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 they 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!
Chris Johnson says:
The Reason The Short Sale Has issues…
Is because the Realtors Inovlved refuse to acquire any acumen at the time of listing.
They don’t put together packages, they don’t do anything even close to correct.
April 21, 2008 — 1:43 pm
Geno Petro says:
If the SS is not dead here in Chicago, it is at the very least, a Zombie.
April 21, 2008 — 1:58 pm
Charles in Las Vegas says:
Slowing dying here in Las Vegas. According to statistics, only 11% of the short sale offers actually go through.
April 21, 2008 — 1:59 pm
Barry Cunningham says:
Hey Chris: You are so correct!
Hi Geno: I just saw I Am Legend for the second time…zombie’s are scary! Short sales turning scarier.
Charles: that is one horrible statistic!
April 21, 2008 — 3:13 pm
Broker Bryant says:
Barry, The REOs started hitting my market heavily about 3 months ago. Short Sales are certainly dying a slow death. About 80% of the closings in Poinciana are now REOs. And the prices are looooooooooooow.
Damn…..sure wish I were an REO agent!!!! I guess I will just have to break down and work some buyers. At least until I can get me some of those REO listings.
Of course I can always just work on my tan:)
Seriously though, numerous REOs is the first sign of a market bottom. Investors will now be swooping in and inventory should start declining over the next 6 months or so. So while it’s painful for the average Seller who can’t compete on price, this REO phase needs to happen.
April 21, 2008 — 3:45 pm
sherry says:
Who would even want to sell a short sale? It takes weeks to get a phone call back from the bank and then you are informed your full price offer isn’t good enough and the bank wants $5000 more to close. We are not even guarenteed a commission (the bank doesn’t have to pay the CC price in the MLS). There are plenty of other homes out there to show.
April 21, 2008 — 9:00 pm
Dan Sullivan says:
This is really a well-written post. Barry is growing on me.
Is all of this just inevitable? The short sale system is broken. Lenders are receiving over 300 short sale applications per day and rising. They obviously can’t handle the load, and the process is too complicated for 80-90% of applicants. It is an effort in futility to even show a short sale to your buyers.
In a smoky boardroom somewhere, they are looking at the costs of improving the short sale system and making it efficient, or just letting things go to REO and dealing with the legal costs.
If there was money in fixing the short sale process, they would fix it. But they don’t. Follow the lack of money and effort on the lender’s part. The short-sale process may be dead before it even arrived.
April 21, 2008 — 9:10 pm
Barry Cunningham says:
BB…80%!!!! OMG….My friend, I believe you are correct. As the REO frenzy begins…it will help the inventory decline. Bargain hunters (like I) swoop in and look for the deals. Sort of like a real estate cleansing if you will.
You may be right to break on thru to the other side for a while!
April 21, 2008 — 9:13 pm
Barry Cunningham says:
Hey Dan: you wrote “In a smoky boardroom somewhere, they are looking at the costs of improving the short sale system and making it efficient, or just letting things go to REO and dealing with the legal costs”
While we got a good number of our deals accepted, lately it became tougher and tougher and I suspect that you may have something. We know that loss mitigation is based upon the numbers and insurance companies and banks are notorious for looking at data for their decisions and it may be just that…that they figure it’s more cost effective to sell at REO than to deal with the Short Sale.
We had heard that Ocwen simply stopped doing them altogether.
April 22, 2008 — 5:43 am
Bob says:
As prices continue to fall, short sales become less viable because of the investor issues.
Many agents think they are dealing with the lender, but in many cases they aren’t – they’re dealing with the loan servicer. As prices drop below a certain point, the inhouse ability to make the deal is gone. At that point, the language that protects the investor pretty much guarantees that the servicer will just let it go REO.
April 22, 2008 — 7:27 am
Jim Gatos says:
I can’t say I agree 100%.
Yes, short sales are worst than pulling teeth, however, in all honesty, since 1992, I have done some short sales. Everyone closed, I got “mildly” burned on a commission, but NOT enough to swear them off, and I am focusing on them now. I presently have a couple of Short sale listings, a short sale website and a short sale blog.
Maybe your post is a wee bit on the negative? Or am I being a little too optimistic? How about the use of short sale processing companies? I know a lawyer in my area, (Worcester, MA) that loves the processing companies; he told me they really do work.
In my area, I think I heard one out of every 4 sales is now a short sale.
Am I living in a “Zombified” city?
Jim
April 22, 2008 — 5:58 pm
Barry Cunningham says:
Jim…I loved doing short sales…very profitable and a good way to take down a property…but business evolves and changes and we must adapt. If it is working for you then great. Are you living in a “Zombified” city? I don’t know, do an MLS search for active “bank owned ” homes. That will give you a good indication.
As for being negative..not at all. We enjoyed to SS..it’s just time to move on for us and many others.
April 22, 2008 — 6:26 pm
Nancy says:
The agent with whom I’ve been working in PHX told me to forget about short sales. What I heard him say is they are too tough to complete. That being said, from a potential buyer in a place many agents say is hitting bottom, I heard “I don’t want to work that hard. REOs are getting into bidding wars and that’s easier.” Pitiful really. If I find the perfect house now, no matter what type of sale, I’ll be thinking twice about using him – I know more than a few agents that would be more than willing to take his place.
April 22, 2008 — 7:25 pm
Thomas Johnson says:
Beware of the REO listing. The same guys that sit on SS offers are now in charge of reducing listing fees and delaying the reimbursement payments for utilities, lawn care, cleaning and minor repairs. You can have months of receivables on your REO listing long after it has closed at a reduced commission.
April 29, 2008 — 12:50 pm