I know you thought that I was finished talking about short sales but here we go again. There has been a trend in short sale pricing that has been a bone of contention and a sore spot for Realtors and would be home buyers. Let me set the stage…. gorgeous home in a fabulous neighborhood should be about 400,000 even in today’s market and this price is a tantalizing teasing price of $199,000 and the lines begin to form and the phones are ringing off the hook. The trend of pricing a short sale too low is not only misleading at best but can cause all other manner of dominoes to fall. Another issue is the offering too low a price for the foreclosure when market value shows the price is way below market.
When someone calls me about a short sale price I always inform them that we will decide on the price to offer after we do a CMA but most importantly after we talk to the listing Realtor. The Listing Realtor can be you best ally in getting your price right for an accepted short sale offer. If the price is too low and not in keeping with market pricing then everyone is more than likely wasting valuable time. I found a great article in Florida Realtor magazine about the consequences of being too low for a short sale listing and delighted to share the insights with you sweet people.
REASONS BEING TOO SHORT MAY NOT BE A GREAT IDEA:
1. The bank turns the short sale offer down.
If a house is truly worth120,000 and the BPO (Broker Price Opinion) backs that price up then the bank will stay close to that number. So to list the home for around 80,000 would more than likely never cinch the deal. Not only could it be a waste of your time and the sellers time it could cost them their home. The clock is ticking and the home is heading to foreclosure without an acceptable short sale price BASED ON MARKET VALUE. It also tends to get the hopes up of a would be buyer with a fantasy price.
When the short sale is being decided upon the negotiator normally ask questions such as:
How long has it been on the market?
How many offers have you gotten? and what price has it been and for how long?
If the same property was listed for 150,000 and all attempts to sell have been futile then a gradual drop in price is acceptable. If you land around 104,000 then the bank may be more inclined to take less money. If you can reasonably show the lender the reason for the drop in price and the extenuating circumstances then you may very well get a lower price if the pricing was correct to begin with.
2. It lowers pricing in the neighborhood.
So the bank accepts a ridiculous low ball offer that is way out of line then you have effectively lowered the price of the entire neighborhood. If the property closes for $75,000, a new market value has been set. Typically Short sales close for fairly close to market value, so if you do get one through, the market will notice. When the property is listed at $80,000 the other sellers in the neighborhood feel pressure to lower their prices too. This further results in a decline in market values for the subject neighborhood.
Short sales are going to be with us for a little while longer and it seems we keep coming up with more questions than answers. Because of the ambiguity of short sales it is vital that you have a Realtor that is well versed in short sales and your local market. Trust his or her advice and know that they have not only your best interest but the health of the market as well. These are challenging times but the more properties that we take out of the inventory the closer we get to real recovery.
I will end as I always do by reminding you my motto that I run my life and business by, “The only people we have to get even with are those that have helped us” Fortunately my list is long.