I am seeing more and more short sale listings as 2008 continues on it's slow course in Scottsdale real estate sales. These listings are competing with the many other real estate listings that are being sold by home owners that want or need to move. In some cases short sale prices and foreclosures are now being used as comparables by appraisers. I've been on both ends of short sales. I had a short sale listing and have presented buyer offers to several short sale listings.
I will talk about my short sale listing that was a Scottsdale condominium for sale. This unit was owned by an out-of-state seller that had only seen the condo once. It was a family investment and a divorce caused the need to sell. This condo was only a few years old. There had been renters since day one but it was vacant when I got the listing.
When we first listed the unit there was another condo in scottsdale for sale in the same building and one that had recently sold and was deal pending. Since this was a unique property, we listed at a lower price than the other two listings as the other units offered a bit more. The deal pending unit lost the deal at the last minute and did not go back on market.
So only my listing and another listing remained for sale. We were the first to take a price drop as we had showings but no offers. The other unit finally started reducing. Still, neither unit was selling. Our competition was brand new units in new buildings as the North Scottsdale area that the building resided in has seen a lot of new construction. We were also up against all price ranges, many units offering similar amenities priced much lower. Still, not much was selling in the area.
The other listing expired and the unit did not re-list. My seller had no choice but to sell (the other unit was owner-occupied). After more than a year on market my seller was feeling the crunch. He couldn't afford to make payments any longer and his CPA suggested he try to sell the property as a short sale.
My seller contacted his mortgage company on his own and started arrangements. We were finally told the mortgage company would consider a short sale offer and told the seller that they would consider offers at least within 20% of appraised value. So we once again dropped the price several times until we got interest.
We dropped down to $230,000 when we got our first offer in over a year. It was extremely low, something like $145,000. But it started the wheels in motion. Only the seller had any communication with the bank. He sent me instructions on how to write up and present the offers.
Soon after the first lowball offer we got a full-price offer. Another full-price offer followed shortly. The offers were faxed as instructed. Then we all waited. My seller was calling the loss mitigation department every Friday. A month went by when he was told that the file was closed. He asked why. They said that they never received the fax. I had proof that they did.
I refaxed everything and even made one of the buyer's agents rewrite her offer as I'm sure that was the offending contract. She did and I faxed the offers once again. Still no contact.
You will read something similar in a prior post I made. Banks losing entire faxes was a common situation with short sales. I feel that losing a page or more could have been easily done since I can just imagine the pile of paperwork on these short sale departments' fax machines.
It took over 2 months for a loss mitigation person to finally contact me. I explained about the file being closed because they said they never received the faxed contracts. He had no answer for that.
I at least started speaking to him on a more regular basis but still no acceptance. We were nearing the 4-month mark when another offer came in at $236,000. I went back to the other buyers and as a courtesy gave them the opportunity to come up with a best and final offer. None of them increased their original offer. The high offer was finally accepted more than 4 months into the short sale. Although I thought it was a long time I've heard of people still waiting for a year!
But think about it, 3 people waited 4 months and more only to be told their offer was not accepted. The final bidders got lucky enough to come in at a good time as they only had to wait about a week or so for acceptance. We made it to closing but I ended up forgoing part of my commission just to get it to close as there were problems with the figures at the last moment (the bank's error).
It was not a pleasant experience although it taught me what to expect and gave me an understanding of how these short sales can go. They're all different. I'm glad I went through it and my Scottsdale home seller and I can consider ourselves lucky that we made it to closing on a short sale. I've heard many horror stories about other sellers where the mortgage holders wouldn't deal or things just went bad. When a short sale is not accepted then the next step is foreclosure.
If you're a buyer of Scottsdale real estate and are interested in short sales keep in mind that high bid wins (as far as I've seen and heard - I'm not sure how different places weigh other factors such as down payment or owner-occupied vs. investor). Unless you come in at the very end of the process you need to be prepared for a long wait.
Unfortunately, if you hound your agent to make phone calls there is nothing an agent can do to make things happen faster. In fact, the more calls an agent makes, the more likely they only get voice mail. There were times when my contact at the mortgage company had a full voice mail and I couldn't even leave a message. If there is no news to give they will not return the call.
And I can't blame them for that. With all the files they're handling if they returned every inquiry they wouldn't have time to actually work the files.
There is no guarantee you'll get a super deal. However, with my listing I believe that by the time my listing sold (the market was already declining at that point) it probably appraised for around $250,000. It sold for $236,000 so those buyers did get a good deal. But so many buyers think they can make lowball offers and have a chance. It doesn't usually work out that way, as I'll explain in future posts.Posted by Judy Orr on