is anyone else finding ridiculous listing prices on short sale properties just to get an offer and to find out what bank will accept?

Asked by Elisabeth (Lis) Weinpel, Sparta, NJ Thu Feb 17, 2011

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18
Lee Goade, Agent, GALLATIN, TN
Fri Feb 18, 2011
I agree with both Marc and Cameron on many points.

S/S's are like the Wild West right now, untamed territory with no orderly Checks and Balances. It is far too easy to end up with strained or even ruined relationships by working with S/S Buyers in the current condition and Chaos of S/S's....

As Cameron points out; "Know your Market"... If it's too Good to be true, Chances are, IT REALLY ISN'T! Banks are not stupid (they do their Homework) and they are only in it for the $$$. They DO NOT have to sell by S/S. Often times it is much more lucrative for the Bank to move to a Foreclosure and remove most of the problematic details surrounding the property. So for us Agents, why not just cut out the frustrations and ruined relationships and deal with properties that are legitimately on the market?

There is much to beware of and even more that you cannot possibly know going in. Like; how many liens will end up on the property prior to close. Homeowners in distress may have countless credit issues besides the house. In fact, most people tend to prioritize and protect their Home placing their Home Loan as a top priority. (it is often the last thing to fall victim to hard times...)

It is usual and customary to have liens (C/C's, Medical, Auto loans, mechanics,...) show up even after ALL is seemingly well with the rest of the Deal 4, 6 8 months out after beginning the S/S process.

There are far too many reasonable reasons for why Not to Buy S/S's and very few advantageous reasons to pursue them...

If more Agents would start educating their clients on the pit falls and deception of "Short Sales" then eventually the banks could clean up their own mess and sell the Homes in a ligitimate and better regulated format...

http://www.trulia.com/voices/Home_Buying/Who_decides_closing…
2 votes
Marc Paolella, Agent, Succasunna, NJ
Thu Feb 17, 2011
Hi Sarah,

Yes, I tell them up front that I will not deal with short sales, because in my opinion, they are not on the market. A house that is on the market is able to be offered upon, negotiated, and closed in an orderly and timely process. A short sale does not meet those criteria. It may or may not actually be on the market, the asking price may be a ploy to get offers that may or may not ever be accepted, the closing date cannot be guaranteed, the home inspection issues may or may not be negotiated. It is often unclear who is in charge of the decision to sell in the first place. If one of my buyers wants to pursue something like that, I inform him that there are plenty of agents able to help him, but that my reputation lies in providing a high level of reliable and predictable service for my clients. Regardless of whose fault it may be, a frustrating and impossible short sale transaction will leave my buyers without good feelings, and will leave me without valuable references. So I do not do them. In fact, if I have a buyer whose primary attraction is short sales and foreclosures, I refer them out. And even if I have a legitimate buyer, if their price range is at the lower end of scale and they are looking in a market that has a lot of short listings, I refer them out. They are just not worth it. They are a temporary phenomenon anyway as the economy is beginning to pick up steam, employment numbers are gradually improving, and short sales will soon be a horrible memory. I have simply chosen to accelerate that process in my own practice.

-Marc
2 votes
Bill Eckler, Agent, Venice, FL
Sat Feb 19, 2011
Yes, and this makes it ever more important for agents working with buyers that are considering these properties as viable options to explain that the bank will likely counter with a higher amount than the asking price.

Bill
1 vote
Tammy Benkwi…, Agent, Somers, NY
Fri Feb 18, 2011
I also counsel my buyers that because there is no single process that every bank follows, a short sale purchase can be truly unpredictable. They are not meant for every buyer. If you are a flipper or have cash and time to waste, great.

Unfortunately too many agents take a short sale listing without having a clue and before making sure that seller even contaced their bank to get the ball rolling.

When there are many other perfectly good homes to buy that are not short sales, the buyer simly has better choices in my area. The banks need to get it together!
1 vote
Peter Colt, Agent, Irving, TX
Fri Feb 18, 2011
Yes Lee is absolutely correct here. The advertised price for a Short Sale is just a bogus number to get offers rolling in and then hold the buyers in a holding pattern until the dust settles and the lender finally lets all parties know what the real price is going to be. This is the biggest shell game in real estate I have ever seen. Amazing that it is acceptable and not found to be false advertising per the statutes that govern: Deceptive Trade Practices Act. Not sure how the agents are getting around this, but it seems to me that it is an area that is rife with lawsuits and legal issues for those agents that are pursueing this method of marketing.

Key cause for DTPA actions:

+ Advertises goods or services with intent not to sell them as advertised

+ Engages in any other conduct which similarly creates the likelihood of confusion or of misunderstanding

+ Taking advantage of bargaining power of vulnerable groups


the FTC does not require that actual deception occur. The FTC merely requires that a party have the capacity to deceive or commit an unfair trade practice. If a business or individual has this capacity or tendency to deceive, the FTC under the FTCA may order the company to cease and desist the deceptive or unfair practice. State statutes similarly do not require that a company specifically intends to deceive, nor must a company always have knowledge that a statement is false to be liable for misrepresentations made to a consumer. Each state defines the penalties. 3X damages is common.
1 vote
Cameron Piper, Agent, Forest Lake, MN
Thu Feb 17, 2011
Banks are getting smarter and aren't just taking offers because the agent says it is the best they can do. Too many agents are taking short sale listings that shouldn't because they have no idea what they are doing. If you list short sales regularly you know that the price submitted to the bank needs to be defensible because the bank will independently verify (either through appraisal or BPO) the value against the offer price. Price reductions need to be in line with the marketplace otherwise the BPO or the appraiser will report a higher value and the sale you tried so desperately to get will fall apart because the bank will want more than the buyer is willing to spend because the list price was artificially low

Cameron Piper
Realtor
Independent Short Sale Negotiator
Coldwell Banker Burnet
Web Reference:  http://www.campiper.com
1 vote
Marc Paolella, Agent, Succasunna, NJ
Thu Feb 17, 2011
Agreed, I don't like the dishonesty and duplicity, so I just choose not to play the game. There are plenty of honest and decent buyers and sellers to do business with.

-Marc

Marc Paolella
Relocation Director/Appraiser
Century 21 Joe Tekula Realtors
201 Route 10 East
Succasunna, NJ 07876
Phone (direct): (973) 584-4235
Coolest map-based home search: http://www.marcpaolella.com
1 vote
John Walin, Agent, Libertyville, IL
Fri Feb 18, 2011
Short sale starts with a simple premise, legit hardship of the seller! A lot of agents take a short sale listing when the seller doesn't have a hardship and surprise, it won't get approved. But to answer your question, some agents do price on the low side of the continuum in hopes of throwing it over the fence and see what the bank says.
0 votes
Gina Chirico, Agent, Fairfield, NJ
Fri Feb 18, 2011
Lis,

Not really. I've been dealing with some short sales in the Belleville and Bloomfield areas of Essex County and they are priced relatively close to today's market value.

Gina Chirico, Sales Associate
Lattimer Realty
973-715-1158 cell
973-575-6353 ext 17 office
Gina@GinaChiricoRealEstate.com
0 votes
Annette Law…, Agent, Palm Harbor, FL
Fri Feb 18, 2011
Rediculously low prices? As pointed out previously, this makes it incumbant upon the buyers agent to do the appropriate research and educate the buyer what the likely acquisition cost may be. After all, here in FL every short sale listing has in the public remarks, "List price may not cover costs associated with property acquisition. 3rd party approval required."

Sarah, I do not refuse to show short sale properties, however, I make it really, really, really clear that the likelihood of success is less than 30% and while waiting the outcome of their offer,the #2, and #3 traditional choices willl be sold. This is backed up by a non-refundable deposit that will be applied as credit towards an eventual purchase. Most citizens don't have what it takes to endure a 'non-seasoned' short sale. Too many are in hot pursuit of the mythical million dollar beach front that sold for $200 K. The greed factor won't allow them to accept the fact that this legendary transaction NEVER happened. Of course, they won't trust their real estate professional and believe any failure to acquire such a deal is associated with their representation.

I do not find the low price profile to be any more objectionable than assignable contracts. It is simply a tool to counter the gaming the banks are doing to advance their agenda. Because each situation is different based on bank(s), negoiator, location, situation and direction of the wind, a logicial process has proven to be elusive.

There is a way to make short sales work for sellers and buyers consistantly, but that is for a new thread.

Annette Lawrence
ReMax Realtec Group
Palm Harbor, FL
727. 420. 4041
Web Reference:  http://www.mydunedin.com
0 votes
Cameron Piper, Agent, Forest Lake, MN
Thu Feb 17, 2011
The cure to this ill however is very simple - know your market. If a price seems too low and the property is a short sale - avoid it. If a short sale has price that is in line with the market feel free to make and offer - pretty simple really.

Cameron Piper
Coldwell Banker Burnet
Web Reference:  http://www.campiper.com
0 votes
Sarah Goulart…, Agent, Plymouth, MA
Thu Feb 17, 2011
I find it interesting that many of you said that you will no longer work with short sales. Out of curiousity, how do you handle that with buyer clients? Do you refuse to show them short sale properties?

I think short sales will be around for a while and I can't imagine being an agent and completely refusing to work with them.
0 votes
Lee Goade, Agent, GALLATIN, TN
Thu Feb 17, 2011
"SHORT SALE" -The Longest 4 letter word in Real estate!

Yes, I am actually in the middle of one right now. The Bank tried to bring us up 9k above list on a 99k house!
0 votes
Suzanne MacD…, Agent, Succasunna, NJ
Thu Feb 17, 2011
No more ridiculous than the offers I am getting, $230K on a house that appraised at $325K a week ago!?!

This game we play with shoIrt sales is the most ridiculous thing I have ever seen, on all sides, but I guess if you want the piper to pay you at the end of the day you have to play the game...and this one has absolutely NO rules!
0 votes
John Sacktig, Agent, New Jersey, NJ
Thu Feb 17, 2011
Hi Elisabeth,

Not really and typically if you do find this situation this happens by inexperienced agents. That really do not know what to do.

Short sales are not all that time consuming if you know what you are doing. You need to know how to handle the paperwork and contacts. These transactions, if you know what you ar a doing can usually be done within 30 - 80 days.
0 votes
Dp2, , Virginia
Thu Feb 17, 2011
Banks are using all kinds of gimmicks, stalling tactics, and other techniques to try to get multiple buyers in bidding wars. Essentially, each bank already has a number in mind, and if the other stuff didn't work, then they'll proceed with a few "Jedi mind tricks" to persuade buyers to offer more.

They purposely price multiple, similar properties at different price points to test the market, and to develop a feedback loop.

BTW, these games aren't unique to short-sales; the same banks play the same games on their REOs too.
0 votes
Bill Gosman, , Maryland
Thu Feb 17, 2011
Yes, but I see it the other way also. That is the buyer offering to0 high a price to get the bank to accept their offer knowing that the appraisal will come in low opening up re negotiation with the bank.
0 votes
Marc Paolella, Agent, Succasunna, NJ
Thu Feb 17, 2011
Hi Lis,

Yes, standard operating procedure. That is why I will no longer make offers on short sales. Too much time is wasted and there is no level of honesty to depend on. I choose not to operate in this segment of the market. I'd rather not waste my time.

-Marc
0 votes
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