Kansas City Real Estate Thoughts...
The odds are stacked against a given short sale listing ever reaching the closing table. You'll get better odds on the Kansas City Royals to win the World Series than you are to be a part of a successful short sale transaction. Now I certainly don't blame sellers for attempting this if they have consulted with a real estate attorney and believe it's the best alternative - a last resort if you will. But the statistics show the odds of a successful short sale are few and far between and all involved should get out their lucky rabbits foot if they choose to participate - wait, losing a foot wasn't lucky for the rabbit so forget that idea. Rather get out your four leaf clovers. Start thinking Hearts, stars and horseshoes! Home seller's in a short-sale situation are attempting to sell their home for less than they owe on the mortgage - all the while needing their bank's blessing to forgive the resulting loss. Clovers and blue moons! Home buyers who choose to move forward on a home with short sale implications are very likely hoping to buy a home at a major discount - but too often don't foresee the up-hill battles they are about to face. Pots of gold and rainbows! Realtors who regularly work with short sales are attempting to make a living in a niche market - all the the while hoping to get lucky in the face of a horrendous short sale success rate. And me red balloons!
There are many reasons that I don't personally deal with short sales. One of the main reasons is that if I'm going to be involved in a real estate transaction that has two sellers, I want them to be "husband and wife" and not "homeowner and bank". Just thinking about trying to get a homeowner, their bank, a home buyer and the buyer's lender on the same page makes my head hurt. But probably more ingrained in my head is an unscientific study I did a couple of years ago. One day I pulled all of the homes that appeared on MLS to be in a short sale situation. I then went back six months later to see how many of those listings had sold and was surprised to find that less than 4% made it the closing table! So I really struggle to see how anyone can pick this niche market and work to make it their own. 
Buyers, sellers and Realtors alike are spinning their wheels when it comes to short sales. The only time I would be willing to take on a listing facing a short sale situation is if it was to help someone in my family, a friend or a past client. On the buying side, the only time I would consider showing a buyer a home in a short sale situation is, well... when monkeys fly. The last time a monkey flew I contacted a listing agent to ask "Has a short sale been given the bank's blessing AND has a short sale at least been approved at the listing price?". I figured at least I'd know at a minimum if a full price offer had any potential. But, alas, the answer I got was "no, but we're working to get the short sale approved by the bank". Where is Lucky the Leprechaun when I need him? 
Seriously though, here are some additional reasons why the success rate of short sales is so low. The assumption often is that the lender is over a barrel and they are silly to not accept a short sale offer. But the reality is we are seeing more and more lenders willing to take the home in foreclosure than accept a huge short sale loss. Banks don't want to own homes but they aren't dumb and will choose the path that makes the best financial sense. Short sales are rarely it. I'm not saying they can't be successful. They can be. Just like hitting the Power Ball could allow me to retire at the age of 38. Some banks will prefer to foreclose on the house and tempt the market using THEIR preferred Realtor and in a way where they are in complete control of the property. And, all things being equal, a lender is going to be sure a homeowner receives a mark on their credit report as big and painful as the one the bank's financial records. Another point to consider is that if there is mortgage insurance involved on the loan then the bank is assured to come out fine if the home is foreclosed on, but not if they were to accept a short sale. 
My lack of interest in short sales shouldn't be confused with an unwillingness to deal with foreclosure (REO) listings. Although I'm not in big with the local banks on listing their REO properties, it's not because I wouldn't do it. It's just isn't a part of my current business plan to solicit that business and there are some very special dynamics that come into play when listing REO properties. Anyhow, as a buyer's agent I show buyers bank-owned properties that are listed on MLS because by that point they have often become very salable listings. Our readers are always welcome to comment below...
|