Some agents have a low skill level in the real estate industry and do not understand the process. If you are investing in real estate it is smart to look at all options and keep an open mind. Beware: it you are buying a short sale or foreclosure it could take longer to navigate the banking system. The banks are flooded with problems and the systems are working slowly. Please hire a seasoned agent with knowledge.

All of times, it is easier to get a great deal from a motivated seller than from a foreclosure/short sale. The bank has a mortgage on a property and usually the listing price will reflect a number close to that mortgage that is owed. Sometimes it may be very difficult to negotiate an offer with the bank than from another property that is not a foreclosure/short sale with a very motivated seller. Every situation is different and depending on it a foreclosure/short sale may be the best deal or it may not be depending.
Listen to your realtor.

Leah George
leah@srqmls.com
941-780-0597
Weichert Realtors on the Key
http://www.romanian-realtor.com

Hi Tim,

I personally believe that most agents are not familiar with short sales and foreclosures. I attended a seminar last week on the topic and many top realtors who were there agreed that more education is needed in that area. There are a few who are very well versed in those types of sales but they are the exception rather than the norm. Some of the people who steer you clear of short sales and foreclosures are aware that short sales and/or foreclosures are not necessarily the best way to get a great deal. They also know that the process can take a long time and might prohibit their buyers from jumping at another bargain that might present itself. Banks are notorious for slowing the process down. They don't have enough people in their Loss Mitigation departments and very often those people are so new at dealing with those issues that they are overwhelmed and don't act in the interest of the all parties involved in the transaction. I know the name of a great attorney who is very knowledgeable in that area. His name is Steven Greenberg and I will be glad to give you his coordinates if you want them. He is the one who offered the seminar I attended. Good luck with your house hunting. Do not hesitate to contact me. How about a Frenchman helping a Norwegian purchasing a property in Florida ;-) We are truly getting global, aren't we?

Matthew, I disagree with your statement that "very few Realtors had a clue as to the procedures needed for a short sales or foreclosure transactions." I think that you will find that most Realtors are very well-informed concerning the issues involved with foreclosures and short sales. Brokers are working hard to be sure that their agents know how to handle such transactions, because unfortunately they are becoming an increasingly large part of today's residential real estate business.

I think that several of the agents who have previously posted have given valid reasons why local Realtors may have steered him away from short sales and foreclosures. Those Realtors may have considered Tim's personal circumstances and decided that this kind of transaction was not appropriate for him, or they may have made a personal business decision that they did not want to waste time pursuing that kind of business. We'll never know the real reasons, but I think that we have provided Tim with enough information to figure things out for himself.

Charles Offer
Coldwell Banker Residential Real Estate
423 St. Armands Circle
Sarasota, FL 34236
(941) 321-9664

Because very few Realtors had a clue as to the procedures needed for a short sales or foreclosure transactions. A Short Sale can take 60 days up to 6 months to close depending on the Bank's Loss Mitigation department and how far behind the home owner are in their monthly payments. Many foreclosures can have title issuses, improper foreclosure procedures, bankruptcy filings. It takes patience on the part of the Buyers and the Realtor these are 30 days plus deals minimum. Your Realtor needs more than three years of knowledge and experience in dealing with short sales and foreclosures unless they are working for a Broker who specializes in foreclosures. There are also tax issues.

It is very difficult to deal with the banks and 1 out of 5 offers do not work. The banks or lenders sit on the offers until they get a better offer for the property and have the right to switch up to a few days before closing. If you were to spend money on appraisals, credit reports, and inspections ... you would loose that money. Most folks buying homes do not have 800-900 $ to throw away. Then guess who they blame when that happens. Their realtor! In this market you are safer waiting and getting a home listed at a fair price. There are so many on the market resulting in a buyers market. Good homes go fast. There is a reason that the bank took that home back.. It wouldn't sell for the price that was owed on it or something is wrong with the home to prevent someone from buying it.

Trust your realtor.

Time is the best anwer I can give you. If you need to get into a home in a specific amount of time, OR have funds that need to be used within a time period, waiting on a bank may not be a good option for you. If you are an investor and/or time is not a concern, a home being listed as a short sale or pre-foreclosure should not be of concern to your agent. If you are patient and have available funds at your disposal, a short sale could be a great option. Most are being sold as-is or have limited seller's disclosures, so make sure you do all your inspections and perform due diligence in your purchase. Good luck to you.

Another important item for the buyer to be mindful of is their financing. They will need to keep on top of their mortgage program they'll be using with all the changes in the lending industry out there. The long drawn out nature of the short sale process can be long enough that a marginal buyer's program may not exist any longer or not at the same terms as before. Also even once "accepted" by the lender different corporate addendums take away some protections afforded the buyer such as right to accept a better offer without recourse by the bank. The buyer will need alot of flexibility in case the deal falls apart at the last minute. In the case of foreclosure, what happens if the current occupant doesn't allow for access by appraisers, an important issue with the rise in popularity of FHA loans. Another issue we found this winter was with winterized properties. The buyer will typically have to pay for the property to be de-winterized and re-winterized at least 2x adding several thousand dollars to the expenditures of the buyers. In order to get an idea if the systems work in the property for the home inspection the utilities will have to be turned on, sometimes for a fee as well as having the lenders company de-winterize the property then re-winterize after the inspection (not cheap). Then repeat the process for the appraiser when it comes to that. How would most buyers feel after having spent all that money if the transaction didn't close. Granted that's a worst case scenario it just highlights some of the risks Further reason why dealing with an agent experienced in the short sale process and a thorough understanding of the process is vital. A buyers agent is hired by a buyer to make the sales process go as smoothly as possible and to limit the buyers risks to pitfalls in the purchase of a property. How different lenders operate in different states and with different properties in the same state can vary wildly.

My husband listed a short sale home, 5/4/3 pool/spa on the lake. The owners owed +-680k. He submitted an offer for 514k with 5k in escrow on 8/29/07 to the REO representative for Auroroa Loan. The entire commission Aurora had to pay was 3 percent and negotiable to 2 percent. He provided all info to Aurora Loan. He was treated like garbage by the bank and continued on with weekly calls, etc., Two days before Thanksgiving, Aurora stated thay wanted 530k - no less and no negotiation. Being as the market had dropped considerably since August, the clients declined. Aurora foreclosed on the home, placed it on the market with a 5% commission and it sold last week for 490k. My husband will not work with short sales again. PS - a note of caution, if you buy a short or foreclosed home, you are responsible for getting any tenants out of the property!

Many agents may be advising you based on their knowledge of the short sale process. The average time to get an answer back from the bank, based on my experience is somewhere between 45-60 days. And I promise after the first week you don't hear anythng, you will be contacting your agent incessantly wondering why you haven't heard anything. Let me break it down in plant life.. If I borrow $300k from you, and then when the note is due, I come back to you and say "look I don't have your $300k will you accept $200k, and we call it even?" What would you say to me? Well that's basically the position the bank is in. You/the seller are asking them to forgive a lot of money that is owed them, and they aren't going to be in any hurry to write it off just like that. They will be working on alternative ways for the seller to be able to get them their money! At the end of the 45 day period, there is no guarantee that the lender will agree to the terms of your offer. Additionally, during your waiting period, they can accept other offers as well. Once, after waiting with my client, the lender received another offer. The sellers agent came back to both me and the other agent and said both offers were close, and to resubmit our best offer, and guess what we waited again. Now in the end, my clients won the bid for the home, but in the meantime, they had to rent a property because their family had to find a place to live.

Most people looking for homes time is of the essence and they need to find a place for their family to live in, and don't have the luxury of waiting that kind of time and then come up empty, and then will have to start the process over again. Now if you are in a lease, live on a military base or stay with your parents and have that kind of time, then go for it.

Roxanne, we have had some good ideas being thrown back and forth here haven't we. You had inquired about statistics on short sales in my area. I don't feel that pulling any statistics of short sales would be accurate as that would go back to what I was referring to earlier that there are many listing agents that aren't familiar with the short sale process, negotiations and documentation therefore the statistics would not reflect accurate numbers, in my opinion. I would prefer to speak with agents who are actively taking on short sale listings because they have chosen to specialize in this area and talk to them about their success rate and from what they're telling me their success rate isn't 100% but they are having success and if they can save one homeowner from the disastor of a foreclosure then they're doing good.

Roxanne,

FYI, my home isn't listed for short-sale. I'm not planning on selling it anytime soon. Definitely not in this market. I plan to rent it. And by the way, it's fully paid off. I bought a fixer upper right out of college. So, it was easy to pay if off. No need for short-sale.

Roxanne,

I admit. I was underinformed. My assumptions were wrong. I read the article that you sent along with some other articles. I think knowing someone in the bank would help with the short-sale process.

I was skeptical about this whole short-sale thing to begin with. But I haven't given up on it yet. Optimism pays off in the long run. :-)

I recently read an article online regarding the difficulties with short sales. Link below. I think it'd be interesting to see more in depth investigating region by region as to the % of "short sale" listings that actually sell. Around here the short sale process has been quite drawn out. Buyers persuing this avenue should stay on top of their financing. With changes in the lending pratices they need to keep tabs that the loan program they were initially approved for will work with the foreclosure/short sale process.

I've also found that certain offices seem to have alot of the short sale/foreclosure listings but don't seem to service the properties very well. From not returning phone calls, to not monitoring to not wanting to reply with buyer questions/lender inquiries to facilitate the sales. We've had quite a few where the listing agent takes days to return phone calls from other agents. Another difficulty is usually the lack of details in the listing sheets, only 1 picture, very limited or sometimes no details at all.

From a buyers agent side there is also alot of risk for their buyers with the way the purchase & sales contracts are drawn up with no changes allowed to corporate addendums. The need to educate the buyers that the normal insights and protections afforded with a traditional sale often do not exist with short sale and foreclosure sales.

The link below is an interesting comment on the short sale market and what they are. Happy reading

Be,

Ask your agent you have been working with, he should be able to provide this info for you.

Your home must be listed to do a short sale, therefore the opposite would be true. You will generally have more short sales than foreclosures due to the involved process of the short sales. Because of the length of time usually associated with the short sale process they tend to sit on the market and for several months. We have seen the short sales process take anywhere from 2 months to 9 months to be foreclosed on or sold.

Once the property is foreclosed on it is usually priced at a realistic price and the banks are generally VERY motivated to get rid of them. Most foreclosed property is sold pretty quickly. If the banks don’t get an offer on the property within a very short time period they usually reduced the price by 10% and this continues every week or so until they receive an offer.

As I have stated before, I’m not opposed to the short sale process and I’m experienced dealing with short sales and foreclosures but I just want everyone to be well informed of the process.

Lynn,

Could you share with us the ratio of short sales that are closing in you area? I think it would be interesting to see the differences in closing rates with short sales in different areas.

With so many properties available many buyers would prefer not to deal with the short sale process. Often times they look towards foreclosures or owner occupied properties.

Here's a quote taken out of this article:
http://www.nuwireinvestor.com/articles/short-sales-fact-vs-f…
It takes a lot of patience and negotiating with many people to make [short sales] happen,” Alexis McGee, president of Foreclosures.com, said. “[Short sales are] long drawn out deals, with less than 10 percent of the lenders approving the short sale at my...discounts.” She said she does not recommend short sales as a primary investment option because the profits are lower than with other foreclosures, she said.

Tim, you may see that there are a great percentage of short sale contracts that are not closing however, there are many that are closing when they're handled by a seller's listing agent that is familiar with the negotiation process and document requirements. I feel a great part of those that aren't successful are partly due to the sellers agent simply not knowing what to do. The increase in short sales has come on with great force leaving many unprepared if they did not prepare in advance. In other words, they did not anticipate helping homeowners facing foreclosure. They're taking on short sales only to find out that they're in over their heads. These statistics will change as listing agents acknowledge that they must be educated in the handling of a short sale. Hopefully, this will not come at the expense of too many homeowners facing foreclosure.

Here's blog that talks about real estate in you neck of the woods, Be. Not the article I am searching for, but yet another conversation on the situation:
http://www.businessweek.com/the_thread/hotproperty/archives/…
Everything I have stated in my posts is stated here.

Be, it would be interesting to see if your agent comes up with the same kind of stats. Have him run the sold properties for the last month and run the same stats that I have below. I think he will come up with the same result, proving my point. Let me know what your agent comes up with...

I wish I had that kind of data to help me make my decision of buying my house. But since I'm not a real estate agent, I don't have one.

I have a question though. Is every foreclosed property listed at some point as a short-sale property? I ask since the answer to this question is directly tied to the percentage of short-sale which eventually turn into foreclosures.

Also, if the foreclosed properties were never listed as short-sale, obviously there would be more foreclosed properties than short sale.

If you could give me more info about the process and the decision points a bank goes through from a loan goes into default to selling a foreclosed property, that would be greatly appreciated. I would like to see in that process where does short sale phase stands and how much emphasis is given to it.

I'm off to look for the article. I would agree with you and your agent, they do cost banks a lot of money, but they are overwhelmed and not able to deal with so many short sales at once. This might be different with a smaller, local bank but when you are dealing with the big dogs there is so much red tape and they are often not equipped to deal with such a work load.

Again, this is been my personal experience in dealing with short sales. I think it would be interesting to see if this is the experience that most agents have had with short sales.

Let me give you an example taken directly from the North Port-Punta Gorda-Port Charlotte MLS, one of the local MLS's I am a member of.

Let's take the city of North Port:
There were 53 sales from Feb 8-Mar 8 of those sales 20 were foreclosed properties (owned by the bank). 31 were owner occupied and 2 were short sales. There are a ton of short sales listed, they're just not closing, for a number of reasons. Lack of motivation from the bank, response time from the bank, etc.

As you can see from the numbers above, the odds of closing on a foreclosed property are much greater than the odds of closing on a short sale.

I don't have any experience with short sales. However, my agent does. He's the one who told me that foreclosures cost banks anywhere from 50-100K. So, they will go out of their way to do a short sale rather than go for foreclosure.

I will concede to you if you show me a published article where it says 95% of short sales end up in foreclosures. Until then, I would have to go by my real estate agent who has over 40+ years experience in real estate market and who also happens to be a real estate investor.

Hence, I would have to assume that your numbers (95%) are just like they're pulled out of thin air.

Be,

Why wouldn't you want me as your Realtor because I tell it like it is? Do you have much experience dealing with short sales on a daily basis? I do. Banks are overwhelmed with all of the short sale files and in some cases have one person dealing with 3,000 files (for instance, Countrywide). Banks, for the most part, do not go out of their way to negoiate/deal with short sales in a timely manner. Foreclosures are much higher up on the list of importance because the banks actually own them. As I stated previously, foreclosures are a whole different story.

Sounds like you haven't had very much experience with short sales, Be.

95% of short sales result in foreclosures???

That seems unreasonably high....especially considering banks go out of their ways to make sure that they won't have to file for foreclosures. They will go for short sale any given day over foreslocures. Thank god you're not my real estate agent. I don't think that stat is even close to right.

Also, if you're not in a hurry to buy a house, short sales and/or foreclosures give you a huge leverage for negotiations. All you need to do is your due diligence.

In this declining market, I would buy a short sale or foreclosure anytime over a regular sale. But then again, I can afford to wait to get the best deal.

Gauri,

Your assumption hasn't changed.....it's still Greed. I rest my case.

Well said, Phil. I think that you are right on with your opinion.

I read somewhere that 95% of short sales end up in foreclosure. That's not great odds when you are looking at purchasing a home. I think that it is fine to look at all options, you just need to be aware of what you are dealing with.

As stated below, we have had much greater sucess with foreclosed properties as opposed to short sales.

Roxanne Moore, Realtor®
Re/Max Anchor Realty
North Port/Port Charlotte
941-626-3926 http://www.TropicalFloridaProperty.com http://www.TwoMoores.com

If you are considering living in the home. A short sale can take 2 to 4 weeks before you get an answer to your offer. The reason it takes this long is that the senior management of the mortgage company must approve the documentation, (ie purchase agreement from you, the hardship letter from the seller, the seller financials, the preliminary HUD1 and title work). The managment also orders a bpo (broker price opinion) and appraisal before they answer on your offer.

On foreclosure properties you get the property as is an no warranties.

Tim,
Here's are two important points to consider:

1. Because a home is offered as a short sale or foreclosure does not mean it represents the best deal you could find. As a matter of fact, many sales of homes where the owner has owned the property for 10....15...20...or more years are much better opportunities that homes purchased in the height of the "Hot Market." These long time owners can afford to accept much less because they purchased the property at a much lower price.

2. There is a much higher "degree of difficulty" in completing a "short sale" or "foreclosure" compared to a normal transaction. Banks don't care about commonly accepted real estate deadlines or practices. It is quite possible the agent is trying to protect you from the frustration and disappointment often associated with this type of transaction.

Hope this is helpful.

The "Eckler Team"
Century 21 Almar & Associates
Venice, Fl 34285

Gauri,

When a Realtor takes on a listing or takes out a buyer, there is no guarantee that the property will sell or the buyer will buy.

You can work with clients for a year, invest time, money and energy and not be compensated. Understand, we only get paid at closing.

My point is this, a realtor who lists a property let alone a shortsale and it does not sell is in the red. So much for the commission.

Your so called "facts" are nothing more than your opinion which you are entitled to. I take offense because you are suggesting Realtors only go after higher commissions.

If that were the case, we would not list lower priced properties or take out buyers in lower price ranges. The point I was trying to make was, which you missed, (go back and read my original post ) these types of properties are more involved, time consuming and complex and you had better know what you are doing before investing in them or your 20-30% below market value price, could end up costing you a lot more.

I think that all of the answers that have been given by the previous posters are good ones, but I wonder if one reason may be especially important in your situation. As has been mentioned, it often takes a long time to put together a short sale, and the process is complicated. I see that you are from Norway - are you a short-term visitor? I can imagine that local real estate agents might think it difficult or impossible to put a short sale deal together when their buyer has to leave in the middle of the process. We do deals with foreign buyers all the time, and they can certainly be done with email, faxes, and long-distance calls, but I'd hate to get involved with all of the hassle of a short sale transaction knowing that I'd have to be communicating with a buyer who is five time zones away.

I think that some Realtors might steer you away from short sales because they know that their commission is not guaranteed. I sympathize with them. Would you want to do a tremendous amount of extra work at your job, knowing that you might never get paid, or if you do get paid the amount is far less than your usual compensation?

From personal experience, I can tell you that in the Sarasota market short sales are occasionally not the best deals in a particular neighborhood. Keep in mind that in a short sale transaction the bank is trying to recover as much as possible, so they have a limit to how low they are willing to go on a property. I have sometimes found similar homes or condos offered by sellers who are not financially distressed, but who would just like to sell their property and get on with their lives. They might be going into a nursing home, or moving back up north to be closer to their family. In some cases they bought the property several years ago and their cost basis is far less than the outstanding mortgage on the competing similar short sale property. Occasionally, if you discover a seller who is in a situation like this you can negotiate a deal that is better and easier than the short sale.

Not knowing your circumstances, I won't discourage you from pursuing short sale opportunities. I'll just advise to to remember that there are other great real estate deals in today's market. Keep your eyes open, and I'm sure that you'll find one.

Charles Offer
Coldwell Banker Residential Real Estate, Inc.
423 St. Armands Circle
Sarasota, FL 34236
(941) 321-9664
charlesoffer@comcast.net

Tim,

It's obvious Gauri is NOT a Realtor, and he does not get the point, otherwise he would not make a comment like that. He forgets that it is a Realtor who is spending time, energy and dollars marketing the property and helping the sellers get through a crisis in their lives. By the way, we do not have to spend our time, and share knowledge and experience on this forum assisting buyers like Gauri or yourself, answer questions but we do.

Tim, I agree with the answers below and have gone in detail to describe the process in an article I recently wrote referencing a colleague. If you know what you are getting into and you have the patience and expertise, then short sales and foreclosures may be for you.

Tim, many answers have hit on some of the reasons; a short sale typically will take longer to get approved and closed however, each lender will vary with their own time frames. I've seen approval in two weeks but the majority will take longer 30-60 days. Also agents need to be knowledgeable about short sales so they can make sure that they ask the listing agent the right questions about the short sale listing and to make sure that the listing agent is on the ball. Also, many agents will not want to show a short sale if they know that their commission at a higher rate is not guaranteed. With a short sale everything is negotiable including commissions and unfortunately, you'll have agents simply concerned about what's in it for them. However, if you want to look at short sales and your agent denies you then simply look for an agent in your area who will look out for what it is that you need. Short sales offer fabulous buying opportunites so just make sure you're working with an agent who knows. With foreclosures being owned by banks, you'll have banks that may have certain requirements and disclosures that some agents don't want to be bothered with - same thing...find a new agent if they deny you.

There are qualified agents out there to assist you with short sales and foreclosures just seek them out.

A Short sale is when the bank is willing to take less for the property than what is owed on the mortgage, hence shorting the sale. We have found that very often the price is set way low on many of the short sales. The agent doesn't know what price the bank will take until they get an offer on the home. We often see the banks counter to an offer come back way over what the property was listed at and then both sides are disappointed. Another problem with short sales is that you usually can't get an offer back from the bank for several months (we've been waiting five months on one short sale with no answer back from the bank). So as you can see short sales aren't always the best option.

Foreclosures on the other hand are usually much easier to deal with. They often sell for list price or below and you usually only have to wait a few days for an answer from the bank. We have had several people get very good deals with foreclosures.

Hopefully, I have explained this process fully. If you are not working with an agent I would love to help you out with your home search in Sarasota. Please give me a call or email.

Roxanne Moore, Realtor®
Re/Max Anchor Realty
North Port/Port Charlotte
941-626-3926 http://www.TropicalFloridaProperty.com http://www.TwoMoores.com

Hi Tim.......Some Realtors do not want or have the experience to deal with these type of property sales.Patience is a virtue with the banks etc dealing with their unwanted assetts as they take forever to answer Realtor requests for information and final acceptable offers on their properties.Ask around other Realtor companies in your preferred area and ask to speak to a Short Sale/Foreclosure expert. Good Luck!

Hello Tim,

Short sales and foreclosures are not for the faint of heart. IThey are time consuming and complicated if you don't know what you are doing. t can take up to 60 days to receive a response from the lender regarding an offer in the case of a short sale. They take a long time to close, are sold "as-is", so it is prudent to have a home inspection done (around $300 depending on the property) before you make an offer. If there are too many repairs to be done, you just lost $300. Do that a few times on different properties and it adds up quickly. If a higher offer comes in after you have submitted yours, you have the "First RIght of Refusal" contingency, which means you can withdaw your offer or raise your offer up to the highest offer.


Bottom line, there are many good deals out there which are not short sales or foreclosures to purchase.
The list goes on........ However, with an experienced Realtor assisting you, it could be worth your while.