In the past two years, most experienced real estate agents avoided “Short Sales“, on both sides of the transaction (seller and buyer). Why? It’s because they rarely had an escrow close successfully.
Listing agents secured an (current market value) offer, only to have the REO bank demand a higher price, and slash the real estate agent’s pay, often at the last minute. The agent’s frustration would be greater when that same property was forclosed upon, and sold at a far lower price than the offers previously declined. The situation was even more complicated when two lenders had liens on the property. The second lender, potentially getting nothing upon forclosure, would make aggressive demands for some cash, but the first lender would give up nothing. Often, the 2nd lender would demand a part of the real estate agents pay, or at least an IOU from the borrower.
Buyer’s Agents also advised their clients to stay away from the “Short Sale” listings, to only consider “fair market” or bank owned homes. The reasoning was:
- There were many REO listings, and few buyers in the market.
- The REO bank had already agreed to the price and agent pay.
- The escrow could close quickly.
However, it seems that there are new reasons to consider buying “Short Sale” homes, perhaps even pursue these listings first. The dynamics have recently changed. At this time:
- REO listings are scarce and the local inventory is low. Most listing receive many offers within days of becoming available. Full price offers from buyers often get ignored or rejected.
- Buyer’s continue to mostly pursue REO homes.
- The home is seen as “sold” when the homeowner accepts the offer. (The bank is not the seller)
- New guidelines from “Fannie Mae” stop lenders from changing agent’s pay. (See link for more details). http://www.car.org/newsstand/crem/past-i…
I found this update on short sales very helpful. Most of us remember how difficult a short sale situation could be.