said, I highly recommend to a majority of buyers that need to find a home live in within 3 months to stay away from short-sales.  I have had well over 90% of my short-sale transactions NOT GET APPROVED.  Why?  Ask the bank.

So, I hope this helps in your understanding of a short-sale and will help you determine if you would like to proceed in putting an offer in on a short-sale.

Comments

By John,  Wed Feb 25 2009, 15:40
The success of any short sale starts with the listing and proper marketing of the property. Discouraging homebuyers to avoid short sales because of your negative experiences is irresponsible.

I used a company in Tucson. They are real estate investors and handled the negotiation of our short sale. I spoke to three RE agents and none of them knew nearly as much about the negotiation of a lender approved short sale. Plus, in our case, the owner's actually made us an offer on the home and were able negotiate a good price.

This home was an investment gone bad for my family and was on the market for 7 months. They were able to help facillitate a fair deal for all parties through our agent. They were honest, communicated very well and followed through with great success! Highly Recommended.
By The Urban Team,  Thu Feb 26 2009, 10:32
I wouldn't say it is irresponsible to suggest that short sales are unwise for people looking to move within 3 months. Short sales are not for everyone and a good agent will advise their client of the pros and cons.

Since 94% of short sales did not close escrow in the 4th quarter of 2008, it is not reckless to suggest they are a tough purchasing vehicle. With the plethera of REO's, often priced below short sales, it is often more prudent to take that route.

That said, I am delighted you had a good experience... you were in the 6% group who had a successful close of escrow. Well done and yes it can be done with good prepalnning and knowledge on the listing agent and sellers part.
By Justin Baker,  Thu Feb 26 2009, 14:08
First off....JOHN....it is reckless and irresponsible for you to suggest you know anything about a short-sale when you have had one good transaction. My guess is I have sold and closed 300 more transactions than you. SECOND....Hello The Urban Team! Well I guess my numbers work out to be the norm! But, what do I know! I only sell 50- homes a year and 'John' sold one! I congratulate anyone whom has a successful short-sale. HOWEVER, I would NEVER bet on a 6% success rate, or on my 10% success rate. I had 1 of 10 short-sale transactions close last year. AND...you would never guess it....BUT....100% of all my REO's closed!! Maybe not on time, but they closed which means for me....I actually got PAID. Unfortuntaley, Joe or Jayne the consumer, fail to see the amount of time and energy we put into deals that NEVER close. So...I hate to beat a dead horse...but once again....THANKS The Urban Team....And...you are correct! Short-sales can be done...but #1) Not quickly and #2) Less than 10% of the time. Man...I hate it when I am right!!!
By Roberto Ribas,  Sun Mar 1 2009, 20:56
there are roughly 11,000 listed shortsales on the MLS currently here in arizona. In february 530 closed, the most ever! However, when compared to 10,000 bank owned REO homes, and 3508 of them closed, I have to say that Justin Baker is precisely correct: short sales generally don't sell ever. They foreclose and come back to life as REO that will eventually sell.

I just ripped Justin apart on his completely wrong bottom call, on another thread, so I'll give him credit here for being correct: Even as an investor, I spend very little time even reading mls details about short sales, they are to date a waste of time; maybe someday the banks will start getting real with them, but til then there is no shortage of REO property to concern myself with.

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