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Abresson, Home Buyer in California

What's wrong with short sales?

Asked by Abresson, California Sat May 24, 2008

Hello, I am a buyer looking for a home in Pasadena, Glendale or Burbank areas. I am working with a very dedicated real estate agent, but recently she's been talking a lot about trying to avoid short sale homes. If I was in a hurry to buy, I understand that she wouldn't want me to wait around indefinitely to hear from the bank, but i am not pressed for time, and she knows it. Ia m looking for the best deal for my money, whatever the terms are. Many of the homes in my price range are short sale homes. She is the 3rd real estate agent I have met with, and the previous two have also advised me against short sales. What is the big issue there?

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BEST ANSWER
Hello Abresson, Short sales are not "wrong", but are you prepared for your interest rate to go up while you wait 60-90 days for the transaction to close? Are you prepared to pay to redraw loan documents, if necessary, because the bank's loss mitigation department personnel needs more time to evaluate, or go on their scheduled vacation? Some banks, by the way, are responding on a timely basis, but many have staff with little or no prior experience, or, on the other hand, the listing agent or the seller may not have submitted everything the bank needs for a file that ends up being several inches thick. If that's OK with you, there are definitely plenty of properties waiting to be sold right now in the short sale mode. If you're an all-cash buyer, then you don't have to worry about interest rates going up (which could mean an increase in your monthly payment of 50-$100 or more). But most people require financing and will therefore be impacted by market changes, and even the disappearance of their loan program which could completely remove the buyer's ability to but at this time.
2 votes Thank Flag Link Sat May 24, 2008
Abresson,
As long as you have the patience to wait for an answer, there is nothing wrong with short sales. I have clients that really want a home and we have submitted a back-up offer on that home, but we are continuing to look while this offer gathers dust. Keep looking for that home that fits into your budget and if it is short sale just submit the offer. Make sure that your agent gets all the information that he/she can from the listing agent about the home. If the home was under contract while listed as a short sale, the listing agent may know exactly what the bank may be willing to accept.

On the other hand!
I just finished listening to an insider with Countrywide Home Loans talking about their reorganization / elimination of jobs for those handling short sales and he talked about one clerk who had nearly 850 files on her desk and she was lucky to handle 3 files in a day. It didn't take me too long to figure out that at that pace she has over 9 months worth of files to complete, if she was not given any additional files.
It is situations like these that cause clients to walk away from offers that they have submitted and even agents to be frustrated.
Keep going and hang in there!

Charles
4 votes Thank Flag Link Sat May 24, 2008
If you have not committed to your agent and made a buyer's representation agreement, it's time to do so. Time and the work involved for the pay-off are significant issues for agents, and we often take undeserved heat from buyers who become frustrated by the process. Most of us will endure these for clients, but have no obligation to customers who will make no commitment to us.

Months of uncertainty followed potentially by disappointment are the principal issues for buyers. As long as you understand the frustrations and are willing to endure them, there is no reason to avoid short sales or REOs. Short sale properties will often be in better condition than an REO, so scrutinize the REOs a bit more closely if you look at them too--and get an option period and an inspection no matter what you buy.
3 votes Thank Flag Link Sat May 24, 2008
If you are not in the rush to buy a home, SS may be for you then! Some buyers/investors find their niches in Short Sales, REOs, or Incidental Properties. Not many Realtors are yet experienced in this type of transactions, since it may take a while before the Lender may respond for an approval.

Tell her if you can use another realtor who specializes in this type of transactions, after all she is not doing nothing more than submitting the offer, the Listing Agent on the other hand is doing the hard part of the negotiation and will get the same commission your realtor will. Perhaps, this is the most common rejection to SS from many of the colleagues out there.
2 votes Thank Flag Link Sat May 24, 2008
Abresson, there's absolutely nothing wrong with Short Sales. Yes... they take a long time and Yes... sometimes they are not successful, but the opportunity is there. If you have time before you buy, do not give up or avoid looking at homes that are Short Sales. I am attaching a post that I wrote on Short Sales in Pasadena.

Good luck!
2 votes Thank Flag Link Sat May 24, 2008
Abresson,

I agree with Julia as to the fact there is nothing wrong with short sales. You must be prepared for the interest rates to go up though. They can take a long time, however, if you get the right agent who is on the listing side and the right bank, then you could stand a good shot at it. But remember, just because the seller agrees to the price, does not mean that the lender will. You can wait and wait, but be turned down still. So, it all depends on what you want to do. Yes, there are deals out there to be had, but it sounds like you have a lot of patience and time, so if you want to do it, then do it! I would just tell your agent you want to make offers on short sales. If he/she won't write it up, then you have the wrong agent. They should do what you want because after all, it is going to be your house! Good luck!
Regards,
Joan Patterson, B.A., G.R.I., A.S.P, Realtor
Keller Williams Realty
8250 White Oak Avenue, Ste 102
Rancho Cucamonga, CA 91730
951-204-1864
2 votes Thank Flag Link Sat May 24, 2008
Hi therer Abresson, It sounds like your agent is not working short sales. If you think this is what you want then you should work with an agent who can explain all the pros and cons about short sales.
There is nothinng wrong with short sales, they do take longer. and require a lot more paperwork, Some agents steer clear of this market section.
KInd Regards
Michael Barron
First Team Real Estate
(714) 552-6817
2 votes Thank Flag Link Sat May 24, 2008
Abresson,
I understand there can be problems with short sales, but that does not mean you should avoid them. After you've clearly explained that you are in no hurry and you're more concearned with the house of your choice, there are several Realtors out there that know how to work short sales and get the home of you chose within 60-90 days. Typically, you can get a better deal for your money with a short sale, depending on the price and area of the home. I think you should talk to a Realtor in the area that you like who specializes in short sales.

Jimmy
Atmosphere Realtor
2 votes Thank Flag Link Sat May 24, 2008
Nothing is wrong with short sales...they just require a little more patience on your side...and a good Realtor to lead you through the paperwork.
2 votes Thank Flag Link Sat May 24, 2008
I am a short sale specialist in the #1 foreclosure city in the country(Cape Coral Fl.)The #1 reason for Realtor reluctance to deal with short sales is because the buyer will continue to shop while waiting to get an approval and may find a better or more suitable deal without that realtor.You have to know who is mitigating the deal and have confidence with their abilities...Patty McGuire 239 333 9301
1 vote Thank Flag Link Wed Jun 11, 2008
One thing that people did not realize short sales homes are very LOW ENERGY level, according to Chinese Feng Suei. So, anyone trying to "connect" with it will be "drained". The previous owner of such property eventually got drained all the energy and life screwup and gave up the home. If you trying to follow that, you will assume the badluck for sure.

In general, realtors are "flippers"; they flip a property with 6% gain or commission. The faster they "flip", the more profit they will make, otherwise, they lost money, time and effort.

So, who is going to want to flip something hard to flip? In general, I do not advise realtor to buy those short sales either. Realtors' energy level normally HIGH, but you still can not afford those draining, especially if you got many in hand.

So, who are the ideal people to deal with them? Since those properties all have Feng Suei issue, it may require some modification of the property, so may be a builder or handy man can do. After got the property, you need to knock down something, add some rooms ...etc, may be ask a Feng Suei master to give you advise, or may be read a few Feng Suei books if your energy level is very high.

If you are "rush" need to buy and move (e.g. your lease expiring), your energy level is LOW. Think of the energy is the combined of your "time" and "resouces".
1 vote Thank Flag Link Sat May 24, 2008
A common problem with "short sales" is that you have a property with (likely) a first, second and sometimes, third mortgage- which make the amount owed on the property substantially (in some cases) higher than what the property is worth. Banks look at the total owed, including their own fees, when viewing offers that are going to come in closer to market value (if you are aware of market value).
The real estate agents that you've talked with know what the value vs. amount owed is, and likely also know that it's going to end up on the courthouse steps, at which point, the bank will likely reduce the price to a reasonable value- much better than you might receive in a short sale situation. Unless the bank were willing to drop the price to an amount below current market value, which many won't until it's foreclosed upon, an agent watching out for your best interest might discourage that avenue. Best to get an agent that is extremely well versed in that area, if that is your plan. Just an opinion.
Web Reference: http://optionsrealty.com
1 vote Thank Flag Link Sat May 24, 2008
Hi Abresson,

Your Realtor's are giving very good advice. Many short sales never happen. Agents, sellers, and buyers put hours of effort into a deal & the bank can say "NO" after several months of work.

I'm finding traditional sellers to be the most likely to negotiate in this market. Noone is going to prevent you from closing the sale. Yes, short sales often have low prices but what does this mean? We may or may not sell it to you at this price. You should spend your effort with a seller who truly has the ability to sell their home.

I'm sure you'll get many responses encouraging you to go ahead with short sale offers on this site, but I think you're better off working with an agent you trust, especially if they are advising you to concentrate on traditional sales.
1 vote Thank Flag Link Sat May 24, 2008
Hi Abresson,

I am curious what has happened since you posted your question. You received many good answers, but I am sure others would like to know where you are in the process...please let us know and best of luck to you!

Jodie
0 votes Thank Flag Link Sat Jun 7, 2008
If you are not happy with the service your agents is provide you fire her and you can search the MLS for free at my website http://reolicensedspecialist.com or email me and I can send you daily or weekly updates in the area you want to buy. All I need is your criteria: Price, area, features, etc.—and you will get daily or week updates directly from the MLS. I specialize in Foreclosures and I am a real estate broker for over 20 years.
0 votes Thank Flag Link Fri Jun 6, 2008
There are no guarantees, banks change their minds and their first order of business after the offer is presented is to lower the broker compensation significantly. I'll help my clients with them, but I won't prospect for them.
0 votes Thank Flag Link Sun May 25, 2008
THe bank can be slow in responding. If you need to get something quick I wouldn't go this route.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sun May 25, 2008
I am closing a short sale in Hawaiin Gardens. I made an offer when the NOD has been filed. I made an offer on this a month ago, and this week the bank is sending the appraiser to the property. It's a lot faster if you do it this way because the bank's only choice is to sell or foreclose the property once the NOD has been filed. Ask your agent about the status of the buyer and how many months they have missed the payments. You can also tell if it's getting close to be foreclosed if the property has been in the market for months.
0 votes Thank Flag Link Sun May 25, 2008
Hi A
There is nothing WRONG with a short sale if the seller and the bank(s) taking the loss are in agreement with what terms,conditions and timeline are in place. The problems arise when expectations are not realistic. Every transaction is different because there are different circumstances surrounding the "short sale" of any home.
One thing for sure is that the BANK is taking a major asset loss and they never get in a hurry to do so ( unless the 2nd mortgage holder is about to be foreclosed by the 1st mortgage holder).
For this reason many agents shy away from showing these....the payout for selling such a home can be days or it can be 6 months away.
If the selling agent has done their homework, presented the hardship to the lenders of the seller's home and pre-negotiated out a sale price , then things can go rather smoothly. If this has NOT been done prior to putting the home on the open market it can set the stage for frustration ..especially for a BUYER who wants to close quickly. Sorry to ramble, but I hope that expalins a few things
Ct*
0 votes Thank Flag Link Sat May 24, 2008
Abresson,

Have your agent run the stats for the areas you are looking in. I have ran the stats for the 3 different hot "short sale" markets here in San Jose and have found that the short sales actually sold at a higher price per square foot then private, motivated seller homes of like kind.

The trick to finding deal is finding a seller that is motivated and has equity. Short sales are typically properties that do not have much equity and banks are not necessarily the most motivated sellers. Add that information to the other headaches of slow response, as is, buyer pay all inspection fees, and you have to ask yourself if they are really the "deal" you are looking for?

Good luck,
CJ
Web Reference: http://www.TalkToCJ.com
0 votes Thank Flag Link Sat May 24, 2008
Hello Abresson:
Why focus on a short sale? The best way to get a good deal, is to look at properties already forclosed and owned by the bank. You have time therefore, you can make offers on REO If the bank doesn't take your offer, wait and try again at a later date. With REO 1-they want and need to sell 2-you deal with one entity 3- The bank knows its bottom line and consequently you get a quick answer.
Versus short sales which most likely will have 2 lenders involved, with no one willing to give in or know what is going on!. Short sales are very time consuming and are most generally not succesful. Wait until they get forclosed on. and go shopping.
0 votes Thank Flag Link Sat May 24, 2008
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