Good Evening, folks!
Time for my usual Sunday night Blog-a-Thon, from the Northwest Side of Chicago. Hope you're well!
Short Sale Properties! Should you consider buying them? If you are a Real Estate Practitioner, should you counsel your clients to buy one?
Often times, here in Chicago and the suburbs - the answer is clearly NO! Despite their often-attractive price.
Why not?
For most motivated buyers, who need to be in a house or condo time-definite, short sales are just too risky, and involve the loss of control in the transaction.
This Loss of Control comes in several forms -
1. The Loss of Control to a Listing Agent who has little or no experience dealing in the nuances of closing a short sale transaction, or little persistence in handling the necessary, day-to-day follow-up to get the deal closed.
2. The Loss of Control to a Seller's Attorney who has other, guarantee-pay priorities besides this particular short sale.
3. The Loss of Control to the Lender, or, usually Lenders Plural, who nearly always fail to respond to the short sale in a timely manner.
4. The Loss of Control to the Secondary Lender, or subsequent lien holders, like contractors or condominium associations, who continue to in fight for an always-higher payout at the expense of any sale at all.
5. The Loss of Control over Your Own Client, you Realtors - who may become impatient or distrustful with you and your Team in reacting to the length of the whole process, despite your best efforts to explain the longer time frame and possible pitfalls likely.
Now, don't get me wrong! In many Chicago Neighborhoods eliminating Short Sale Properties from your search list cuts out 80 or 90% of the available inventory. You just can't ignore short sale properties!
But you can prioritize, or help your buyer client prioritize, exactly which short properties are most likely to sell and close.
Those with the greatest likelihood for success, in my experience -
1. Those listed with an agent with a reliable track record for consummating short sale deals, if you can accurately determine that. Agents who allow you to become authorized to speak directly to the lender to check status score bonus points - but these Listing Agents are quite rare indeed!
2. Those with only one lender's lien on the home, rather than a main loan and a piggy back or Home Equity Line of Credit attached.
3. Those properties whose "underwater" status is less than 40% (this used to be 20% - but banks now seem more willing to negotiate lower prices - anything to avoid foreclosure!) And, prices in many areas of the Chicago Area continue to decline in value month by month - banks are beginning to recognize this.
4. Those sellers who are easily found and identified. In many cases, divorced couples where one spouse left town, location undetermined, could scuttle a deal if the bank comes back, after eight to ten weeks, with a counter offer.
5. Those sellers whose level of distressed is bona-fide and evident. As you know, banks scrutinize the sellers as well as the buyers before agreeing to a short sale. Finding a house with a couple of Mercedes cars and a large boat parked on the driveway, and several large HDTV's scattered throughout the house, shows, most likely, seller poor judgment. If he still is making a good salary, or even not - likely, the short sale will be disapproved by the bank. Usually, after many weeks of buyer waiting.
Our Real Estate Team will dissuade many of our clients from pursuing a short sale property if a similar property in the same neighborhood fits their needs, even for a somewhat higher price - due to the uncertainty and loss of buyer control as discussed here.
If our buyers do decide to proceed, we are very careful to pre-frame in detail the waiting time involved, and the strong possibility of rejection, as our clients need to stay with our Team to locate another property if the short sale deal does not get approved.
All of this paints a sour picture for those selling short to escape likely foreclosure - but, when buying or working with buyers, you have to find the property likely to close, with certainty - or at least as much certainty as we can reasonably find these days.
Am I wrong? Please share!
DEAN & DEAN'S TEAM CHICAGO
I work with a few buyers, but I'm usually working with the sellers. But the buyers who contact me have usually already decided if they want to look at Short Sales, Foreclosures, or traditional listings. But if they haven't, I take their situation into consideration as to what types of properties will meet their expectations, and I discuss the pros and cons of each type, when necessary. Your list is a good one to share with buyers =)
Short sales are not an easy way to go if someone really wants to decide on a house they like and expect to move in any time soon.