Canyon View Real Estate


Canyon View Real Estate, PLLC, Real Estate, Alpine, UT


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2011-08-01 12:33:08
Eagle Mountain short sales vs. foreclosures

Short sales are usually the best way out of a bad situation for homeowners who can no longer pay their mortgage and find the value of their home significantly lower than the loan they took out on it four years ago. But because the short sale process involves extended communication and negotiation with note holders who are faced with cutting their losses, it affects not only delinquent homeowners but buyers and the larger market as well. As explained in detail here, the short sale is a fundamentally different kind of real estate than the real estate most of us are used to, where a buyer and a seller agree on a price and make a relatively unhindered exchange. In a short sale, banks are the authority. They are almost always a reluctant authority. They don't want to lose, but they're going to. They get to choose how they want to lose. They can either foreclose and sell later, which takes a significant investment of time and labor, or they can cut their losses with a short sale. If they choose a short sale, they take their time. They are usually large organizations, and the liquidity of homeowner X's mortgage means there are a few other large organizations with a piece of the pie. A selling agent is trying to get 2, 3, 4 large organizations to cut the pie in half. This can take 4 to 6 months at least, if the banks feel like cooperating.

So listing agents also find themselves in a tough situation. They are half a year out at least on homeowner X's sale, and that sale is entirely dependent on the ineffable decision made by faceless bank Y. So they get creative. They put X's home on the market at a price way below everything else. To be fair, they don't really know if the bank will accept an offer at market value anyway. So they list low and get a little PR for themselves while they work on the short sale.

The multiple listing service indicates whether or not a list price is approved or subject to approval. Approved means it's realistic. Subject to approval means it's b.s. But b.s. gets calls, showings, publicity and buyers, and real estate agents love calls, showings, publicity and buyers. The problem with b.s. prices is that they're still prices, and prices have an effect on markets. Prices also have an effect on buyers, and uneducated buyers see an undifferentiated list of prices and think they can buy what they want for less than they can.

So it becomes helpful to understand what a short sale is. They are legitimate attempts by a homeowner to sell their home. But they come with a number of subject tos. They will take time, and they will involve a lot of uncertainty.

Here is a snapshot of the $80,000-$100,000 condo market in Eagle Mountain. Each listing is relatively similar in terms of build date, square footage, and amenities. Our condo, at 3561 E ROCK CREEK RD #12 (MLS #1025669), is currently the lowest-priced listing in the area that is not a short sale. The lowest four or so are subject to 3rd party approval with b.s. prices. Most of the rest are subject to 3rd party approval with real-looking prices. A few are approved prices, including one at $79,900, which may or may not be the price it sells for. Only one listing, at $82,875, offers an indicator that its price is dependable: 'SHORT SALE APPROVED @ LISTING PRICE.'

So only a fraction of these low-priced listings have dependable prices. And buying them will still take 4-6 months. Ours, at $84,900, takes 45 days, at most. I think most homebuyers are going to take 45 days over several months of grueling uncertainty for an extra $2,000, don't you?

 
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