The Short Sale Conundrum 4/27/08

As buyers we are always interested in getting the best value for our hard earned dollars. In the real estate industry, short sales and bank owned properties represent an opportunity to get a house for less. It has been estimated that 40% of short sales don’t close. Why?

First let me explain why short sale properties go for less than traditional properties. The obvious response is banks don’t want to own the house so they value them to sell. The more pragmatic reality is working with a bank during a short sale is taxing vs. a traditional escrow.

During a traditional escrow, the exchange between the buyer and the seller lasts about 3 days before there is a meeting of the minds on price and other considerations. After that there is an exchange of information about the house from the seller. 17 days into escrow the parties meet again to discuss any newly discover facts from inspections. At the 30 day mark, the property transfers to the buyer. Done. (These dates are approximate but generally accurate for most escrows.)

The short sale escrow is just the opposite in regards to time and communication!! A buyer finds the house, decides on price and submits an offer. The offer gets submitted to the bank for their response. Then the waiting starts. There is no deadline for the bank to response within. Weeks or months can go by before the buyer knows if they will start discussing price and get to a meeting of the minds. During this unknown period of time other properties are entering the market. The buyer is committed to their offer on but there is no guarantee that the bank will accept it. What is the buyer to do? Write more offers? Take a chance that their current offer will go through? This is the Short Sale Conundrum!

The kicker is short sales and bank owned properties are As-is Where-is. The bank does not pay for any reports and will not repair anything that is discovered during the inspection period. As a buyer, you can terminate the escrow without penalty but you are out any monies that were used for inspection.

Short sales can represent exceptional values but becoming emotionally attached to a house before the escrow closes can be detrimental to your hairline. When writing offers be prepared to wait and price in your time (that does not mean writing 50% under fair market value but 10-30% is not unrealistic.)

I am here to help you navigate the intricacies. Call me today to get a list of bank owned properties.

Your very full time real estate agent
Matthew
Keller Williams Realty Chico Area
530-518-0974 (Office)
530-230-2708 (Fax)
530-518-0974 (Cell)

matt@MatthewHerman.com

Don’t forget to check out all of my listings at www.matthewherman.com or for neighborhood information go to www.chiconeighborhoods.com.