In Arizona right now, we have two kinds of homes selling. Those that are in the foreclosure process, and those that have already gone through the process. My own anecdotal evidence suggests that these are really the only two types of listings that are selling. There undoubtedly are a few (very few) homeowners who have both the equity and the stomach to price their homes in line with foreclosures, and are selling. What does this indicate? What it has always indicated: if you price the home to sell, it will sell. In June (remember June? It was just a few days ago), 5265 homes sold. That means that there ARE people buying homes. And those numbers are actually very good compared to January, where only 2471 homes sold. Literally, home sales have very close to doubled in the last few months. This great news leads me to my next point: the pricing of short sales in Arizona.
As an agent who handles both short sales and lender owned homes, I see the following scenario played out on a weekly basis. I get a call from a lender indicating that they want me to sell a home for them that they have just “taken away” from some unfortunate homeowner. When I go into the data systems to examine the property, about half the time I find the subject property is actively for sale still as a short sale. Needless to say, the short sale didn’t work for those poor people. I immediately find out why though, and it’s not pretty. A ficticious conversation will illustrate nicely:
Me: “Hi. I was calling about your listing at 12345 W. Elm St.”
Shorty the “Short-sale expert”: “Yes! That property is still available. Would you like to see it?”
Me: “Actually, I have seen it. I met your nice homeowner, and informed him that he needs to leave the home. It doesn’t belong to him anymore.”
Shorty: “That’s news to me! Who are you anyway? Do you work for the bank?”
Me: “That’s right. I do work for the bank. It appears that your short sale effort has not paid off. The lender has taken your client’s home away.”
Shorty: “And you are the lender’s new listing agent?”
Me: “That’s correct. I’ll need you to cancel your listing, and remove your sign and lockbox from the property. Also, you may want to help your client find a new place to live.”
Shorty: “The short sale negotiator from XYZ Bank told me that if the home went to foreclosure that they would give me the listing to sell for them.”
Me: “Uh. . .you might want to call that person back and see what they say now. Sorry about the confusion. Good luck to you. . .”
Now, what does this conversation illustrate? A few things, actually, none of them good for the poor homeowner who lost his home to the bank. First, the fact that Shorty tried unsuccessfully to complete a short sale over a period of six months strains the bounds of credulity. How does one fail at short sales? By over-pricing. Same as any other failed home-sale attempt. A home will simply not sell if it’s over-priced. Doesn’t matter if it’s a short sale, foreclosure, builder spec home, or traditional sale. If it’s over-priced it won’t sell. Period.
Second, it seemed to me that Shorty the short sale expert had more hope of getting the REO listing from the lender than he did of completing the short sale. Can you spell F-I-D-U-C-I-A-R-Y? In a nutshell: you place the client’s needs needs above your own. Period.
Let’s look at the home in question. The short sale was listed at $249,500. When the bank called me to sell the property for them, they asked me what I thought it was worth. I did my research, and determined that the home was worth $150,000, tops. The lender (not having any emotional attachments, simply wanting the home sold) agreed with my assesment, listed the property at $147,900, and had it sold within two weeks.
Seems like common sense, doesn’t it? So how did Shorty miss this? The short sale listing sat on the market for 6 months, without having had a price reduction once. Wouldn’t the lack of people going to see the home have been one clue? How about other properties selling all around this one for far less? A second clue perhaps? Or how about the fact that the lender kept calling asking for an offer on the property? Where was Shorty? Did he go on vacation? What was he telling his client this whole time? I don’t know. It was frustrating for me to see. And now, I have to kick this poor guy out of his house!
Bottom line? You MUST price your short sale to actually sell! My own policy? Price it at what you think the market will bear. If you don’t get an offer in the first two weeks, drop the price. Repeat and rinse. Price drops every two weeks until sold. Works every time. See, here’s the thing: if I can’t sell it for a certain price, the lender won’t be able to either. Whatever the price is that someone’s willing to pay, they’ll pay whether its for sale as a short sale, lender owned, or owner sale.
This scenario is further complicated by one salient fact, and the fact that drives the entire short sale process: the only reason to do a short sale is to salvage your client’s credit. Every month that your client misses a payment is another “ding” to their credit. The longer it takes, the more damage your client suffers. You pricing their property above what someone is willing to pay is simply destroying your client’s credit! Don’t do it.