As a real estate broker I have been representing sellers on short sales for a year now. The experience I have gained during this year has been unmeasurable. It has been very satisfying to prevent a foreclosure for a seller and it has also been frustrating when the bank just won’t approve a quality offer. Through this experience I have put together a team that makes me feel very confident about continuing to work with sellers on short sales as I feel it is very important for real estate market recovery in the Phoenix Metro area.

One reason I feel like they are important to get approved is that our inventory levels are never going to drop if we keep “recycling” listings. Here is an example of what I am talking about. Many sellers who need to sell start by listing their home at an unreasonable price that will cover their mortgages, real estate commissions and title fees. Once it becomes obvious that the home will not sell at that price, it becomes a short sale listing. If the seller receives an offer, then it can continue on the market for 3 months while the bank reviews. If the bank does not approve the offer or if the buyer walks, then the property goes to auction where it most likely will not be bid on as the opening bid is to high. Approximately 14-30 days later, this property is re-listed AGAIN as a bank owned property (REO). From this example, you can see that one listing can be on the market multiple times over the course of a year! This is causing our real estate inventory to be skewed in my opinion.

I feel strongly that we will see a positive change in the way banks handle short sales. The banks are flooded with real estate owned properties (REO’s) and are finding that they are not selling quickly for what they think they will after they foreclose. In many cases of files I have dealt with where they did not approve an offer, the bank would have clearly netted more money had they accepted the offer we had on the table. Change does not happen fast though. I can appreciate the position these banks are in. Properties values have dropped at unprecedented rates here in Arizona and the banks did not have the manpower to facilitate all of the files that were coming to them as defaults.

Now we are seeing banks with larger loss mitigation departments and we are seeing that if there is a file with an offer on their desk for review, they are very likely to postpone the pending auction so the file can be reviewed. I am not saying that this is still not taking weeks and months, but I think I see “change”. This motivates me to continue to help sellers prevent foreclosure and keep working short sales. Many people will try to say that a short sale is just as bad as a foreclosure, but I strongly disagree. I will touch on those reasons in another post that is coming. I have an approach to short sales now that I feel will elicit more approvals from the bank and create some great buying opportunities for buyers. In my next Short Sale post I will be outlining our process for sellers and continuing to deliver important hands on news and experience from short sales.

Make it a great day! – Kim

One of the most common untruths I hear is that a short sale will only drop a credit score 100-150 points while a foreclosure will drop a credit score 200-250 points. The fact is that there is no grading scale for anything in a FICO score. Fico scores are an algorithm that utilize many pieces of information, so credit scores are impacted differently depending on other factors.

Some sellers facing foreclosure have been told that there will not be much difference between a short sale or a foreclosure on their credit score so why go through the “hassle” of trying to do a short sale. In my opinion, a short sale will ALWAYS be better than a foreclosure. If your credit score is impacted in a similar way, the fact that short sale is reported vs. foreclosure is still better. Also, when doing a short sale there is always a chance that the short sale will get reported as something as neutral as “Paid as Agreed”. Yes, you will have mortgage lates, but over time those will roll off.

I have also been told by one lender that they would cooperate with my seller if they continue to pay their mortgage on time. This would be a first in my world as my experience has been that the lenders will not pay attention to those who are current and requesting a short sale…they have too many files to contend with who are in default. I will continue to report on the success of that transaction to see if they do cooperate.

In conclusion, I feel like the landscape of short sales is changing. It has taken months for the lenders to ramp up their loss mitigation departments to handle the amount of defaulting files on their desks. However, for those of us who are in the trenches in this daily, we are feeling some progress is being made. The lenders are feeling the pain of all of the homes they are taking back as REO’s and realizing how deeply they are having to discount those when they come back on the market as an REO sale. We are even perfecting our strategies in dealing with this short sale market and are excited about the opportunity to prevent foreclosure for sellers. Give me a call at 480-201-4185 if you want to discuss your situation.

If that seller must sell, then offers can be presented to the lender than owns the mortgage to see if the lender will accept less than what is owed to satisfy the mortgage.

Unfortunately most lenders will not even look at a short sale (short pay) offer unless the seller is in default of their mortgage. Sellers are faced with either getting a short sale approved or going to foreclosure. Do these situations present good buyer opportunities? The answer is yes, but it takes patience.

If you are a buyer who needs to buy within a certain amount of time, I do not recommend offering on a short sale. It can take sometimes months for the bank to approve. This can be very frustrating for the buyer who not only has to wait, but may not even get the offer accepted. There may also be multiple offers submitted to the bank and you won’t even know if you are the best offer. My recommendation would be to offer on a bank owned property, new construction or a seller who can accept your offer promptly.

If you have time and patience, then you may want to offer on a short sale. The good news is the buying experience is much like a traditional sale once the bank approves your contract. You have a due diligence period, the transaction runs through a title company and you can get traditional financing. The benefit of the short sale is that the contract you write is not an accepted contract until the banks approves. This means that you can continue to look at other homes and cancel the contract at any time. You also do not have to escrow any earnest money until the bank approves your offer.

Short sales are great opportunity for investors, especially those with cash. The lenders tend to like the cash offers as the closing tends to be quicker and less chance of the deal falling through due to financing. The ability write multiple offers with no commitment is also attractive.

The real estate market in Scottsdale and surrounding area is very opportunistic. I am telling my buyers that it is a great time to buy. There are great buys all over the Phoenix Metro area, but you have to know what you are doing and understand the differences between traditional sellers, bank owned homes or short sales. I also recommend having a Realtor who is proficient in all of these arenas. I have closed several short sales and would be able to consult with a buyer as to whether or not a short sale is a good idea for you. Call me anytime if you just have questions. Reach me direct at 480-201-4185. – Kim