Owner,
You bring up a good point- that the real estate market is so variable from region to region, sometimes even from one neighborhood to another.
Something to keep in mind though: the way a short sale works is banks tell interested buyers to present their highest and best offer. Properties may be listed lower than market value because banks know that this can generate interest, possible multiple offers and therefore put pressure on buyers to bring in higher offers. The number I would be more interested in is what the sold price is.
John, that figure is also probably extremely variable, depending on what area you are. I think people were at first jumping on the short sale bandwagon, thinking they were getting a deal, but as reality has hit the market, buyers are learning that there is often no advantage in the short sale and the process can be so frustrating and time consuming that people are starting to stay away.

In our area short sales are often listed on the market for much less than other homes.

I recently heard that currently only about 60% of short sales are closing, not sure if anybody can collaborate this info?

Joe,

Since short sales require both the current owner and their bank to agree on a sale price the asking price is normally quite solid and offers little flexibility. Short sales property that does not sell often ends up as a foreclosure.

P.S. Buyers have the impression that they are getting great deals on short sales. In most cases they are not such a great deal and are actually a big pain.

Joe,

I have yet to see a huge advantage to a buyer regarding a short sale other than the house falls into a price range that the buyer can afford. That particular house may not have been on the market had it not been for the fact that the seller needed to do the short sale to avoid foreclosure. In other words if that seller was still able to make the payments, the house would not have been an option. The short sales have opened up more homes for buyers to choose from.

Joe,
Having to go into a short sale is simply is the lesser of 2 "evils": with a short sale being less catastrophic on the seller's credit than a foreclosure.
It can be a very difficult and time consuming process but unfortunately, it is the reality of the market today.
The banks don't care about incentives. They care about their bottom line.

So what is the motivation for a buyer? It sounds like a short sale can take a considerably larger time to go under contract. If a buyer has to wait 4 or 5 or 6 months for a bank to review the offer, then there should be some incentive for the buyer to wait that long.

Patrick,
I think you said it better anyway!

Joe- Not all homes sold at short sale are good or great deals for a buyer. There are many variables. The good thing is that the seller is usually living in the property, so at least they are maintaining the property as opposed to a foreclosure.

After a short sale doesn't work and if they seller is 90+ days behind, then foreclosure proceedings start.
For the buyer, its important to know who own the house- which lender? That can make a difference.
If you'd like to discuss any further, please contact me. Thanks and good luck,

Ken L.

Sorry Joan,

I must have been writing while you posted. I didn't mean to say the same thing that you did. :-)

Every situation is different. Short sales are usually listed at current market value. With a short sale you are dealing with the seller first so they put the house on the market at what they can currently expect to get for the house. For example they may have paid $300,000 when they purchased it but not the market supports a current value of $250,000. So it should sell around the same price that any other house in similar condition, size and area would sell for in that price range.

If the seller accepts an offer that the bank considers too low, they could reject the short sale. If the bank does not approve a short sale then they would most likely start the foreclosure process. During that foreclosure process the house may end up in a sheriffs sale. If not purchased at sheriffs sale then the bank will get the property bank and will probably sell it as an REO (bank owned) property.

Foreclosures differ in that they are owned by the bank and usually vacant and not kept up. There is a better chance of getting foreclosed houses at a lower price.

Joe,
In a short sale, the lender makes an agreement wih the seller to accept less than what is owed on the mortgage.
This means that market price has fallen below what is owed.
As a buyer, you are still expected to pay market price. The seller entertains all offers and it is up to the lender to decide whether the offer is accepted or not.
Short sales are often a precurser to foreclosure. The difference is that in a short sale, the house is still owned by the seller, but offers are approved(or rejected) by the lender. In a foreclosure, the property is owned by the lender.
Hope this helps.