Short sales, what can I say. It’s like the car ad that sounds too good to be true and the guy that talks really fast gives you the VIN number of the car that sold yesterday.
By now everyone knows that a short sale is a home that is priced below what the seller owes on the property, but how (and why) do real estate agents and sellers come up with the “too good to be true” prices that we are seeing today? Here are a couple of ideas. If a low price can attract a couple of buyers and start a bidding war he (the seller and his agent) just might get the price up to or at least closer to what he owes. This might cause the bank to accept the short sale. Good strategy for the seller, not so good for the buyer.
More often the prices are just a reflection of the current market and the price is reality. The fact that the seller is underwater has no bearing on the price. At the current market value the seller has two choices. Let the property be foreclosed or attempt a short sale and hope the bank will take less than what the seller owes.
Why would the bank take less than is owed on the property? If the numbers work it may be more economically viable for the bank to take what they can get rather than foreclosure costs. It is this decision that must be made by the bank that has made short sales so troublesome. They have hundreds of requests and each one has to be looked at individually.
In the mean time you, the buyer, who has made an offer, are in a “wait and see mode”, and sometimes the “wait” can be up to six months, and the “see” is a 1 in 5 chance of an acceptance. Sometimes short sales are acompanied by an addendum requiring the buyer to “stay in the deal” for a period of time. causing him to be sidelined for up to 60 days.
Today some 20%-25% of the houses on the market in Vancouver are priced below what it would take to cover the mortgage.
