Statistics show that only about 1 - 10 (10%) of all short sales actually close, but I believe that number is higher. A good agent that is a shrewd negotiator and can multi-task should close over 70%.
Are they even worth placing an offer?
Absolutely, if you do a little homework. Before placing an offer, have your agent ask a few simple and basic (but very important) questions of the listing agent:
1. how many loans are involved? If only one, and it was a 'purchase money' loan, then it should be a fairly simple task as long as the seller has a legit hardship. Even if it was an investment purchase, it still has a good chance of getting approved if there's only one loan. Two loans are a different story. If they were part of an 80/20 purchase loan, and with the same bank, then it might not be too bad although it will decrease the chances of approval. If the 2nd loan is a HELOC (Home Equity Line of Credit) and it was taken out after purchase as a loan on the equity of the home, then your chances of success diminish greatly. The reason being this lender does not want to 'roll over' and take just a few thousand dollars to release their lien, which is what the 1st lien holder will try and do.
2. Which banks are involved? Wells Fargo is quick and efficient, and I've closed several short sales with them in just 4-5 weeks. EMC Mortgage, Litton Loan Servicing, Select Portfolio Servicing, Aurora Loans, First Franklin...these are examples of good banks to work with. They are fairly well staffed and respond quick to the agent(s) request for updates and information. Bank of America, on the other hand, is NOT on this list. They are basically overwhelmed at the moment; I was told last week that the week prior they received 400,000 NEW requests for short sales. They are VERY slow to respond to offers and it's not unusual for them to take 12-15 weeks to get a short sale approved and closed, if not more.
3. Are their any other misc. liens on the property? Tax liens, HOA liens, medical/child support liens, etc. These can all hinder the approval process and lengthen it by several days if not weeks, and can sometimes kill the deal entirely.
4. Is the owner/seller cooperative? If the seller doesn't care what happens, and the agent(s) and buyer(s) care more than them, then it's likely you'll have a very difficult time closing the transaction.
5. Who determined the listing price, the bank (pre-approved) or the listing agent? This is crucial. If it's priced too low, then the bank will have a hard time approving the short sale. If it's priced too high, then you run into the problem of it not appraising for the offer amount and maybe overpaying for the property.
6. Look for the ones that say 'Pre-Approved; buyer fell out'. Those should be easier and quicker to deal with if the listing agent knows what they're doing.
You also asked.."if you do place an offer, should it be for the asking amount or lower?"
Have your agent do a market analysis to determine what you should offer. It might be at full list price if the home is priced correctly and in good condition with some upgrades, or you could come in a bit lower and see what the bank says. Always remember...you can always increase your offer and meet the bank's demands for a higher purchase price, but you can't decrease it unless the appraisal comes in lower than your offer. That being said, sometimes the bank just doesn't care what the appraisal says...they want $XXX dollars and they'll either wait until they get it or they'll just foreclose.
In this aggressive market, I'm seeing multiple offers on the good short sales within the first week or two on the market, so it's not unusual for the offers to exceed the listing price by several thousand dollars.
As always, you should consult with a licensed Realtor who can help guide you through the buying process. *remember...by using a Realtor to represent you in the purchase of a home as your 'buyer's agent', you don't pay for that service...our commission is paid by the seller!*
Hope this helps guide you in the right direction!
Century 21 All Star, REALTORS
I understand that short sales are an unfortunate situation for both the seller and the mortgage holder, but they are far better than a forclosure. They can definately be a pain to work, but the key word here is work, and that should be a part of a realtors job. They are also necessary to reduce the ballooning inventories most markets are experiencing right now.
What do you think we should we do if someone cannot pay their mortgage?
Jim did provide some very good and valid information about SS's. I also agree with Randy in that "some" cases short sales will make you crazy... it's all relative. I've closed a short sale in as little as 2 months and I also had a nightmare that that took one year (buyer wanted to wait to purchase in a specific area).
Many times, the listed price isn't always accurate or final. Offer what you are willing to pay and if the comps justify and support a fair maket price that the bank will consider (due to the condition of the property, neighborhood/city trend, loan balance etc...). Remember, the bank will decide the final price that they will agree to sell it.
Have your agent do their due diligence. Keep in mind that the price you offer needs to reflect a realistic price in 2-3 months time (or more) by the time you receive the final approval letter and most importantly... will the property appraise then!
In general, shorts sales do take longer... but that doesn't mean you should avoid them. Just like California, Arizona has a ton of short sales and bank owned properties. Some neighborhoods have a large percentage of short sales and some don't. Make sure you are working with an experienced agent that is familiar with SS's and bank owned. In regards to how many SS's go through? A couple of years ago, a 10% success rate (what Jim said) is probably correct. In today's market, it is much higher than that. Good luck in your home search!
With Kind Regards,
Bank Owned and Short Sale Specialist
Weichert Realtors Elite