Tuesday, December 16th, 2008 at 7:20 AM
Balancing Desperation and Price
Rob said,
You can smell the desperation. Why can’t we see the desperation prices?
Most listing agents think their job is to protect the sellers, and prevent them from giving their house away. It’s only after a few months of trying to sell, and prodding usually from the sellers themselves, that you’ll see any big price drops.
More and more short sales are being listed at below-market prices, trying to appear desperate. But they’re not desperate – if anything, the sellers are the opposite of desperate – they are milking the free rent and have no motivation to cooperate with the sale.
It’s a racket that’ll catch up with sellers and their short-sale listing agents in the next few months, because buyers, and the buyer-agents, are going to avoid them.
We’ve already seen and heard the disgust from buyers about their attempts to purchase a short sale; long delays, much uncertainty, other offers submitted late in the game, etc. When they include an ultra-low list price and get several offers right away, it’s a turn off to buyers.
If there were more desperate-looking prices, would you trust them? I already don’t trust the low list prices on short sales, and if a regular seller went way low, it would look fishy.
Just do what the REOs do - list your house a little under market, and call it a bank deal!
Here’s an example of how a low-priced short sale that backfired.
Remember the psuedo-auction in San Elijo Hills? They listed this house for $399,000 as a starting bid, and gathered around the interested parties on a Saturday to find the winner.
But the highest bid was only $455,000, and guess what happened – the short sale failed and Wachovia foreclosed on the house. They listed it for $559,900 on December 1st.
Don’t be surprised if we see more short sales looking like bull!
Posted on Tuesday, December 16th, 2008 at 7:20 AM in Short Sales | 18 Comments » | 
Print
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
Short sales seem to be a real joke.I would not even look at the crap.The agents slap a low price on a house and try to get a bidding war going.It is a long drawn out process.Bank owned the only way to go right now in my eyes.
arizonadude | December 16th, 2008 at 7:28 amwhat I don’t like is the bank owned properties that expect you to qualify with their bank before excepting an offer. They do this for two reasons 1 they want to know if you actually qualify 2 they want to offer you financing directly. What’s annoying is every time your credit is run your fico score takes a hit. If you apply to multiple bank owned properties this can hurt you.
shadash | December 16th, 2008 at 7:56 amI had a conversation about this with a listing agent during our househunt last year. The selling bank wanted to credit check us even though we were already prequalified with the lender we were going to use. I asked what would be the point, since the REO already demonstrated that they were unable to distinguish between good and bad loan risks?
We passed on making an offer.
GeneK | December 16th, 2008 at 8:42 am“…More and more short sales are being listed at below-market prices, trying to appear desperate. But they’re not desperate – if anything, the sellers are the opposite of desperate – they are milking the free rent and have no motivation to cooperate with the sale….”
Excellent point, Jim.
Jenny | December 16th, 2008 at 9:54 amI seem to be getting told different things from a listing agent of which I am trying to purchase a property through a short sale. The difference here is the owner is not in the property milking the free rent. Is there a reason why a bank or a listing agent would not accept an FHA loan for this type of situation? Does the FHA inspection pose a problem? What about the second on the house? Does this need to be satisfied prior to securing a purchase contract?
Neil Diamond | December 16th, 2008 at 10:06 amFHA appraisers are required to mention any repairs they deem necessary, and the seller usually fixes them.
The sellers are normally required to fix them, but in a short sale they may not care, or the agent may not want to risk the hassle, and as a result, FHA offers are discouraged.
There are many offers going unanswered just because the listing agents don’t know how to deal with them. The buyer’s agent has to be deft in pushing the deal through, with or without the help of the listing agent.
Jim the Realtor | December 16th, 2008 at 11:05 amThanks Jenny, and the sellers’ lack of motivation is running rampant currently.
The lenders aren’t foreclosing, so the sellers are on easy street. Then, because their agent put a ridiculously low list price on it, they get a bunch of showings and offers the first week, and figure they’re done cooperating.
But 2-4 months later is all that counts, once the bank has made a determination.
If you’re a buyer, that’s when you want to be hanging around, in case a good deal comes of it and the other buyers got sick of waiting.
Jim the Realtor | December 16th, 2008 at 11:11 amcontinue rant…
I am really sick of the value-range pricing on short sales too.
Agent and Seller, how about if I tell you what the price is going to be, and you send it in, seeing how you have nothing at stake. And you better ask me nicely too!
Jim the Realtor | December 16th, 2008 at 11:19 amRight now there’s not a lot of pressure on sellers unless they have equity. And that latter pool is growing smaller every month or has already gotten out. Unemployment is the only new surprise factor here, turning someone who thought they could ride this out into someone who wants desperately to save what equity he has by selling.
Of course, you do always have the “old” surprise factors like divorce, job transfer, etc.. The economy always has a funny influence on those factors.
BDiego | December 16th, 2008 at 11:23 amThe new chasm. People qualified to make offers and people qualified to accept offers.
Rob Dawg | December 16th, 2008 at 12:27 pmLove them horns!!
Downturn | December 16th, 2008 at 1:17 pmJim,
Thank you for the personal response in #6. Could the FHA repairs deemed necessary be completed by myself or does the FHA requirement place the onus solely on the seller? If a small amount of mold were to be found, if I was willing to sign a waiver absolving the seller of any obligation, would that be something a seller/ bank would look at favorably?
Your comment about the listing agent is correct, I am not sure he understands what he is doing. Why would such a transaction be placed in the hands of someone with no experience? I really want this house and have offered above asking price to get it only to find out that FHA is some sort of pariah.
One last question (for now). How can a buyer’s agent push a deal through with or without the help of the listing agent? How is this possible? They seem as if they are the gate keeper between you and the owner/ bank. Is there another way?
I am very thankful for your time and advice.
Neil Diamond | December 16th, 2008 at 1:26 pmShort sale comment…
Since we just closed on one, I have to say, short sale sellers are a piece of work. First, they are the ones losing their home and in over their head, but they want to blame the world for their misery. They will fix nothing, leave nothing and act like they deserve everything. News flash!!! YOU don’t own the house and you don’t call the shots, the bank does. Hell, I did you a favor. You should get on your knees and thank me. RANT, RANT, RANT!!!! Ok. I feel better. Our sellers did things like take shower heads, mirrors, fixtures and clip the surround sound wires. I’m glad the real estate and mortgage industry shake down is weeding out people like this and I also feel they deserve what they get. No pity for the greedy and flippers. So much for getting rich, huh? boo-hoo.
Oh, and one more thing…What’s up with Banks renting back to the losers. We have that happening in our neighborhood. And they are horrible. They don’t have any regard for the neighbors, house, nothing. Why should they? They don’t have a stake in the house or the neighborhood. If you lose the house, the bank should kick you out. PERIOD!!!!
sd_momma22 | December 16th, 2008 at 2:04 pmJim,
Rob Dawg | December 16th, 2008 at 2:10 pmWhy limit it to short sales? I don’t want to deal with someone who is so incompetent that they cannot accurately price their product. For short sales just say $xxxk (subject to lender approval). Eventually some smart cookie is going to offer high range no conditions and sue successfully for specific performance.
I like that, $xxxk. Let the market and bank decide. They are the only ones that really matter in the deal, right?
sd_momma22 | December 16th, 2008 at 2:18 pmRob, one obvious problem with suing the sellers for specific performance is that people trying to short-sell their houses usually aren’t good lawsuit targets. They don’t have any money and don’t have the common sense to make money, which is why they’re in the situation they’re in. Even if you get a judgement, how are you going to collect?
greenlander | December 16th, 2008 at 5:26 pmIn response to Number 16, specific performance is an equitable remedy and not a legal remedy. What that means is the instead of a court entering a judgment that someone pay money, the court orders the person to specifically perform the contract. Failure to comply with such an order is contempt of court and that can be punished a number of ways, including jail. Nevertheless, I doubt you can obtain specific performance in a situation like this when said performance is not really possible because, at best, the seller could only convey subject to a mortgage that is worth more than the house in the first place.
Hoping to Buy | December 16th, 2008 at 6:06 pmHow would one get a judgement for specific performance if there is no contract? Listing prices that are framed as “seller will consider” are unlikely to carry the same level of “promise to perform” meaning as say, and advertisement for a TV set that fails to say “limited to items in stock.”
The only way I’d even consider putting in an offer on a bank-owned property would be if the listed price said “Close-out! First $xxx,xxx takes it!”
GeneK | December 17th, 2008 at 9:10 am