by Phil Hoover, Real Estate Broker

Why Boise Short Sales Are Difficult

If you’re like many folks, you think a short sale is a chance to snag a bargain.

But, that often is not the case.

Here’s why:

A short sale occurs when a seller of a home will not net enough at closing to pay off the existing loan(s) on the property.

That means the lender must agree to take less than they are owed.  That’s where it gets complicated because the lender controls the deal.

Since most lenders are buried in short sales and foreclosures, they are notoriously unresponsive due to being overwhelmed and understaffed.

Lenders in short sale situations often take 30 or more days to respond to a request to agree to a short sale, and some never respond at all.

I recently lost a short sale on one of my listings because WAMU (Washington Mutual) failed to respond in a timely manner.  Understandably, the buyers withdrew their offer and bought another home.

It’s also common for listing agents to intentionally underprice a short sale listing to attract multiple offers on their listing.  That isn’t helpful when the lender counteroffers the sales price back to a higher appraised value and the buyer ends up paying full value for the property anyway.

Accurate numbers are hard to come by, but in my experience about 1 in 3 short sales actually make  it to closing.  The rest end up being a tremendous waste of time for all involved.

October 21st, 2008 Posted in Buyer Stuff, Inside Real Estate, Seller Stuff Print This Post Print This Post

  1. No Responses to “Why Boise Short Sales Are Difficult”

  2. By emdeplam on Oct 22, 2008

    Short sales are a waste of time for whom?

    You deal with people making the biggest financial decision of their lives. Why rush, why not get the value and the home you want.

    I know, I know and I apologize to all the agents in advance who now have to work hard for their money. Just so you know most other jobs are hard too! I hope you get another bubble one day where sales fall from the sky, till then, agents that dont want to work hard are a commodity and RE agent on a resume is about the same as ‘felony’.

  3. By Phil Hoover on Oct 22, 2008

    Thanks for your comment.
    To reiterate, short sales are often a waste of time for ALL concerned.
    I am now representing a seller on a short sale and have sold the property three times.
    First sale fell thru because the lender (WAMU) never responded and current sale has been in escrow for 40 days.
    The lender WAMU) admitted yesterday that they never did read the purchase agreement and didn’t realize they had been asked to pay the buyer’s closing costs (duh!)
    Now, they want more time to “rework” the file with no assurance they will agree to the deal.
    Short sales work best for buyers who don’t care if they get the house and have infinite patience.
    Most short sales do not get to a closing.
    Regarding your comment about “getting a good value”, buyers are often better off finding a sharp home offered by a seller who really wants to sell, has some equity, and will negotiate.
    Further, sellers who are getting nothing from the sale of their home make their homes difficult to show and often fail to maintain them.
    Hope this clarifies my post.
    Thanks!

  4. By Brian on Oct 23, 2008

    You describe a Short Sale as a case where “the lender must agree to take less than they are owed.”

    Just a question – does this scenario typically have a negative effect on the seller’s credit rating? Or does this type of “deal” never make it that far, to the credit agencies? Just wondering.

  5. By Phil Hoover on Oct 23, 2008

    Hi Brian ~
    Excellent question.
    Yes, sellers in a short sale will definitely incur damage to their credit rating, specifically with late mortgage pay ratings.
    In a short sale situation, most sellers simply stop making payments.
    In fact, most lenders will not even consider a short sale until the borrower is behind on payments.
    Lenders take an especially dim view of a borrower with a record of late payments or non-payments.
    In our current market, with many lenders reluctant to foreclose, some sellers manage to continue living in their home for months, or even more than a year, before the lender forecloses.
    Some savvy (tricky/dishonest?) sellers in a short sale situation make it difficult to show their home, thereby thwarting the sale of the home while living in it for free because the lender doesn’t want to foreclose.

  6. By Jimmy on Oct 28, 2008

    Phil, you are so right about this one. I am going on 80 days in my attempt to close on a short sale. I should just walk away and get the home at auction. You would think that lenders would be more organized in this sort of climate, but then again, maybe this is why so many of them are going out of business.

  7. By Miami Beach Real Estate on Oct 30, 2008

    Short sales are also getting very difficult here in Miami. Lenders of course are always a problem because they are so slow at approving the application and the second often just refuses to deal. But the bigger problem is that there are so many REO opportunities here, that most short sale buyers back out and simply buy a substitute from a lender without all the short sale hassle.

  8. By Jon Gosche on Dec 6, 2008

    I don’t agree with all of that Phil. We have completed several short sales this year. Yes they are harder than a conventional sale, but if everyone involved is on the same page and understands the process they can be great deals for buyers and a good way for a seller to prevent a worst disastor. Some of these new RE forms are not approriate and cause trouble. An agent needs to know what the lender is going to want, get it before listing, get the seller and buyer on the same track, get through to the loss mitiagors and it happens most of the time.

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