2 out of ten? 20% ? - You smiling optimist !! ;-)
I ran the following analysis back in August 2007, If I get time I will run it again; I don't expect huge changes. The percentage that I got back then was 16% I believe my sample size of 3885 listings
( 3350 failures + 535 successes ) was large enough to be statistically useful.
August 24th 2007:
I ran this analysis which estimates the percentage of short sales listings that sold The data base was from listings whose sale, pending, withdrawn or expired date was in 2007 Area: 7 major counties covered by Metrolist Sacramento Valley. Active listings are mentioned only as reference point; I did not predict the percentage of active short sale listings that might succeed.
Date of the analysis was August 24th, 2007:
- There were 1083 active short sale listings; 1975 listings were withdrawn and 785 expired since the first of the year, 55 were temporarily off market. There were 213 pending short sales, 29 were expired pending and there were 293 closed short sales. If we assume that all the pendings and expired pendings eventually closed, and assume that none of the expireds, withdrawns and temporary offs sold,
then the ratio was 3350/ 535.----16% sold, 84% did not sell,
or about 1 in 6 got sold.
If a lot of the pendings fell out of escrow (likely) that ratio could be much worse perhaps as bad as only 1 in 7 or 1 in 8 -
I only used the off markets, expireds and withdrawns. my ratio was: 1975 + 785 + 55 = 2815 / 535 That ratio is to 5.26 failures to 1 each pending or closed escrow.
Or 16 out of 100 short sale listings sold or went pending as short sales.
As for the percent that fell out of escrow, that statistic could be obtained from MLS data but would require hand sorting or special software. My personal anecdotal experience in the nineteen nineties was that one out of five short sale escrows closed. After the 4th burn, I managed to dissuade subsequent buyers away from short sale listings and eliminated them from search results disseminated to my buyers. My professional opinion was that avoiding entanglements in short sales was in the best interests of buyers that I represented.
In spite of all this, we got the transaction closed with 30 days of the accepted offer, due to a lot of follow-up by the listing agent and title agent.
All in all..I would chase another one, if I prepped my client for the roller-coaster ride!
Dan in Fairhope, AL
Thanks for the BA -
I linked below to an article in Broker Agent News by Steve Stovall. He gives a pretty good description of the short sale process, seller, property, paperwork, and buyer requirements
In my not so humble opinion ( imnsho,) ) The reasons why the failure is above 80% are:
1. Many sellers don't qualify, they think that being upside down and hating it is enough.
You must also be undergoing hardship not of your own making. such as illness, unemployment or natural disaster. Stovall gives a few other reasons.
An investor who made an unlucky or foolish investment, can't expect relief from a short sale.
2. Prospective buyers think that these are bargains, so very few buyers offer close to full market value.
The banks will not approve sales at huge discounts, tiny discounts: yes.
3. The wait, 4. the paperwork, the wait 5. the anti-buyer addenda, the long wait 6. the uncertainty of the sale, still waiting 7. the perception, if not a reality, of bad faith dealing by the bank loss mitigation managers.
Purchased a 'short sale' property at the offered and advertised price, did the homework and put 10% down, seller and her agent signed the contract. Later the seller wanted an additional 10% on the 'selling price', I needed a home, I am 70 and retired on SS, and this fit my needs. Seller and her agent signed the new amended contract and her agent give me a 'Closing Date', assuring me that all was approved. I then put my home for sale and purchased a moving van, and sold off all my excess property in an effort to increase my net-worth and 749 credit score. My house sold, I packed it out and moved to relative's home in AZ, waiting for the April 13, 2013 closing in Nevada. Two days before closing, they backed out and said that the lender was going to 'Foreclosure', leaving me high and dry. It is now May 12, 2013 and the house is still being advertised all over the MLS for the 'ORIGINAL' selling price.
Thus. two questions. One is how many 'deposits' can a seller accept on a 'short sale' home. Seems to me that this home is being used by the RE's as a 'bait and switch' or has nearly 200 offers on it, each with a deposit of 10%.
Second, since it now appears that the 'seller and her agent' had no authority to offer the house at the 'short sale' price, is this fraud? They lied about the 'Notice of Default' and misrepresented themselves as being the 'sellers', and having authorization, pre-approval, to sell at the listing price.
Thanks.. Out $18,000 over this mess.
The loss mitigation departments are still way to slow to even respond to an offer that was submitted and many buyers think that placing a deadline for response will work- which it does NOT.
we do everything we can to try and make the Short Sale process a smooth and efficient one, preparing the buyers and sellers for what is to come.
we all hope that somehow this will go much quicker and shorten the time to get this inventory OFF the market so all property owners will not continue to suffer...
Collier County Florida was worst hit in areas like Golden Gate Estates and Golden Gate City, Lee County Florida found Cape Coral and Lehigh Acres effected the hardest for Short Sales and Foreclosures!
Yes 20% is Optimistic.
I am looking for a change in Short Sales. In my opinion if the banks are going to start doing them, it is now.
After reading your post I crunched the numbers in AZ again. I have to search our MLS by remarks. Individual areas. Individual solds.
It is worse than I thought, However now I have the actual numbers to show my clients.
"Statistically useful." No not really.
There must be something more to Short Sales than just a late night commercial?
Even though I have a small area this is one stat that I don't try to keep up with. Either you get the house your working on or you don't. The length of time a Short Sale completion takes (usually 5-8 months) its nothing you depend on for cash flow.
Because of how the banks and mortgage companies have (not knowingly?) taken the Equity out of most all houses currently in foreclosure here in SE Georgia Short Sales are not viable options.
Where I am there has been alot of new building so 90% of the houses in Foreclosure were built less than four years ago. With the banks and mortgage brokers all directed to sell their "product' (95-100% Loans that jack up percentage rates that escelate the monthly payments above the local rental rates- teaser rate ARMS etal. The banks brought this upon themselves.) and not to push conventional 30yr fixed loans. This problem we have today was completely foreseeable, all we could do was hope it wouldn't turn into what it has.
You know as I do Short Sale & Pre-Foreclosure deals are equity based, when there isn't any equity and the amount you can create in a depreciating market doesn't justify getting involved you look to other markets.
So, if I could take a rain check on answering that question when we are in a more "normal" market. I'll have better input for SE Georgia.
It may come as a surprise but recently on a Short Sale I was doing instead of waiting for my overnite package to come to him (the loss mitigator) he was ready for me to make an offer right over the phone and then prepare my paperwork accordingly to our conversation.
Definately a sign of the times were in, shows how desperate these banks are right now with too, too much property taken back by them through foreclosures.
Think about it. They are essentially cutting the RE Broker out of the picture if it were to be listed, with making deals and decisions in minutes, which ends all chance of a brokerage getting that house as an REO. But then again there are so many the brokers will hardly feel the difference.
Be prepared and fast!!