Here's something you won't read on most listing centric real estate websites, however I'll post it here. Short Sales are phantom listings. You've read it right. Short Sales are phantom listings. They look like regular listings, they smell like regular listings, they even taste like regular listings when it comes to reviewing the information provided via the Northwest MLS.

As far as consumers are concerned, Short Sales look just like every other listing in the MLS except for one very important distinction. You can't buy 70 - 80% of them and even if you could buy one (which again is highly unlikely) you'll pull every hair out of your head waiting for it to close.

Short Sales are the bane of real estate right now. First of all it typically takes between 30 - 90 days to even get a response from a bank on a short sale. Then even if you have heard back from the bank, quite often the banks are asking for promissory notes from the seller in order to allow a sale to take place. Often the seller is better off letting the property go to foreclosure then accepting the terms of the bank. If a seller is unwilling to accept the terms of the promissory note, then in many cases the banks aren't authorized to accept the sale since the loan had been turned into a mortgage backed security with numerous investors who own the paper. As a result the only way to go forward from the bank's perspective is to foreclose on the property even if a willing buyer was standing ready to purchase the property.

Bank's are also waiting for more info from the Obama administration on how the government is going to continue to bailout the banks as well as borrowers. There's no reason for the bank to accept less then what is owed because the government is putting together plans to bail out homeowners who are upside down on their home.

Right now almost everyone loses on a short sale:

The buyer loses because in all likelihood he/she can't actually close on the property they have an offer on.

The seller loses because he/she has numerous people coming through their home with the expectation that they can actually sell the home. In most cases they won't be able to make it to a successful close.

The buyer's agent loses because buyer's are becoming disenchanted with the buying process since many of the properties they are looking at are "short sales".

The listing agent loses all the money and effort they put into marketing the property without getting paid. The only upside is maybe they pick up a couple of buyer's in the process.

What is the better alternative with all the short sales?

Either make offers on properties which aren't short sales, or make offers on bank owned properties. It really doesn't make sense to make offers on anything else if the property you are looking to buy is a place you are going to live. I've seen way too many short sale transactions go all the way to closing, with the buyer expecting to move in with a moving truck on the way, not close. The buyer then goes to renting a property they don't like.

The delema as a buyer's agent is this however: Quite often we have clients who want to see short sale listings (the phantom listings). If we don't show those listings then the client doesn't feel well represented, so we show them. It's a psychological principal that you tend to want something you are told you can't have, so what happens, they buyer wants to make an offer on one of the short sales. Even though it's not logical, the offer process often is more emotional then logical. Of course we are now caught in the trap of being in contract or potential contract on a property that can't close... Where emotions run high, well as they say, "All hell breaks loose."

Bottom line: Short Sales are the Plague... Avoid them as such.

Labels: Bank Owned, Distressed Home Owners, Foreclosure, Short Sales