St George Utah Short Sales
How to Search the St George Utah MLS while navigating St George Utah Short Sales
The nature of Short Sales have changed in both time and in how they are processed. They are less risky than they were before. And there is some literature on the horizon regarding further stream-lined processes that 'could' be forthcoming. This is already, to a small extent what has happened. This may increase the supply of Short Sales with one factor being the amount of people that would like to move, but owe more on their homes than they are currently worth. For instance, how many people would do a Short Sale if they found out they are becoming easier to accomplish and perhaps less destructive to their credit scores?
First Common Buyer Mistake
The very first common buyer mistake is seeing short sales on the market and thinking it to be a more potential sale than they really are WHEN the first offer on the place typically is the only offer they work with. As such, this marks it as a Short Sale that should have been updated by now to Offer Under Review status. It may not reflect that precisely on purpose- to facilitate more calls and winning buyers to be able to take you and buy something else with you. What is the best way around this? 
Have me pre-screen them by calling on any and all Short Sales you begin to become interested in, to find out what the 'real availability' is for you on them. Be sure to mouse over our 'Raiders of the Lost Ark' picture to the right for a true message.
What is a Short Sale?
Basically a Short Sale is when the debt owed on a property is greater than the current fair market value of a home and the owner or Seller of the home wishes to sell the property in what we refer to a Short Sale. In doing so, the seller of the home will most often petition the bank with a hardship situation or a hardship letter. This now typically takes place once the seller has the first offer on the property and the entire package of hardship letter, financial's, etc. gets submitted to one, sometime two banks or more lien holders that may possibly be involved. If you are a potential distressed seller as such, for expert advise, please call me, Brian, at (435) 674-3600. If you are either a buyer or seller, please check into this Short Sale Disclosure as it describes what a Buyer typically gets as part of putting in an offer on a St George Short Sale.
Property Gets Appraised, No Earnest Money, 'Waiting Too Long' Deadline
Regarding the realtor setting the price lower than usual- it can be a bit of a "mirage in the desert". As such, you need to know, that once the bank sends out for an estimate of value (typically after the First Offer and a long wait), either through a Broker Price Opinion (BPO) or an appraisal, then every anxious participator (ONLY the FIRST OFFER) can be 'called on price' to come into better line with reality- the banks reality. To be fair, most realtors have started to price Short Sales more realistically, precisely because they do not want to have incubated things that long only to see things fall out over the price having been so unrealistically too low. But the price being set too low is still done. You just have to weigh each one out. I can help if you like.
Technically, you can shop other properties after putting an offer on a Short Sale (this is done less seriously since the timeline is shorter on them now) and you put NO earnest money down as well. So, you are out nothing and you can cancel or rescind your offer anytime. There is also a 'waiting too long' deadline or drop-dead deadline you put on the Short Sale addendum that can hold a ray of hope that you could get a response before that time. Please be aware, nobody or no bank pays much attention to it. Basically, beyond the deadline, that you write into the offer, the offer becomes void[able] or ‘dead as you have wished or wish it to be'. This actually comes in handy after a certain point, but usually in terms of you having gone a different direction, found something else, etc., that you then do not have to worry about closing that one off (a formal cancellation addendum).
Expectations, Chances of One Going Through and Timeline
When you put an offer on a Short Sale, it is still understood that you could still be shopping the market and possibly even putting an offer on something else. If it is another Short Sale, then you can keep both alive. If it is not, then you need to close off or cancel the Short Sale offer. The typical scenario, setting Short Sales aside, is to not be putting more than one offer on anything. So, the flip side to putting an offer to 'never hear back on it again' on a Short Sale, is that you get to also 'play' the rest of the market in keeping your options open too. More and more however, Short Sales have more confidence of going through and people therefore also tend to follow through more on them also.
In the past, I regarded that there is little chance of them ever going through. This has changed if you are the first offer to come on the place. Of the ones that do get done my guess is 60-70% actually sell (used to be like 30% or so; these are educated guesses), as apposed to going into foreclosure or something else. Other variables of it not going through include: Seller has renegotiated with bank for new terms for lower loan payments, seller found a way to pay debts and stay, or seller hears scary things about banks coming after them for money long after the sale and choose to not sign the deal, letting it slip into foreclosure (this happend to my buyer on 4/15/2010 on an Entrada Short Sale), etc.
Still, unrealistic expectations will ensue on Short Sale regarding what gets expressed to the buyer, by both Realtor optimism and what gets reported to you on the progress of a Short Sale- things take longer than planned on. Still, Short Sales less time than they used to, perhaps some are done between 4 to 6 months now. However, still read the below and although a bit dated, it will set you up with what could happen:
Learn the shocking truth about how long Short Sales take to get accepted.
Keys or Encouragers on Short Sales:
- No offers on it currently.
- Price looks good,but not too good to be true.
- The Listing Realtor doing the Short Sale can reveal to your Realtor that they know how to do Short Sales.
- The home is in basically good repair, because the appraiser/inspector for the buyers lender will PASS the home, unless the buyer has one of those loans, it has to be a specific type, that allows for repairs.
- When you call and find out that the first offer has recently dropped out of the running and you would be a "shoe-in" for a home that already has some time on the 'conveyor belt' toward being responded regarding, this is a good thing. In other words, the Listing Realtors generally will not report to the bank that the first offer has "fell off the band wagon" because they do not want the seasoning of that Short Sale's response timeline to cease 'ticking' in order that it can find its way to the top of the pile of files. Those listing Realtors think they will have another offer to reveal by then, and they typically do. Many times your back up offer might substitute, but not completely in terms of timelines being served. It may still be dropped back a month in the process to register it as a new buyer. BUT it is still along the 'conveyor belt' that much further.
- Some Listing Realtors are known to get them done faster. When we call on a Short Sale and they are involved, they can generally tell us more that can be counted on as reliable information to go off of. As a Realtor I tend to know who these Realtors are.
- Call, call, call on them before you ever get emotionally attached, even in thinking it is show-able, in the sense that you might not like that there is already the first offer (see below explanation of First Offer) on it etc. When you can get a good Realtor, that knows all the right questions to ask and you can "weed them" or "thin your pile" before getting excited toward showings, or before arranging "enough" listings in your list of favorites, enough to come to town for. For example, one person called me prior to coming, trip all planned and I said, 'wait, let me call real quick on these'. I had to call her back and the entire list of 6 listing were obsolete.
First Offer
The key is to be the first offer. If it already has an offer submitted the question becomes, "What is the chance of a backup offer getting it? First you need to know WHERE back up offers go once they are submitted. Do you see the picture on the right?
Unless your Realtor has been told of some likely chances of the first offer getting tired and having gone and bought something else. A back up offer typically has a slim chance of working out. You need to have your agent check it out first. IF it has been investigated by your Realtor as a situation where the first offer is strong enough on price and the financing or pre-qualification letter looks in order and that the time line looks for a good response from the bank, everybody's time is better served moving on. There may be a temptation in cases where you believe it could be a long wait for the primary offer, therefore the chances of them backing out and you becoming the primary offer are greater, or so you may think. But please remember there is possibly a stronger variable to consider. Namely, if the primary offer can find something better before waiting that long, YOU most likely will too. Also, if there was a better house at a better price, you should have gotten it right? Given these conditions, experience tells me, unless there is some indication the first offer is not going to hang in there, I give you about a 1 in 10 chance of having it "stick", either because the first offer is sticking it out, or of something better coming along, or of that Short Sale going into foreclosure first. If you were a Realtor, would you even want to show one of those, that already had an otherwise good offer on it? Yet it is not uncommon to have a person coming into town having a whole list of these to show. It is because that buyer did not know that many of them will possibly already have the first offer on them. What should you do as a buyer? Please call ahead of time to find out what you really have in a Short Sale opportunity- your realtor can look into the "real" availability for you.
Good Advice
- Let a Good Realtor 'tame the alligator' (call and report) on these. Believe me when I say, they are case-specific in nature. They can be much like saying they are their own animal- you don't know what you are dealing with until somebody that knows"the territory" gets their hands on them, with the right questions. That would be Brian of course- he is your Crocodile Dundee!
- Do NOT let thinking about looking at one become an emotional decision. If it is a buyer LOOKING FOR THEIR DREAM home, this is enough to make a Realtor want to cough a bit. That would be our first reflex (not to worry, not our main one).
- Don't expect ANYTHING on them, or in other words to hear back regarding anything substantive. If you are the primary offer you might here back that they have submitted it. But then it is wait, wait and more waiting. Don't expect updates. They don't get any work done on them if you call and harass them is what they say. Oh, we call anyway, but it is much like the old tag line: "Don't Call Us - We Will Call You".
- Don't make it your staple diet on purpose. In other words, look at a couple short sales, but have your main staple diet be other valid listings you are looking at and have short sales as 'a side dish'. Other valid listings include regular re-sales, foreclosures, and new construction. One purpose here is to evaluate what price things are really going for. I had a buyer that had 5 Short Sale offers and after 3 months of waiting, he finally found a foreclosure we bought.
- Take the 'several' approach while calling first to find out on them. It is because your hopes will be dashed if your focus is on "the right one". There is more hope now then there used to be. Then mentally, is if you want to get attached, then do it much like dating- get attached to a few before you narrow it down and still you may want offers in on maybe two or three. Capiche?! If you want to be an investor, then this is thinking like one.
Key Questions by Your Key Realtor - Brian
A few important questions exist to ask the listing agent on Short Sales. Other tell tale signs can be ascertained by a good St George Realtor, like myself. One is how far along the road toward better turn-around times we can anticipate in hearing back once an offer is submitted. Of such questions I like to ask are probably in this order and varies depending on the situation of course:
- Is there more than one mortgage lien holder?
- How far along the road are we, has all the short sale paper work been submitted to all the lien holders it applies to? A new development here is that no short sale paper work is submitted to the bank for approval of a Short Sale process, until the first offer is submitted. So, the bank is definitely not "into" it to begin with.
- Has there been a first offer to “prime the pump” in getting things going or in other words, has a Realtor BPO (Broker Price Opinion) or appraisal by the bank been conducted on the home.
- What did that BPO come back at? (Often they don’t let the realtor know, but half the time they do).
- How good of a communication do you have with the bank, meaning can you talk to them and hear back quickly? (This is often my favorite question and sometimes I will ask it first. Realtors are crazy about sharing common anxt, so cannot do the bold faced lie to each other. Some are real good at side stepping the question though. This tells you a lot sometimes about if real decision makers are engaged and motivated to sell. This is such a basic function regarding being able to put a deal together and I'll bet most just miss it.)
- And as such, are you usually talking to a Loss Mitigator now or has one been assigned?
- What is your pattern if you are open to submitting back-up offers, do you wait for the bank to make a move in asking for any or will you bring up other offers?
- Do you have a good contact/title person to get the HUD work and package paper work the bank requires with an offer and how long does that take you? How many of these have you done so far? There are a myriad of other questions like pricing history, how did they arrive at price, do you have a feel for how long this one could take, etc., etc., etc.
On the good side, good responses to these questions leads us down a far better road than what some have traveled.
Second Lien Holders
Just for example, let's say there are a first and a second mortgage/lien holders on the home. Sometimes the seller will have spoken and received agreement with one lien holder regarding short selling the home, but is or has not been in as much communication with the second lien holder who usually stands to lose more on the deal. Remember, when people were getting a loan, it might have covered 80% of the cost to buy, then a second loan or second lien holder would sort of come up with the rest. Only it would be at a higher interest rate for the extra risk. For if the home depreciates in value, instead of appreciating and if the home should be sold, they could recoop their investment money, should the buyer be unable to suffer the depreciation (cover the loss) of value upon a move.
The problem is that the second lien holder, whom everyone needs a consenting approval to the seller to sale the home, 'drags their feet', such that they demand more than the going rate of $3,000 to sign the papers. What you need to know, is that you might have First Lien approval to Short Sale the home, the major stake holder doing the 'Jedi Wave Blessing', thus getting the major go-ahead right? Not necessarily. Often, now-a-days, even in literature supporting a futuristic "faster" way Short Sales will be conducted in the future, to the tune of them inundating the market in potential droves, that the problem of the Second Lien Holder Approval is as difficult as it is becoming known to be, even more difficult sometimes. Basically, it can be all over the map on what some of them demand in a pay-off. My most recent one is $5,300. How did they pick that number? Well! You heard the truth I believe when I say- NO REASON. Normally, I've heard $3,000 is standard. Finicky cat I tell you AND just ask, they HAVE and CAN kill a deal and send it into foreclosure. Where in the heck do you think all our foreclosures came from? Most of them were short sales at one time. However, second lien holders can't be too fussy, because if it goes to foreclosure, they get nothing.
The alternative is for the first primary lien holder to force the home to go into foreclosure where upon the home is stripped of all lien holders in an auction of the home going to the highest bidder, or in most cases, the largest stake holder. Subsequently, because the primary lien holder has more at stake and can usually get their money "back out", they then tend to be the highest bidder at auction- as a St George foreclosure or NOW as a genuine "Real Estate Owned" REO bank home.
Marketing "Violation"?
Be aware of such, that when the seller starts marketing the home, he/she/their Realtor, will usually market it lower than they otherwise would, to get offers into the door- after all, it will not be their loss. But this does not mean a higher price will not be expected eventually by the bank or '3rd party approvals' involved. When they do get around to looking at that first offer, they then have sent out for a BPO (Broker Price Opinion) or an appraisal on the property. At this time, offers may then have to come up on their price, in order for the home to be sold. To be fair, Short Sale Realtors are pricing homes more reasonably. Don't worry, most Buyers get something for the wait, most might say it could well not be worth the wait. Some will say that it is.
Conclusion
You've been told about them ahead of time. Now, after that, I'm happy of course to play the Short Sale game with you from an educated basis by calling on each individual one. As on the rare occasion, depending upon that individual one, it could pan out over time and you've picked up an OK deal. I'm imagining however, that through all the waiting, more good deals can sometimes be found before it goes through, in months. Given all that... I've had some I've been able to get accomplished for buyers, which is pretty good to be able to say. Whether to get help for buying or being resuscitated after trying to buy one, or in selling short sales, call Brian- I can help!
If it is in your nature to believe as an investor, in being a real live bargain hunter educated about several possibilities, realize our current market has plenty of St George Short Sales waiting just for you to call me on. I await your call or email me from here.
