Is The Short Sale Dead?
April 21, 2008
The last time I checked, the short sale was on the gurney headed for the emergency room. I looked through the windows and saw the priest administering last rites so I am not sure if it’s going to survive. I can tell you though, it doesn’t look good.
What happened? Well, doing some investigative journalism, I crossed the police caution tape and started asking the witnesses what hey saw. “Bank took to long to respond and my buyer walked”, remarked one distraught Realtor.
“My homeowner could not compile or would not compile all of the information the bank needed”, lamented another Realtor; while a third said she could not even find any pulse…the bank did not even respond. It was as if they simply gave up on life.
Yet, I could not understand why one Realtor, off in the distance taking pictures, seemed to be smiling, almost guffawing at the tragedy that other Realtors have endured.
I followed closely behind as he hurried away in his newly polished Mercedes. He did not seem to notice that I was following or if he did, he did not care. Either way, he drove for a while and showed up at a property. This property looked familiar.
It appeared similar to the property wherein the short sale was just shot down. The same weedy, tall grass, the same unkempt yard, even from my vantage point I could see the curtain-less windows that indicated that there was no one home. The property was vacant. Was this another short sale prospect ready to meet an untimely end? Was the Mercedes driver the Short Sale Killer?
I had to get a closer look. I moved up closer and closer until I was in view of the suspect. Just as he turned to see me, a bus drove up. From the bus emerged a bevy of other suspects who have been on the lam for some time. I recognized these perps.
They were BUYERS! They have been hiding for what seems like years!What were they doing here? Was the killing of a short sale some kind of gang initiation? Was it some crazy Mansonish cult that got their willies knocking off short sales?
And then it happened. I was spotted. The Cheshire cat smiling Mercedes driver headed over to see me. I froze, not knowing whether to pull my business card or my blackberry. Something had to give, this might get ugly ..what to do..closer..OMG..he’s reaching for something..it’s was going to be either him or me and I had to move on this.
I jumped out the car and shouted, “Hey bud, what’s going on here? I know what you’re doing. You’re not going to get away with killing another short sale”.
The man responded and what he pulled from his bag wasn’t a loaded blackberry at all. He was loaded with something much more powerful. He had a prospectus with everything you wanted to know about this property and asked me to join them.
I looked down somewhat bewildered at the document before me. It was page after page of pertinent information on the house that we were standing in front of. “What is this?” “What are all these Buyers doing here?” “This isn’t how to do a short sale?” “Why are you killing short sales?” These were some of the questions that I peppered the man with.
He laughed ..almost bellowing and said “Haven’t you heard…Short Sales are dead, REO deals are the way to go.”
With that light bulbs began going off in my head. That’s why the Buyers have returned. Of course, that’s it! Buying properties with clear title at prices of 35%-50% off of current market value were bringing the buyers out in droves.
Deals being cut and accepted in days instead of weeks and months. Properties that actually cash flowed from day 1. It was as if there had been some kind of real estate epiphany.
Looking around at the throngs of enthusiastic buyers I realized this man was not to be feared. He was to be revered. He wasn’t the real estate Lucifer, no he was the REO guy. The keeper of profit, The gatekeeper of capitalism. I like Mr. REO.
If you, like me, have been waiting for the ninth wave , the return of yesteryear…it is here and it’s yours for the taking. Good bye short sale!
Viva la REO!
Hey guys,
Needless to say I love you both. Great job keeping it real.
Quick comment:
Do you remember last year when i was in your seminar and i said that I thought
buying REOs were better than try and do a short sale? Are you trying to say I was right all along?
Just showing my boys some love,
Lucilene Ivory.
3057764146
AAA Mortgage & Investment Group, Inc.
[…] had a full show today starting out with a recent Barry C blog post titled, “Is The Short Sale Dead?“. We had a couple of interviews including Terri Lussier from The Brick Ranch and Matthew […]
Barry Barry…You can’t be saying short sales are dead….not YOU!!
You are the short sale guys!! It almost hurts me to hear that from you, really.
Please say it’s a joke!!
Even though I feel that short sales won’t completely go away, i do think that this is the market for REO’s to prosper. MOST of the good homes in our area (on the MLS) are in fact REO’s.
Prime example: a home in my neighborhood (FMV of $400k) was being sold and the owners were in distress due to having another home out of state (job relocation) and couldnt afford paying for both. Well the agent found an interested buyer and attempted to do a short sale as the buyer was only approved for $325k (mortgage payoff was around $370k). The bank took too long, buyer walked, property foreclosed, and voila, REO. Well what’s amazing is that just a few days ago I see people moving into the home and I walked over to greet and welcome them to the neighborhood (about 3 months after it became an REO), and through small talk I was able to find out that they bought the home for $255k AND the bank (Countrywide) paid ALL of their closing costs……….needless to say, there goes the comps in this neighborhood.
The REO strikes again!
Dustin..it’s appearing that way unfortunately. In fact some banks we are now speaking to are actually telling us to wait and that they can cut a better deal afterwards.
The market evolves..and like Julio said above, there will always be a time when it will be appropriate…but for now..it seems the real deals are in the REO sector..gotta keep it real!
Would bank asset managers deal directly with buyers on their REO’s? Or do they always choose to use agents? Getting that extra fat (3-6%) cut off the deal seems like a great idea if this is what the banks seem to be doing now instead of short sales. Any advice Barry?
Barry…I hear ya. I am working more on the listing side of the Short Sale market anyway. Unfortunately I don’t see my buyers getting enough of a benefit when purchasing a short sale to really work it. I mean, they tell me to forget about it most of the time after I explain the deal-e-o.
Well maybe you guys can put together a REO class
Over the last few that I helped some of my buyers buy I’ve sent the inspection report and gotten every dime of that report reduced for my buyer no questions asked. It’s been almost too easy!!
Thanks
Lucilene: Last year was a bit premature. They ahdn’t taken back so much inventory as of then..now it’s an avalanche and the deals are there for the taking. However as Dustin says below…agents till need to know what to do as many Sellers will need an agent’s professional assistance.
Dustin if you have buyers..let me know! We can help you out.
Julio: Asset managers we find only want to deal direct in as much with bulk buyers otherwise they want you to go through their agents.
Ton of inventory out there!
Let me know what you have in mind…
Dustin…email me directly
This is what I wrote to 70 of my sellers, 45 are in short sale postion. This system needs to be fixed it because prices are dropping like a rock.
I case you have not seen this article in today online news, it addresses a huge problem we are currently facing in real estate and is a cause of lower sales and dropping real estate prices.
Reuters - Realtors complain short-sale process is failing
Tue Apr 22, 2008 3:13pm Click here for the story
The fact is, the banks are reacting extremely slow to the short sale offers and therefore causing;
1. Buyers walking away from the contract
2. Agent doesn’t want to sell short sales because they never know if they get the contract done.
3. Reduces re-sales
4. Causes prices to drop
5. Causes people being foreclosed on
6. Cause an increase in bank owned properties and properties being offered at lower prices.
7. Cause none distressed properties having to compete against bank owned properties.
8. Causes lower sales and stresses the economy
9. Reduced profit to the banks and shareholders
10. Increase the losses to the investors who are holding the mortgage paper.
I can go on and on with this subject but hopefully the article is a wakeup call to the banks and the government to immediately seek corrective actions because it is a downward spiral caused by the horrendous responses or lack of responses to this problem. I can see the banks issues but we are in this situation long enough, some corrective actions should have been taken by now. We have lenders who are in 2nd, 3rd and 4th mortgage position saying we are not accepting anything less than the money owed when in fact they will get zero when the property is going in foreclosure and causing the seller to eventfully go in foreclosure. Nobody wins when the property is being foreclosed on, and taking this kind of ignorant approach is inexcusable. This short sale system is so broken; it is what the sub prime problem was to mortgage financing, but only in reverse.
Ernst..wow..70 Sellers??? Un real..what you described was the exact reason we sounded the bell on short sales!
You’re right! It is the slow reaction and the overall inept clerks in the “workout” departments who are not authorized nor able to make reasonable decisions by processing the information on the file with a goal of increasing the lender’s bottom line. It is frustrating to explain perfect logic for a short-sale decision and feel like you are talking to a brick. Narrow minded, bureaucratic and no strategy is an applicable summary of most lender short-sale programs. It’s not surprising an attempt to perform a short sale and save a lender from further loss is met with a tooth and nail fight for a pittance of a commission. We are talking about brilliant people here!