Alert: Short Sales ARE CLOSING! But New Tricks!
NEWSFLASH! MANY Short Sales are NOW CLOSING! But still BEWARE!
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.
Quick Tip:
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!”
N
OW?
Be Smart. Weed out & Pounce on the Good.
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)!
Inventory levels
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.)
Example:
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.
I go more into this over on my Realtor to Realtor Active Rain post where short sellers debate the concept. Anybody Offering on “Under Contract” Short Sales?
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).
c) Look for Listing Agents with Prior closed short sales. Have your Buyer Agent run a FranklyCRA and see if they have closed a short sale before. IF they have, your chances skyrocket.
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.
Hours saved and money on gas to see a 1 photo short sale= Priceless!
Thanks Jeff from OurFairfax.com for being the #1 Contributor on FranklyMLS.com!
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?
The End.
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.
Written by Frank Borges LL0SA
Broker FranklyRealty.com
Owner FranklyMLS.com
Please report types.
Pendulum photo by Brandi666
Fork image by KevinDooley
Random Chair on Head by jawcey
Cat Pounce by Yogi
Back up truck by Wellohorld
- 12
- February
- 2009
Ironically, your request to report typos has, well, a typo.
Seriously though, I credit the ease of use of your site with helping me find what became my first home. A million thanks.
I love all 3 future buyer ideas!! Those are great! I definitely want to know what these particular properties are selling for and when they come back as REOs.
Long time reader, first time poster. Thanks for all the free useful information that you put on this site. I’m sure I speak for many people when I say your work is very appreciated. You definitely have created quite a powerful search engine on FranklyMLS.com which for me has supplanted other tools I used to use (including Redfin). Keep up the good work.
Frank, you are the black belt! And lecturing while skiing!
Beautiful!
—Brad
Just read your short sale post. Very interesting.
Quick question– when you mention offering on a SS “under contract,” does the apply to the listings that have gone “gray” and are crossed out, or just the ones still active, but say “contract accepted” and what not?
Hey BB,
I am referring to the ones on FranklyMLS.com that are crossed out and officially “Under Contract”.
Great idea. I’ve been conditioned to just skip over all short sales, but it seems like that strategy would totally makes sense.
It would definitely require some scrubbing like you said though, to weed out the good ones so you have my vote on some new franklymls features for that…
I’m going to have to re-look at all the short sale listings I’ve been ignoring to maybe find a good one to test this theory out on :)
Great post, Frank! There is a montage in the movie _Major League_ where the Indians start to get a little bit better and the locals begin to realize that the Indians “aren’t so bad” after all. However, the groundskeepers remain unconvinced as evidenced by the subtitle: “They’re still sh***y.” With regard to short sales, for various reasons, I’m still one of the groundskeepers! =)
Warm Regards,
Lee
Frank – thanks so much for taking the time to speak with me this morning about my situation. I really appreciate it. I can’t believe that I hadn’t conceptualized the notion of “left pocket/right pocket” money and eating a monthly loss by renting my property in the way you described to me before. Though I know you don’t do rentals, I think there could be some value in putting that in a separate blog post just to get that notion out there for people to understand. Or perhaps I could do a post like that on my own blog!
Hi Frank, a bit of relevant data from the Arlington County (VA) assessor is that in 2008, the 280 (approximately) REOs in the county sold for an average of 15% under the assessed value. A short sale can be a better deal than an REO because the (real, human) seller still has motivation to keep up the property. For short sales, it is imperative to set the buyer’s expectations about what might happen with a short sale: it may or may not get to settlement; the contract is not necessarily a contract in the classic sense because the bank may demand additional requirements; the bank may even demand more money from the buyer as well as slices of the agents’ compensation. With a short sale, a buyer may well be advised to submit the offer AND keep on house hunting.
Ski cam!
Love it!
Don’t know how the camera didnt shake more!
I think the short sale highlights would be helpful. Perhaps even going further to be able to access some kind of listing agent profile to see their selling/buying record or link to their site would be even better. Don’t know if this is allowed or possible.
BTW your MLS site and blog are awesome!
We are looking at homes in Manassas (I know, I know, ‘Manassas???’ but they have big lots.) Anyway, short sale prices are now over county assessment (2009). What the hell? And they are selling, well they are are getting contracts, who knows what happens in the end. Every nice house (really, it seems) in Manassas is a short sale — there are so few normal for sale houses in the area it is amazing (S. Manassas, 1 acre or more, newer houses, bigger than 3k feet). I am totally baffled??? Any wise advise would be really appreciated. Great website! Hard to find information found here!
Hey Jack, First of all ignore the tax assessment for the most part. Lets say a home’s tax assessment drops $150,000 when the new report comes out. Does that mean the home’s value drops $!50k overnight? No. Don’t use that data.
Look to supply and demand and what things are closing for. And make sure you have an agent that knows how to deal with short sales. Let me know if you don’t have one.
Yep there are a TON of biddings wars on bank owned too. And the inventory is tanking!!
As in, the # of homes sold DOUBLED and investors have come out in drives. THe inventory has shrunk by 60%. ANything can happens, but what do you think will happen when each home has 5 offers on it… hummm.
Frank
Frank
Franky,
I’m new to the Mkt and I want to thank you for making such a great site…I think you can become the CARMAX of Realty…giving the buyer the tools to make decisions and find properties….Links to Local tax offices, GIS mappers, etc would be helpful and reports on Agents that have closed SS/REO’s would be helpful. nOT ALL AGENTS ARE VERSED in the new mkt and finding one that gets you that house you have been dreaming of..is priceless…
This is an awesome site and this Realtor knows what he is doing. Sharing that with people like he does, and I know he’ll go far. I wish more agents were like him. He does research and uses facts to come to conclusions. How novel!
We are currently working with a realtor to sell our home, but are not happy and plan not to renew when the contract expires in two weeks. My husband wants me to line up a new agent, but I am concerned that it would not be ethical to talk to another realtor while we are under contract with the first. Is it?
I am a seller doing a short sale on my townhouse and received an offer in May for $349K after 6 months of $25K reductions every 4 weeks. I have lost my job last year and have health problems which render me unable to find more work in my field of expertise. I have a first mortgage with wamu of $295K and a 2nd with citifinancial for $130K. Since citi is the one who has to take the loss my agent has been negotiating with them only. They initially refused the offer because they want wamu to take a loss also, but later offered to reconsider it “if i make another payment”. They have done this twice now and each time i complied. They continue to drag their feet on responding to our negotiations. I have not paid my HOA in 4 mos and I think they will initiate foreclosure in about 2-3 mos. I have not defaulted on my mortgage, but after doing research, it seems like i need to stop paying the mortgage. Is this true? I don’t want to foreclose but i cannot afford to keep paying them and at this stage it seems that I have no choice. I am in deep financial hardship. My house has been on sale since november 2008. I have had this offer on my townhouse since May and there has been no movement. Citi keeps saying i need to make another payment in order for a short sale to be considered.
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)
BRYAN SAYS THE ABOVE WOULD BE AWESOME!!!
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.
BRYAN SAYS THE ABOVE WOULD BE AWESOME TOO!!!
Looking for approved short sales in Miami any ideas on how to find a bank approved list for the Miami area or do I just have to call ba banks
Hello,
We are trying to close on a short sale that we have had undercontract for 7 months!! The bank finally approved it, but now the “investers” are saying its not actually approved? I don’t understand!! Now we have to wait another 30-45 days before we know if we close? We are suppsoe to close on August 10th. Whats going on? Have you ever heard of this happening? I thought once the bank approved it, we were good to go….please help!
Thanks,
Claire
Hello Claire,
While I do not understand the exact nature of the bank approving it, but the investor (is that the investor in the mortgage of the owner of the house for sale, who might have been a flipper or investor) attempting to stop the approval. What I do know is that EVERYTHING abnormal is normal with a short sale! Think of it this way. The months of uncertainty in order to save $10k – $50k is like a salary. You are basically being paid for the hassle factor. Sorry. I hope you were warned about the uncertainty.