“Hi Gary. I saw a condo for sale in P.B. priced extremely low, about 25% below market. Then I found out its one of those short sales. Do you think it will actually sell for that price?”
***ANSWER:
No.
Before I explain, lets first review what a short sale is:
A short sale is when an owner sells a property with a loan balance that exceeds the net after selling expenses. For example:
100K = Loan
90K = Value
85K = Net after selling expenses.
15K = Shortfall
To avoid foreclosure (a huge money-loser for banks), the bank agrees to accept the 85K and eat a 15K loss. So the homeowner is able to sell instead of losing the home to foreclosure.
Short sales usually sell 2-5% below market. Thats because a buyer must typically wait 6-8 weeks to find out if the bank will OK the sale. With plenty of homes to choose from, its got to be worth the wait.
Of course, banks wont roll over and agree to ANY price, no matter how low it is. Herein lies the problem:
Some agents are pricing short sale homes WAY below market to attract offers. Then when they get a buyer, they wait 6 weeks only for the bank to shoot the sale down because the price is too low.
In fact, that almost just happened with my superb buyer agent, Steve. Hes helping some great clients of ours buy a home
They were about to write an offer on a house that was a short sale. It was a bargain at $375,000. Steve smartly called the sellers agent and learned the bank had TURNED DOWN $430,000. Why the agent thought the bank would then OK a $375,000 price is beyond me.
MORAL OF THE STORY: If the price sounds too good to be true, its probably a short sale the bank will never approve. Dont waste your time
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