Short Sales & Foreclosures

Short Sales

I saw this image online and just had to use it! I’m asked very frequently “What is a short sale?” so I thought I’d comment. Let’s say a seller has loans on their homes of $700,000, and that seller get’s behind on their payments and is forced to sell to get out from under the burden. Now let’s say that the home’s value has fallen to $600,000. The seller, and their agent, list the house for somewhere near it’s current market value or less and when they get an offer they attempt to negotiate with the seller’s lender, or lenders, to get them to accept less than the full amount of their loan payoff. I don’t think it’s quite as dire as this picture suggests…but it’s no picnic either. There’s a very common perception, that’s been true in my experience, that it can take months for a lender to decide what to do with an offer that comes in asking for them to take a loss. Often a listing agent makes several calls per day to the lender just trying to find the right person to talk to…and thereby leaving lots of messages that never get returned. It’s an extremely tedious battle and often the buyers give up and move on when frustration sets in. Sometimes it all works out too. It’s tough to make plans, spend money on inspections and appraisals…etc, when you don’t really know if you’ll get the property in question.

In Foster City there really have not been many of these sales so far this year and mostly have been confined to the lower price ranges in condos. I’m certainly not trying to discourage anybody from taking a run at a short sale, because there’s plenty of them outside of our immediate area but you should know going in that it could be a long process.

A foreclosure is a bank owned property. It is a sale that takes place after the bank takes the given property back from the seller and after the short sale fails. Typically, it’s less bureaucratic (believe it or not) to buy a foreclosure because now the bank is ready to get it off of their books. I showed a foreclosure today in Redwood City that I thought was a really good buy listed in the low $800’s. It sold a couple of years ago for $1,200,000. Foreclosures like this can be really sad. There were holes in the walls, dirt and grime all over everything, the kitchen was a mess and there was spoiled food in the sink. I really thought you could feel the sadness of the sellers who had lost their home and were, most likely, evicted. Lot’s of times sellers facing foreclosure are not as proactive as they once were about maintaining these houses…and it shows. It’s sad…and it also is an opportunity for a buyer.

Comments

  1. We purchased our first short sale in April…it was a little more diffulcult than explained…but because we had taken a course and got personal training from a reputable business it was easier than we had anticipated…the bank offered us a list of other homes they have in pre-forclosure which is cool…we have just began to market the home we purchased and are looking forward to a profit of about $20-25,000 profit after marketing costs etc…looking forward to the next deal. Short sales are great!!

  2. Short sales take so long and leave so much uncertainty for both the seller and the buyer. Congrats Kathy on your first short sale!

  3. Short sales are becoming more and more popular and they will be the norm in the coming years. Bank owned property is good but short selling a house is great for all parties involved.
    Jon Christopher of Short Sale Way

  4. Gerald Coghlan says:

    I’ve been looking for info on how much REO mortgage holders are willing to discount a short sale. Is there a ballpark figure of what percentage of the note which they are holding that they might consider accepting to get the property off their books, if you are a qualified buyer. Is there a place where I can research recent short sales?

  5. Jim Minkey says:

    Hi Gerald…welcome to the blog. I really don’t think there’s any “formula”. My advice to you would be to take your best shot…and have lots of patience. Secondly, an REO is different than a short sale. REO’s are more likely to impassionately dispense with a property to get it off their books. I’m not familiar with any database exclusive to short sales…etc.

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