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SHORT SALE MISCONCEPTIONS COULD BE MISSED OPPORTUNITIES FOR AGENTS.

IS KISMET AT WORK IN THE MYSTERIOUS WORLD OF SHORT SALES??

SHORT SALES HERE, SHORT SALES THERE, SHORT SALES EVERYWHERE.  The significant number of short Sale listings and sales these days have led to the misconception on the part of many agents licensed within the past 5 years or so that Short Sales.

Kathy Schowe writes today about a Gentleman who made $1,000,000 in the past years but now wants to sell his home as a Short Sale.

The ubiquity of Short Sales caused by the mortgage mess is unique to the real estate industry.  However, SHORT SALES are not new and agents with some years in the business have likely been through a few of them in the past. 

WHAT'S THE DIFFERENCE NOW??? 

• Value of the property - $300,000.
• Owner owes - $450,000.
• Estimated loss - $150,000. 

That's a $150,000 loss that the owner's mortgagee(s) is expected to take.  Further, the mortgagor, the owner who purchased the property, lived in it for some time fully expects to complete a Short Sale transaction and be left with no liability for the deficiency beyond a reduction in credit score.  A reduction in loss of credit score that will be less than that they would experience with a foreclosure. 

The difference in Short Sales now and in years that predated 2004 or so is that the mortgage company or investor is now expected to take the loss. 

SHORT SALES OCCUR ANY TIME A PROPERTY TRANSFERS AND THE SALES PRICE IS LESS THAN THE OWNER/SELLER OWES ON THE PROPERTY.  Over the years, as a Buyer's Agent, I have represented a number of home buyers who purchased homes whereby the seller owed more than that for which they could sell their home.  In order to complete the sale, the OWNER/SELLER came to the settlement table with money to pay the mortgage company the difference in what the home was selling for and that which they owned.  I've had closings whereby the sellers came to the settlement table with $10,000, $25,000 and one time over $70,000.  It was still a Short Sale. 

Short Sales whereby the banks take the loss are a very recent phenomenon.

The thought of a mortgage company taking a loss on the sale of a property was unlikely and foreclosure was the naxt logical step if the owner/seller didn't have the resources to cover the loss. 

SO, WHY ARE THINGS DIFFERENT NOW???  LENN'S EPIPHANY! 

• On the average, short sales sell for more than the same property after a foreclosure. 
• Short Sales result in better public relations for the bank than a foreclosure.
• Short Sales avoid the lengthily FORBEARANCE offered to owners with government backed loans.

HUD (and VA) FORBEARANCE.  Compare the relative short typical Short Sale transaction of 3-10 months with that of an FHA loan and the HUD forbearance of 1 to 2 years.  With a short sale, the owner often continues to make mortgage payments, albeit perhaps not as timely as before, but the band is offsetting their loss.  With a HUD forbearance, the home owner may not make a payment for 1-2 years before accepting a modification of their loan or the property going to foreclosure.

BANKS THAT FORCE FORECLOSURE OF EVERY PROPERTY IN DEFAULT contribute to the serious decline IN market value of communities.  Market adjustments are often good for an inflated market, but severe declines eventually cost the banks, the home owners and the taxing income of local municipalities.

OPPORTUNITIES FOR LISTING AGENTS.  Before you dismiss that owner as a Short Sale because the bank doesn't accept their HARDEHIP, it is sometimes possible that a seller will pay the difference themselves.  It will surely benefit an owner with the resources to pay the deficiency themselves rather than have a credit report showing a deed in lieu of or foreclosure or even a short sale with the deficiency taken by the bank.  A good credit report is, after all, money in the bank. 

KISMET.  One thing we've learned about financial institutions that take severe losses in the market place is that profits are enjoyed by the financial houses and their investors.  Losses are suffered by the tax payers.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

• BUYERS WILL NOT GET OFF THE FENCE!
• BUYERS WILL NOT PULL THE TRIGGER!
• BUYERS ARE SO SKITTISH!
• BUYERS ARE NOT MAKING REALISTIC OFFERS!

How often do we read or hear all of the above day after day?  The only folks who will really predict the end of the real estate industry recession or depression, depending on your location, is the NAR or some agents who believe that if they think good thoughts reality will follow. 

YES, we, REAL ESTATE AGENTS, can force a reversal of the buyers market in many communities across the country. 

Come on Lenn, get real.  Our inventory is a 15 months supply.  That's a long way from becoming a seller's market or even a neutral market.  Have you taken leave of your senses. . . . .

again?? 

LET'S START WITH SOME FACTS so we can get off on a realistic start.

• FACT:  SOLD TRANSACTIONS will remain stagnant for the next 3-5 years.  Expect real estate transactions to remain no more than about 2/3 of the average number of transaction represented by the years 2000 through 2005. 
• FACT:  THE TREND IS FOR MORE FORECLOSURES.  As a percentage of listings and SOLD transactions, foreclosures will dominate some markets and grow dramatically in others. 
• FACT:  THE TREND IS FOR MORE SHORT SALES.  The percentage of short sales will increase as home owners are relocated, lose jobs or 3-5-7 year ARMs reset and force mortgage payments higher. 
• FACT:  MOVE UP HOME BUYERS WILL BE RARE.  If home owners cannot sell their existing home because they have negative equity, they cannot buy the larger or second home.
• FACT:  OVERPRICED LISTINGS WILL EAT YOU ALIVE.  Home buyers have the power if not the market knowledge to reduce the glut of homes on the market. 

STEPS TO BRING SOME BALANCE TO THE REAL ESTATE MARKET.

AGENTS:  Use the American Recovery And Reinvestment Act to the fullest.  Last time I looked, the Home Buyer Tax Credit of $15,000 was reduced to $8,000 and is still limited to First Time Home Buyers.  But Senator Johnny Isakson, the Georgia Republican who sponsored the amendment, has suggested that the measure could re-emerge in a stand-alone bill.  Even if the benefit is limited to $8,000 and first time home buyers, USE IT.  GEEZ!  ABUSE IT.  I surely intend to.   Learn about this benefit and include it in your online advertising.  Based on what I'm reading today, it will be good for buyers purchasing a home before December 1, 2009.  Create a flier to explain the tax credit from an authoritative source and include it in every buyer's folder ( YOU DO HAVE BUYER'S FOLDERS, DON'T YOU?).  Print the fliers and include them in the brochure for all of your listings.  Include them in the handouts at your open houses.  

STOP AVOIDING THE SALE OF SHORT SALES.  So what if banks don't know how to sell real estate.  I read many agent who say that they have a duty to show homes with pathetically low co-ops.  Yet, some of these same agents will refuse to show short sale listings because of the nightmarish delay, arbitrary acts of the banks and less than helpful listing agents.  START SELLING SHORT SALE LISTINGS TODAY.  I can tell you that your buyers will love you.  Compared to the average foreclosures listing, short sales are usually in lovely condition, represent homes in very popular areas and communities and are offered and SOLD at prices far below what they would be selling for if they were not a short sale.  WAIT A MINUTE!!!  First, do your homework and learn about the different bank procedures.  Prepare your buyers to have patience, respond as quickly as possible when the bank finally assigns a negotiator and asks for a document.  If they have a 48 hour deadline, get on it.  I've come to refer to this indecent as the "negotiator's test".  This happens with such regularity, I believe it's done just to see if the buyers are serious and the buyer's agent is on the job. 

SELL SOME FORECLOSURES and get these things off the market.  Foreclosures are a dream transaction compared to some short sales.  No, the moon is not made of cheese and your buyer will probably not get the house with a 50% offer.  Foreclosures are priced by appraisals or broker's price opinion and, while they are often discounted, they are not anywhere near 50%.  If they were, they'd all be SOLD.  These ridiculous offers are a waste of everyone's time.  EDUCATE YOUR BUYERS by providing them with the LIST-TO-SOLD price statistics in that market.  Once a serious buyer has a handle on value and understands that the banks usually get near or often more than the list price, they'll know that they need to get real or get to the rental office.  Be firm and if the buyer is more interested in negotiation than finding a home, NEXT.

AGENTS:  LEARN ABOUT THE FHA 203(k) Purchase and Rehabilitation Loan.  If you are in a market where a number of foreclosures are in need of repair and may not qualify for normal FHA financing, educate your buyers about the FHA 203(k) loan.  It will help you sell homes and help your home buyers earn some equity quickly. 

IF AGENTS AND BROKERS KNOW THAT THEY ARE WORKING WITH ONLY 2/3 OF THE BUYING POOL, THE REMAINING 1/3 BEING THOSE MOVE UP BUYERS WHO CAN'T SELL, we should be figuring out ways of attracting home buyers who can buy and CLEAN OUT THE INVENTORY of foreclosures and short sales. 

WHAT HAPPENS IF WE CLEAN OUT THE INVENTORY OF foreclosures and short sales?? 

• Fewer homes on the market. 
• Buyers better prepared. 
• Banks are slow but they have begun to learn. 

PRICES WILL BEGIN TO RISE?   EVERY LISTING AGENT'S DREAM.  You won't even have to advertise it.  The NAR will do it for you.  They'll do it whether prices rise or not so take advantage of the opportunity and include the announcement by the NAR that "home prices rising" publication by the NAR in your buyers folders, at open houses and in your listing brochures.

NOW GET OUT AND SELL SOME REAL ESTATE.  CLEAN OUT THE INVENTORY. 

WE CAN DO IT.  NO ONE ELSE CAN. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-Mail.