Sept. 27, 2008: In a declining market, buying a short sale is too tall an order
Is it time to kick the stilts out from under short sales?
Right now in most neighborhoods in the Phoenix area, the houses that will draw the most attention from buyers will be either short sales or lender-owned homes. They'll be in all states of repair, but the prices will be very aggressive.
And of those homes, the lender-owned homes will actually sell. They may be completely trashed, but the people whose job it is to sell those properties are judged by how quickly they can unload non-performing assets. Make an aggressive offer and you'll get a aggressive deal.
There are downsides, of course. You can inspect all you want, but don't expect repairs. Because of this, many lender-owned homes will not qualify for FHA or VA financing. And once escrow closes, you'll have to restore the home to livable condition.
By contrast, a short-sale home might be in better condition. And it might be even more aggressively priced. The trouble is, the price in the MLS listing will be meaningless. The seller can approve that price, but the seller's lender has to approve it as well. And the people who approve short sales aren't judged by how quickly they sell the home but by how much money they bring in.
The lender can take from 60 to 90 days to respond to your offer for a short sale home. And the response may be to counter at a higher price. If you counter back, you may wait another 30 days for a response.
Here's the worst part about this unwieldy procedure: Home prices are still falling in the Valley. You could wait months to get approval on a contract for a house that is now worth tens of thousands of dollars less than what you offered for it.
My take? We need to cut short sales off at the knees. It seems foolish for Realtors to take them as listings, and beyond foolish to encourage buyers to pursue them. Lender-owned homes are offered by motivated sellers. Short sales are a waste of time.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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