Careful with Short Sales
I am changing my tune, a bit, on Short Sales and the likelihood of closing one. Also my tips for finding short sales that might actually close, and a word about a specialist and moronic lenders.
Ahh, yes my friends. I have been married to the most wonderful woman I have ever met for two years today. We have the best life, the best kids, and wow, what a relationship! I never knew it could be so real, so deep, and so on the level with a woman before. If you knew me during my previous marriage, you’ll understand. Thanks for being my wife, Jeni, and I love you so much.
But, Real Estate intrudes, at least for the afternoon. There is a subject I have been meaning to write about here, as I am changing my tune just a bit on the hot little newcomer to the Real Estate scene- short sales. If you used my previous website, ThomGardner.com, you may have seen my short sale primer, telling buyers not to be scared of shorts, and that that’s where the real deals are. Well, it USED to be that way, but banks are exposing their moronic underbelly to those of us in the business, and those of you with a TV, every day now. It used to be that they understood that prices were in decline, and that they better be prepared to take a loss to move the product that they allowed to become so falsely inflated in price to begin with. THAT is how you clean up a balance sheet, by getting rid of the bad assets, writing off the loss, and moving on with those assets in your portfolio that ARE actually worth the paper they are printed on. I mean, if you have tried to sell anything, as I have, in the past year, cars, boats, bikes, electronics, clothing, whatever, you have likely found that they are worth much less than they were last year. My car had a used book value of about $17,000 at the beginning of the year, only to fall precipitously to about $12,000 today. IF I’m lucky and can find a buyer. But, such is the cost of cyclical swings, and I think both you and I understand that fact of life.
But the banks don’t seem to know what to do. They have homes they are going to have to foreclose on, at a minimum cost of $60,000 per foreclosure. And then you have the Winter here, and have you ever bought a foreclosure in the Winter in Bend? NOT RECOMMENDED! You are buying a foreclosure (an REO) as-is in all cases, and I am here to tell you that these far flung banks have no concept of our climate (they think Oregon is where it rains all winter, not snows or freezes, and hey, it’s all the same hillbilly state, right?), and they hire fly by night fools to “winterize” them, fools who don’t care about the home, only the check, and lo and behold, when you take possession of this home in which they have refused to keep the utilities on, you have tens of thousands of dollars worth of damage from burst pipes waiting for you on move in day! WELCOME TO YOUR NEW HOME!!! I personally watched a bank’s crew “winterize” a home here that we had been representing, and all they did was spend 5 minutes pouring antifreeze down the drains in the home. Yep. That’s it. Magically, we were able to sell the short the day before foreclosure, and the new buyer moved in to a home with ALL the pipes destroyed, and a pool of ice under the house, and a selling lender that basically gave them the finger.
So, you would think they’d be in a hurry to move these homes, cut their losses, and get back on track, right? WRONG. Shorts are becoming harder and harder to close. In the past few months, lenders have clamped down hard, and are choosing to foreclose more often than they used to. I have buyers that made a full price offer on a short, and after almost 3 months of the bank saying, “sorry, you’ll have to pay more”, we are walking away from the table. And do you know what the difference in price is? $15,000! They won’t cut $15,000 from the deal to make it happen, they’d ever so smartly rather walk away and foreclose, and hand $60,000 over to lawyers and handlers, to eventually sell the home we offered $275,000 on, for what I would guess to be about $225,000. I hate seeing great homes sit empty, but I hope National City chokes on that one.
Here are the facts as I now understand them regarding short sales. There are two kinds of shorts which still close relatively easily in this environment.
1) Homes where the loan is just held by one company, meaning there are no seconds or HELOCS (lines of credit), are the easiest to close. This is because only one bank has to make concessions, and in a second loan situation, the subordinate loan often gets next to nothing, as the first has primary dibs on your dough. And you know, they are just a little bit pissy about that. and so they love to play the spoiler and screw up the whole deal, you know, so the first lienholder gets to feel their pain right along with them. That’s pure capitalism, folks.
2) The other decent option is to find a short (such as the one I have listed on Mt. Hope) where the first and second lien are from the SAME BANK, that way, though the second may get very little, the same company gets all the money from the first, and so they are amenable to cutting a deal on the second.
That’s about it. Short sales where there is a first, and a second, and, god forbid, any PMI debt owed, are getting harder and harder to close. I do have access to a specialist that contracts with Realtors (I split my fee with her 50/50) to close even the toughest shorts through insider negotiations from former mortgage specialists with the lenders. Early in the year they could boast a 95% short sale close rate, thought now it is down to 82%, illustrating just how tough it is out there. But my own guess as to the rate of closing otherwise is probably less than 30%. So, if you need to sell your home short, and want to be relatively SURE it sells, call me, and I’ll help you, along with my specialist partner. We collect nothing if you don’t sell, so no risk to you. And if we do sell, we share my usual commission from the bank, at no additional cost to you.
Remember now, just like Grandma used to say, be careful wearing Shorts in the Winter!
POSTSCRIPT: I had to add in this little snippet. Two days after my clients formally left the table in the deal mentioned above, I got a call from the other Realtor, who said the bank now would accept our offer! HAH! I passed it on to my clients, but they are passing. This has also happened in other shorts I have run- often, when you can get nothing out of the lender, it pays to walk away and make them treat you like you matter. Then, YOU get to be “the decider”!
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