Short Sales – Not All They’re Cracked Up to Be
This past weekend I showed a LOT of short sale properties. In the lower price ranges for Colorado Springs, the percentage of properties that are in some level of distress is much higher than in more expensive price ranges, (under $150k it is 1/3 of the homes in our MLS). The problems with short sales are multiple.
1. You don’t know if you get the house for quite a while, even if the seller likes your offer. You can wait for weeks to find out that even though the seller likes it, their bank doesn’t, and you are back to square 1
2. Many sellers in short sale situations have no real intention of trying to make things work, and so they make it intentionally difficult to show their homes (must be present, short showing window, 24 hour notice, no showings during the week, etc)
3. Some of the agents listing short sale properties are playing games with pricing, using listing prices that they know will not work in hopes of generating calls and showings and multiple offers, with no expectation that the house will sell at the price in the listing. This is pretty hard on first time home buyers or someone who is buying the house to live in, because it really means the house is not in their price range. This happened to my own buyers twice this weekend (separate buyers), where a house was such a good deal they wanted to write, only to find out the property had been bid up 10-20% higher than the list price anyway. The irony is that the sellers lender may still not approve the transaction at the higher amount. In both cases the properties were listed at less than 2/3 what the seller owed to the bank.
4. The house is almost always “as is”. For VA and FHA financing, even something as small as peeling paint can blow up a deal, and with short sales, the deferred maintenance can go WAY beyond peeling paint
If you are buying for investment only, have some cash on the side to do repairs, have patience and time to deal with the vagaries of short sales, they can be a great opportunity. If not, they can be the source of a lot of headaches.
The sun is out again today, and the temps should be back into the 40’s, about average for this time of year.