By Kay Wilson-Bolton
September 4, 2007
The traditional method of pricing a home for market is to review the pricing of recent closings, pendings and properties currently being offered for sale.
If you and your REALTOR® are using that information to price your home for sale, beware of relaying on the prices for homes that are subject to “short pays”.
It is common for asking prices of properties being offered for sale to reflect the prices of properties closed within the last six months. In today’s market, sales in the last 90 days are more appropriate.
It is also important that you study the characteristics of homes being offered for sale. Some agents not skilled in short sales are apt to put low prices on new listings, thinking that the bank will decide what price the buyer will pay.
It is also important to look at the cumulative days on the market. If comparable properties indicate 15, 25 and 30 days on the market, one will assume that that is a reasonable marketing time. However, if further investigation reveals that previous marketing history is 180 days with another broker, assume that the asking price may not be justified
Banks are not approving short sales just because there is an offer on the property and the buyers have stopped making payments
Banks look at the borrower’s entire financial and personal situation. They want to know why the borrower is not making their payments. What is the appraised value of the home? What is the borrower’s income? How did they buy the home? Finally, they will look at the costs attached to the sale and decide whether or not to pay them, including the amount of the brokerage fee.
The short sale process is frustrating and very time consuming. In dealing with the Work-Out Department, be prepared to talk to numerous people about the same topic, fax the same documents multiple times, return phone calls to voice mail and wait.
If a buyer decides to make an offer on a short sale property, strategies need to be addressed upon acceptance. Should the buyer initiate their home inspection and appraisal within the terms of the contract, or should they wait for the approval of the bank?
If it is agreed that buyers will wait for bank approval prior to beginning the home inspection, what is the remedy if the inspection reveals problems the buyers does not wish to address and cancel the transaction?
What if the loan lock expires or the buyers lose their job? The sellers have then lost up to six weeks of time which moves them closer to foreclosure and desperation.
This is a new market. Few are equipped to deal with its variables and sticking points.
If you are a seller and you aren’t feeling secure about the advice being given to you, consult with an attorney who understands real estate or involve your agent’s broker to be sure your path is sound.
Relying on the asking price of every comparable property is risky unless you know the details. Therein lies the devil.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and CENTURY 21 Ability. She is an REO specialist and brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.readysetkay.com