They are the best deal in town, by far. More so than bank deals. But if you don’t read this carefully you will be FORKED!
In case you are new to the world of home shopping, there is something called a Short Sale. You need to read the details on my post: Short Sales Are “Fake Listings.” Only 5% Close!
But the 1 liner explanation is this: A distressed seller facing foreclosure tries to get the bank eat the losses and allow a “short sale” thereby selling the home for 10-20% below market and the bank eats the $50k to $250k loss instead of the bank losing even more money in foreclosure.
The problem was that only 1 in 20 were closing. Read the post above to learn why, but it had to do with clueless listing agents (many still exist) and banks having 1 processor for 600 homes.
REOS/ Bank Owned MLS Listings are 7-12% below market
Short Sales MLS Listings are 12-20% below market.
Do you get why this is important? See Wheel Estate Cam Video
1 YEAR AGO
Everyone wanted a Short Sale. They seemed too good to be true… well they were. Then came horror stories of people waiting 4 months and then the bank saying “sorry we changed our mind” and leaving people homeless (they already sold their home!).
6-9 MONTHS AGO
Nobody wanted Short Sales. The pendulum swung too far in the other direction. “Hell no, I’m staying clear of Short Sales, they are fake!”
Well the time has come to putting our thinking caps back on. You have to learn how to spot a “bad” short sale and how to know if a short sale is “real.”
Bad short sales still have a 1 in 10 chance of closing (up from 1 in 20).
But a “Good” short sale can have a 80% chance of closing!!!
NUMBERS OF SHORT SALES CLOSING
In my post over a year ago only 3 short sales had closed in all of Arlington in a year out of many dozens of failures. In the last 4 months 3-4 have closed in my building alone (Clarendon 1021)!
Short sale inventory can vary greatly by each area. Sometimes the “hotter” areas will be so infrequent that a Short Sale might not be an option (keep reading to learn about offers on Under contract Short sales!!! shhhh). Also if you have a good agent (insert plug here for me), for condos, consider asking management about upcoming delinquent condo units.
NEW TRENDS FOR SELLERS/ Listing Agents
1) Undisclosed Short Sales
SS got such a bad wrap that agents stopped putting “Short Sale” in the public remarks. Some even removed them from the Realtor-only remarks. How is that allowed? Something about privacy, and the rights of the seller. And who cares about the buyer anyhow, right?
If it has a crazy low price, like 30-50% off assessment … and it is NOT a bank owned property, it is likely a short sale. (only FranklyMLS.com lets you sort by tax
assessment as a ratio of list price, try it, it is the #1 best tool for bargain hunters, see video)
Sidenote: Undisclosed Bank Properties. This really blows my mind. More and more I am seeing REO and bank owned properties (after foreclosure) that do NOT say “bank” anywhere in the public remarks. Maybe people are getting scared of bank properties too? See video of me skiing a black diamond while talking about banks.
2) “Approved Short Sales”
These can be pretty good. This oftentimes is an experienced agent that has already done the 1-3 month processing and has an “ok” from a bank and a set price. You can sign up for alerts on FranklyMLS for the phrase Approved Short Sale Virginia these can be good, but they go FAST. Note that 50% are under contract.
3) 3rd Party Short Sale Negotiators for sellers
This is a brilliant idea. Non-Realtors that are hired to negotiate short sales for the listing agent. I spoke with one company today. Their team comes from former bank loss mitigators. So they know all the ins and outs. They closed 60 last month! They know exactly what each bank needs, to the “T”. Sure they cost about 1%, but who cares? If they can double your chances for closing a place, and for 20% under market AND make sure the seller doesn’t get stuck with a note of deficiency judgment… well worth it.
OLD TRICKS/TRENDS BY Listing Agents
1) Way Underpriced/Fake Short Sales. Recently one of my buyers found a $2.5M home that was listed for $700,000. Real or fake?
2) Clueless Agents. I am a 3 year member of the NVAR education committee. We are trying our best to get more free education out there for Realtors to list these properties.
NEW TRICKS FOR BUYERS
1) Offer on “Under Contract” short sales.
This is interesting. Do not skip this, you will be quized.
There is a huge Realtor debate on what it mean to be “Under Contract” with a short sale. Even though I got an “A” in my Contracts class in law school last semester, I am not a lawyer, and I am not giving you legal advice.
MRIS (the local MLS provider) has rules that you must put a listing as “Under Contract” when the seller signs the offer from the buyer (and then most people ignore the listing, but not us! & readers of Blog.FranklyRealty.com (make sure you subscribe, do it now, I’ll wait) ).
However some listing agents would prefer to keep it as active so they can get more offers. Obviously this ticks off the buyers.
On my previous short sale post I covered advice directly from the legal department at VAR. It talks about signing it “contingent upon 3rd party approval” versus “Acceptance upon 3rd party approval.” A night and day difference. One is under contract, one is not.
But regardless, the seller would sign anything. They would sign an offer for $100. They don’t care. They are having the bank eat $100,000+.
So my point is, something might be “Under Contract” for a long time, but if the bank doesn’t sign it, it means nothing. So why not offer on homes that have already sat for 30 days and are about to be considered by the bank (takes the bank at least 30 days to hire an appraiser/BPO, review the paperwork.)
Sold Market Price Home A: $500,000 (recently sold unit)
Short Sale Home B: $400,000 which is “Under Contract”
Active Regular Home B: $490,000
Offer $410,000 or $420,000 (note it takes hours for us to come to a real price based on FranklyCRA, and tons of other data, but play along here) for the place a month after it goes under contract.
Technically it would be a “bank up offer” but the bank would see both offers (in some/many cases) and reject the initial offer (which is signed by the seller) and take the 2nd offer that is $10-20k higher thus saving you $70k vs the next “regular” listing.
2) Short Sale Negotiators FOR BUYERS!
Make sure you read above about how these new companies help listing agents. But I think they should help buyers. I plan to use them, I will let you know how it goes. The next offer I put in, I will require in the offer that WE pay* for this 3rd party company to take over the negotiations. Sure we’ll stick around if professionals are running the show. They can get the deal done in 50% less time, and twice the closure rate. When I say “We” I refer to adding the 1% to the seller’s closing costs. This step could really turn around how short sales are viewed.
3) FINDING GOOD SHORT SALES
a) Spot them using the Short Sale Scrubber (tm). Only on FranklyMLS.com, when you search, if you see a * next to the price, that means the words “Short Sale” (or 3rd party approval, and it removes the * when it says “Not a short…”)
b) Look for a HIGH # of Photos. While not conclusive, a listing with over 5 photos is 4 times MORE likely to go to closing vs a 1 photo listing. Lazy agent tends to lead to failed short sales (not always).
d) Top 10 questions to ask a Short Sale.
This was featured in the Washington Post. Ask these questions before getting serious. If the agent can’t answer them, walk. Today I got a “It is none of your buyer’s business if my seller client is still paying the mortgage.” Oh, yeah, my client waiting 6 months because the bank keeps cashing the checks and has no reason to eat $200,000? Yeah right. We have the right to know, or we walk.
e) Short Sale Alerts on FranklyMLS.com
You can set up alerts for phrases like Short Sale Arlington. Our site updates every 90 minutes. Make sure your Realtor is high tech and can do all the contracts digitally (like I always say, dont be silly and try and use the listing agent, subscribe to my blog and soon you will learn why). Consider even offering at or above list sight unseen (that would take another full post to explain pros and cons).
f) Wiki, Wiki, Wiki. 61,000 Additional photos. Found NOWHERE ELSE!
Don’t forget, FranklyMLS.com is the first and only site in the USA that encourages buyer agents to add photos (see video howto) to photoless Short Sales.
ATTN READERS: Why don’t you help out too? You, or your agent, should be contributing photos.
Look at Jeff Royce’s contributions to photoless short sales. Every other site has 1 photo for 14 of these 17
homes. Because of Jeff, we have 300+!
Every other MLS site= 14 homes 14 photos (1 each)
FranklyMLS.com WIKI= 14 homes 350 photos.
Sidenote for Agents: Ask me about getting a Free Branded IDX. Yep, FranklyMLS.com with your name on each page and email alerts.
FUTURE BUYER TRICKS: (sign up for the new features blog for FranklyMLS.com)
1) What do you think of a feature that would put a GREEN * next to a Short Sales listing if it is being performed by an agent that has previously closed a short sale? I think that would be killer, anybody else? (please add comments)
2) Hyper targeted email alerts for homes in an area by “great short sale agents” that have closed 2+ short sales in a year. These people know what they are doing, and you can get a steal. Currently this is not automated, so email me directly to sign up for your area.
3) What do you think about a feature that lets you “favorite” a short sale listing, and if it goes off the market, but comes back as a REO, you get an email alert? Also working on alerts for closed price. Anybody want to get an alert the day your Favorited home sells with the price, including subsidy?
So, sorry for the long post. It was 3 months coming. I feel relieved. Now I can point people to this post instead of spending an hour on a 1/4th as in depth email.
Don’t forget to subscribe to this blog in the upper right corner of Blog.FranklyRealty.com and forward this to anybody considering buying short sales. Note every area of the country is DRASTICALLY different.