Short Sale Pricing Discussion

[Smiling JOe]

aabsolute, I moved the following posts from the foreclosure thread, since short sales aren't foreclosures.

It's funny to hear "our financial system is in the crapper" I know it's true, but it's still a funny adjective.


Josh, I read the short sales section and it still reads to me as a sales pitch more than as a fact. What's the point of showing a price on a listing that is not the price that the public can pay? Haven't ECAR or another group created a more thorough policy on that yet?

It's hard for ECAR to control because it's the banks that aren't giving Realtors enough information. When you speak with the banks in regards to a short sale all they do is tell you to bring an offer. Many Realtors just continue dropping prices until they get an offer to take to the bank. Once they have declined an offer the Realtor should have a better idea of where the bank is at on the price. It's a very frustrating process.

The Realtors are better off getting a low ball offer right when they list a property so that they can find a price that the bank is willing to accept. It always helps to have an investor willing to buy any property at the right price. Some banks are very realistic and taking large losses while others don't understand the market and will end up forclosing on the property before it's over.

I have a short sale in Inlet Beach that the guy owes over $850,000. The bank is willing to take $460,000-$470,000 and the appraisel just came back at $525,000. This is realistic in my opinion. I put in an offer on an unfinished home on Holiday Isle that was listed at $999,000. We went in at $500,000 to feel them out and the bank came back at $1,450,000. 50% higher than the list price!!! You can see that some banks understand the market while others do not. Short sales can present a great way for a buyer to get a deal, but they need to have patience.

Hopefully the banks will begin to foreclose on these properties at a faster rate. The bank owned foreclosures are selling like hot cakes at this point. I know people who haven't made payments in 12 months and still haven't been foreclosed on. The longer these short sales drag out....the longer the market stalls.

Sorry for the rambling.

That one on Holiday Isle that was listed at 999, do you know what the mortgage payoff was?

Around the counter price. Just goes to show that the bank still thinks they're going to get the inflated 2005 price in this market.

Aasolute, can you think of a policy which ECAR or another group could implement that would work? I cannot.

Regarding ECAR's control, ECAR can not tell agents where to price their listings.

I agree with SJ. It is very tough to come up with a blanket policy to fix this problem. The banks would be better off getting an appraisel and listing at that price to start off and reduce as time passes. Instead they give no information whatsoever and get offended when agents bring them ridiculous offers.

The process they now have in place does nothing but piss potential buyers off. I tell buyers going in that they may get a good deal and they may never even get an answer back from the bank.

Fannie Mae is going to start with two test markets, one in Orlando, giving the listing agent their acceptable price. If it sells more real estate, more quickly, they will extend that process into other markets, and other lenders may also catch on.

I saw your post on that the other day. It seems that it would greatly help. The problem is that the banks will realize how bad their losses are. I think they prefer hiding their heads in the sand as the market continues to fall. The smart banks (ha) would be doing this already and selling properties at today's value and not waiting for the market to fall further.
I did see a foreclosure the other day in Crystal Beach that was on a vacation rental program. I thought that was interesting.

How about writing a policy that forbids the advertisement of a price that is not actual by a licensed Realtor? This would force the lender to provide a price or face the next logical consequence.

The Realtor Associations cannot dictate the listing price for agents, and that is essentially what they would be doing if they forced them to price as you state.

The opinion of a FAR (Florida Association of Realtors) attorney is that there could be some "false advertisement" issues if a Realtor or a seller, knowingly price the property less than an acceptable price. However, one would still need proof that they were doing it knowingly. There are some obvious examples, such as the person who listed the $5 million house in 4 mile village, for $10,001 short sale.
That is for the Courts to decide, not the Realtor Associations.

I will add that Realtors have a Code of Ethics to which they are held accountable, and to knowingly deceit the public will not be tolerated. Both the public and other Realtors are able to report Realtors for violations, so if you can prove that a Realtor is violating the Code of Ethics, report them.

What duties concerning accuracy of list price does the Realtor have when they write the listing agreement?

"Accuracy of list price?" The listing Realtor is required to enter the list price which is on the listing contract. That is the only accuracy required.

As mentioned previously in this thread, FAR's attorney has stated that the seller may have a duty to the public to not knowingly list the property for less than the lender will accept. I have yet to hear or read about a lawsuit against a seller for listing the property too low.

I thought there were fiducial responsibilities on the part of the listing professional to ascertain the basics to protect and serve the public interest. Realtors must be more adept than the AverageJoe.

ECAR is doing their best to prevent the public from discerning whether a listing is a short sale. I totally disagree with the new rules set in Dec. '08:
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"Listing agents now have the option of leaving short sales Active while waiting for lender approval of a purchase contract. On December 4, 2008, the Board of Directors approved an MLS Committee recommendation to change the MLS Rules, accommodating sellers and listing agents caught in the ever-changing short-sale landscape. In order to leave a short sale Active after a contract has been signed, the listing agent must “specify and notice” the contingency at the beginning of the Agent Notes. Unlike kick-out clauses where the contingency is noticed in the Remarks, a short-sale contingency must be placed in the Agent Notes to avoid inadvertently disclosing to the public that the listing is a short sale."
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I expressed my feelings that the public is entitled to full disclosure regarding sales type (short sale, REO etc). Also, I do not have any clients who will make an offer on a short sale while the listing remains active while they continue to accumulate offers. In fact, I write into my short sale offers that the MLS status must be changed from "active" to "contingent".

The responce I received from ECAR was this:
Having to sell a property short is not something every seller wants broadcast to the whole world, especially if the property is an investment. It could adversely affect their reputation or even their employment (the example given to me was a junior partner in a law firm or bank). If the seller wants, the agent can place information about the short sale in Remarks.

So now we are protecting seller's reputations because they can't fulfill their investment obligations?????????? LUDICROUS!

This is the 2nd time in this Thread that I've made a statement wherein I can't find the humor but someone else does. Did something happen just before I entered the room?

My only point was that any hack like me can determine the basic encumbrances on a property for sale. I'd think that a Realtor would find out exactly how the seller intends to sell a property for less than the value of its encumbrances in advance of promoting a property on the MLS. If there is no specific answer than why guess? There's a higher duty on a professional than there is on a hack.

I'm not a Realtor, but have been in the middle of 60 million dollars worth of transactions. The idea that a Realtor would take no responsibility at all for entering marketing data into the MLS is lame.

I like your informative posts.

aa, you should read up on "fiduciary" and FL real estate law.

Joe Mammy, get ready for some changes on that recent change regarding keeping a listing active. ECAR sought legal advice, and they are likely reverting back to the way we've always done it. If it is under contract, unless it has a 72 hour, or less, kickout clause, it must be placed in contingent or pending.

You would think that would be an easy wouldn't you, but lenders will not disclose the amount they are willing to accept in advance. SO, if you want to ***** about the listing price, call the lenders and moan away. It would be very helpful to us all, the buyer, the seller, and the Realtor.

If you are selling something and using the MLS to advertise it I think full disclosure is called for. At some point in the last 3 years it has become the fashion to entice the public into receivership transactions with false advertising. If the price is not known, it's not known.

SJ, I thought I understood fiduciary. Will you clarify where I misunderstood Realtor's and their fiducial responsibilities? I think you might be implying that Realtor's are only beholden to their client, but I'm not sure.

So why are you groaning about the Realtors instead of the banks, who will not disclose the acceptable amount? You are focusing your energy in the wrong direction.

Personally, I think it would be great if we didn't accept listings on properties of which we don't know that the listing price is acceptable. It would force lenders to play ball, rather than sitting on the sidelines, hoping for multiple offers from which to choose. I could only guess that all Realtors hoped for the same thing. The only problem with that is that the sellers would be more greatly harmed in the process, until the lenders understood our rules. You just won't see it happen.

There are three types of ways in which a Broker can represent you:
1) No-representation (we still have duties)

2) Transaction Broker (no fiduciary duties - because a Transaction Broker may handle both sides of the transaction, and wouldn't be able to show favoritism to either side.)

3) Single Agent Broker (fiduciary duties) - though without transferring to a different type of representation, thus losing fiduciary duties, you cannot show any other listings which are held by your brokerage. That also means that if a Realtor working as a Single Agent Broker, takes a listing, no other agent working under that Broker can show the listing, unless the Realtor who is showing the property is acting in the very-limited, No Representation Agency. Also, you should be aware that in a Single Agency Brokerage, the client may be liable for the Realtor's actions and the Realtor may be liable for the Client's actions.

In Florida, unless otherwise disclosed, all Real Estate Agents act as Transaction Brokerages.

If you want to read an attorney's summarized history of Agency, click here. I read through it and it looks fairly on target.

If you want to go directly to the Florida Statutes controlling Agency, see Florida Statue 475.278.

Realtors already know the price. It is Recorded in the Official Records and it's called a Mortgage. You might find it under the shortcut RM in the Court Clerks Website. You'll also find things like a Deed and Restrictive Covenants which you might want to study and disclose to the public if you're going to advertise in the MLS. What you're talking about is me going to a bank and telling them to settle a recorded mortgage and possibly a UCC for less than its legitimate securitized amount so you will know how to price a listing without being misleading.

I think I understand now. Thanks for the time you put in.

So, Realtors don't have to disclose everything they know about the property and it's Title if it does not put the property in a light most condusive to gaining an offer.

Not true. Neither the mortgage nor the note, set the market price or the acceptable price by the lender in a short sale. I'm not about to do a short class on Short Sales on here tonight, but a short sale essentially means that the seller is selling for a price which will leave a deficiency, which the seller cannot pay, between the selling price and the amount owed on the note. Each lender is different regarding how much debt they will forgive, so NO, Realtors aren't privy to that information and thus they do not know the price which a lender will permit.

Regarding C&Rs, disclosure is not due at the time of the showing or advertising, so that is irrelevant. They are not required to be posted in order to enter a listing in the MLS.

A person making an offer on a short-sale listing is required to include a short sale disclosure to the contract, so disclosure is made that it will be contingent upon the lender approving it.

No, you don't understand.

I'll give you one last example to clear it up.
Let's say the listing Realtor lists a normal property (not a short sale) at a price of $300,000. Mrs Seller tells the listing Realtor that she is willing to take $275,000 for the house.

The Listing Realtor has a customer, Mr Buyer, who he tells about the house. Mr Buyer asks the Realtor, "How much do you think Mrs Seller will take?"

The Realtor, acting as a Transaction Agency, cannot disclose that information, which is privileged, unless the seller states otherwise in writing. THAT is the type of disclosure which a Transaction Broker cannot disclose. ALL material facts which may affect the buyers purchasing decision, MUST be disclosed. If the Realtor knows that roof leaks, but the seller just had the ceiling freshly painted to cover the stain, but didn't repair the leak, that would be an example of a material fact which must be disclosed.

Hope that helps. You are not alone in your confusion. I'm sure many people have no clue. I think Agency Disclosure has always been confusing even to most Realtors.

BTW, a Realtor is no longer required to disclose if the Realtor knows that a suicide took place in the property. That was not always the case.

One final note on this thread for the evening:
In each of the three types of Agency in Florida, the first rule is:
1. Dealing honestly and fairly

That even includes the NON-Representation Agency. That is a Florida Statute, not just some Realtor Code of Ethics, so it applies to all real estate agents in Florida. (Only one in four real estate agents in Florida are Realtors, which have a Code of Ethics which they must follow.)

I would guess that this (1. Dealing honestly and fairly) is why FL Assoc. of Realtors' lawyers believe that if a Realtor may be held accountable if he or she lists the property at a price less than what he or she knows the lender will accept. Prime example is the $5million (that is what the seller paid) short sale home which WAS listed at $10,001 in Four Mile Village.

All right, let me be sure I understand this.....

I'm building a home and selling it for 1.4. My neighbor, who's a Realtor, advertises his listing in the MLS for 850 despite a mortgage payoff of 1.3. That Realtor has no clue if the bank will accept less than the full mortgage amount. It's o.k. with the Realtor's Association that he advertises the teaser price for his home?

I don't know how do say it differently than I've been saying it. ECAR doesn't tell the Realtor how to market the property, as long as the Realtor is within the rules of ECAR. Marketing the property includes pricing.

If an agent isn't dealing honestly and fairly, report him or her, with your proof, to the Florida Real Estate Commission.

You are totally missing the fact that in a short sale, the sales price will be less than the note payoff, and the lender, the seller, the Listing Agent, the Selling Agent, and the buyer are aware of this. (BTW, you don't pay off the mortgage, you pay off the "note.") The only catch is that the lenders haven't been disclosing the amount they are willing to accept, hence the need for the Short Sale Addendum to the Sales Contract, which states that the contract is contingent upon lender approval.

Maybe a better question to ask is "do I really want to build a home for 1.4 when the market price is at best 850?" No seller or Realtor pursues short sales for fun; they do it in an effort to get the property sold. Believe me, no one's leaving money on the table in these transactions.

And you completely missed my point.

If the Realtor has no pre-approved short payoff then they shouldn't advertise a ficticious price. They should be advertising the mortgage balance minus any reduction the Owner is willing to absorb by way of cash at closing or other provision.

If what you said were actual I would agree 100%. I'm talking about a Realtor advertising a property for less than it has ability to sell for. How is it legitimate to advertise a price that you have no ability to actual sell for?

If the seller could absorb the deficiency, it wouldn't be a short sale.

It sounds like you don't think sellers should be able to short sale their property, and that is an entirely different topic. Actually, this discussion is a bit off from the original thread topic, so let's take this thread back to "Area Foreclosures," and if you wish, start a new thread on short sales or pricing. You can do a multi-quote and post all of the pertinent posts from here, to that new thread.

According to FAR attorneys, if you can prove that the Realtor knowingly is pricing it less than the lender will accept, you may have a case. However, since the lenders haven't been telling Realtors their acceptable price, you would be lacking any evidence to support your claim.

*************
From NAR (National Assoc of Realtors):
What is a short sale? "A short sale is a sales transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan," according to the California Association of REALTORS®.

[Smiling JOe]

aabsolute, remember that a property's value isn't determined by the amount owed on the note. A Realtor should perform a CMA (Comparitive Market Analysis) to determine the fair value of the property, when pricing any property. You must also remember that no buyer who is getting a loan for the purchase, is going to be allowed to purchase for an amount greater than the appraised value. Using your example of the $1.4 million home compared to the short sale listing of the neighboring home priced at $850,000, if the comps aren't selling for $850,000+, the short sale isn't going to sell for $850,000, and the $1.4 million home won't either, if the buyer is getting financing for the purchase. Comparing the listing price of the $1.4 million home is useless, if other similar homes aren't drawing offers at $850,000.

[Joe Mammy]

Smiling Joe-
Are you still on the MLS committee? I was on it briefly a few years ago until I grew weary of the gavel banging. Can you enlighten us to the new short sale rule changes?

[Smiling JOe]

It is in front of the ECAR Board Mtg at the moment. Will know more when this meeting is over. Look on the home page of ECAR for more information to soon be released if there is an actual change.

[Joe Mammy]

SJ-
Have you read the new FL Realtor mag yet? Be sure to check out page 12 in the Law & Ethics section and the "Truth in Advertising" article.

It states that an agent who doesn't change the listing status from "active" to either "contingent" or "pending" is in violation of Article 12, Realtor Code of Ethics". They threw out a hypothetical situation that showed a hearing panel ruling in favor of a broker who challenged another broker for not changing a short sale status after going under a contingent contract...

I wonder why ECAR had to hire an attorney to figure this out????

[AAbsolute]

aabsolute, remember that a property's value isn't determined by the amount owed on the note. A Realtor should perform a CMA (Comparitive Market Analysis) to determine the fair value of the property, when pricing any property. You must also remember that no buyer who is getting a loan for the purchase, is going to be allowed to purchase for an amount greater than the appraised value. Using your example of the $1.4 million home compared to the short sale listing of the neighboring home priced at $850,000, if the comps aren't selling for $850,000+, the short sale isn't going to sell for $850,000, and the $1.4 million home won't either, if the buyer is getting financing for the purchase. Comparing the listing price of the $1.4 million home is useless, if other similar homes aren't drawing offers at $850,000.

I've re-read your notes and comments several times. In the circumstances that you have described, the following scenario is legitimate and not a Realtor's ethical violation:

Current comps show that a neighborhood has a value of 1.4 for a certain style and size home. A Realtor has a Client with a high net worth looking to aggressively market his home. The Realtor knows the mortgage payoff is 1.2 on his Client's property, but hopes to get some immediate activity. The Client instructs the Realtor to list the property at 850, show any and all offers to the Lender and negotiate between the Lender and the Buyer to see if he can create something.

Is this o.k.?
What part of this is unethical on the part of the Realtor?

[Smiling JOe]

SJ-
Have you read the new FL Realtor mag yet? Be sure to check out page 12 in the Law & Ethics section and the "Truth in Advertising" article.

It states that an agent who doesn't change the listing status from "active" to either "contingent" or "pending" is in violation of Article 12, Realtor Code of Ethics". They threw out a hypothetical situation that showed a hearing panel ruling in favor of a broker who challenged another broker for not changing a short sale status after going under a contingent contract...

I wonder why ECAR had to hire an attorney to figure this out????

Joe Mammy, there is no easy answer, but many questions. For example, the short sale addendum to the sales contract says that unless otherwise stated in writing, the listing agent can continue to market the property. (the short sale addendum is a FAR (FL Assoc of Realtors) document, written by FAR attorneys. So the next question is, "what does marketing include?"

Is marketing restricted to only keeping the sign posted on the property, or an ad in the paper? Some might say that the MLS is only an agreement of one broker to pay another broker a particularly stated amount for bringing a buyer to closing, but other people may say that it is much more, especially since most real estate websites, including all of the big ones, such as Realtor.com, Trulia.com, zillow.com, etc, pull their content directly from the local MLSes. If that is the case, the MLS is actually the most important tool for marketing a property. Only properties with an "Active" status will be forwarded to all of those other websites.

So why is the FAR short sale addendum to the sales contract contradictory to the rules which most MLSes set? I've never been a big fan of FAR or NAR, so it won't come as a surprise when you hear me say that maybe the banks and politicians are in ca-hoots with the lobbyists for FAR. (not an accusation, but a possible reason why) The longer the banks can keep the short sale property in the "active" status, the more opportunity the lenders have to see more contracts. That is why I think it takes two months to hear an answer from the lenders after the first offer is put on their desks. If the listing goes into contingent, it will not be seen on the auto-data-feed sites, so the lender isn't likely seeing any other offers, which they must dislike.

Technically, the first contract on a short sale should be the Primary Contract, and any other contracts would have to be back up contracts. Also, I believe that the back up contracts should not be shown to the lender, until they have approved or rejected the acceptance of the first contract. That is not the way that most are operating.

[Smiling JOe]

I've re-read your notes and comments several times. In the circumstances that you have described, the following scenario is legitimate and not a Realtor's ethical violation:

Current comps show that a neighborhood has a value of 1.4 for a certain style and size home. A Realtor has a Client with a high net worth looking to aggressively market his home. The Realtor knows the mortgage payoff is 1.2 on his Client's property, but hopes to get some immediate activity. The Client instructs the Realtor to list the property at 850, show any and all offers to the Lender and negotiate between the Lender and the Buyer to see if he can create something.

Is this o.k.?
What part of this is unethical on the part of the Realtor?

The short answer is that if the seller has a "high net worth" as you state, the lender won't likely allow him to conduct a short sale. He will end up have to pony up the difference at the closing table, thus there would be no deficiency. Also, if the seller wasn't selling this as a short sale, and he rejected a full price offer, the seller may still have to pay the full brokerage fee to the Brokers.

Was there a violation of Realtor Code of Ethics?
Article 1
...This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly....

Article 12
REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations....
*************************************
Not being an attorney, I don't want to pretend to be one, so if you have more legal questions regarding short sales, I recommend you find an attorney. I am merely attempting to explain ECARs rules as it pertains to short sales. There is a ton of good information online.

[AAbsolute]

The short answer is that if the seller has a "high net worth" as you state, the lender won't likely allow him to conduct a short sale. He will end up have to pony up the difference at the closing table, thus there would be no deficiency. Also, if the seller wasn't selling this as a short sale, and he rejected a full price offer, the seller may still have to pay the full brokerage fee to the Brokers.

Was there a violation of Realtor Code of Ethics?
Article 1
...This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly....

Article 12
REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations....
*************************************
Not being an attorney, I don't want to pretend to be one, so if you have more legal questions regarding short sales, I recommend you find an attorney. I am merely attempting to explain ECARs rules as it pertains to short sales. There is a ton of good information online.

This time you touched my root question. It was there all this time, but I couldn't express it correctly:

You know that banks are unlikely to grant a short sale to a person with assets and I do too. However, it doesn't sound like Realtor ethics have dealt with this scenario that is being played out all over South Walton. A Realtor can list something at a price that is "short" despite the fact that the bank won't grant the relief sought merely because the Realtor can say the lender's not playing ball. Innocent Buyer makes a good faith offer which invokes some very predictable psychology in them. If you're a Realtor then you understand what a non-professional goes through psychologically during the phase just after making a written offer. It's at this point in the marketing scheme that the public is being mistreated and I think a Licensed Realtor should not be roping non professional's into a scenario like this.

I disagree with you that the Lender has more duty than to tell the Realtor and Seller to read their Recorded Mortgage. Without a memorandum to the contrary, the price is the payoff.

[ClintClint]

This time you touched my root question. It was there all this time, but I couldn't express it correctly:

You know that banks are unlikely to grant a short sale to a person with assets and I do too. However, it doesn't sound like Realtor ethics have dealt with this scenario that is being played out all over South Walton. A Realtor can list something at a price that is "short" despite the fact that the bank won't grant the relief sought merely because the Realtor can say the lender's not playing ball. Innocent Buyer makes a good faith offer which invokes some very predictable psychology in them. If you're a Realtor then you understand what a non-professional goes through psychologically during the phase just after making a written offer. It's at this point in the marketing scheme that the public is being mistreated and I think a Licensed Realtor should not be roping non professional's into a scenario like this.

I disagree with you that the Lender has more duty than to tell the Realtor and Seller to read their Recorded Mortgage. Without a memorandum to the contrary, the price is the payoff.

Lender ethics??
The only thing they won't do is rob your safe deposit box. Maybe

[kurt]

Thanks SJ - added to SoWal.com home page. I know this is a hot topic in SoWal and a lot of questions out there.

[AAbsolute]

Lender ethics??
The only thing they won't do is rob your safe deposit box. Maybe

I bet we could start a new Thread on that subject too.

I'm hearing and reading a conflict from the keyboards of a lot of Realtors. If you'll watch and read you'll see Realtors say:

Lenders aren't giving the sales price we need in order to correctly price a listing.

Lenders don't give short sale reductions to Sellers with assets.

Realtors aren't responsible for list price and advertising of same.

Mortgages are Recorded in the Public Record.

[AAbsolute]

Here it is...SJ and I saying literally the same thing, but meaning something very different.

[Smiling JOe]

This time you touched my root question. It was there all this time, but I couldn't express it correctly:

You know that banks are unlikely to grant a short sale to a person with assets and I do too. However, it doesn't sound like Realtor ethics have dealt with this scenario that is being played out all over South Walton. A Realtor can list something at a price that is "short" despite the fact that the bank won't grant the relief sought merely because the Realtor can say the lender's not playing ball. Innocent Buyer makes a good faith offer which invokes some very predictable psychology in them. If you're a Realtor then you understand what a non-professional goes through psychologically during the phase just after making a written offer. It's at this point in the marketing scheme that the public is being mistreated and I think a Licensed Realtor should not be roping non professional's into a scenario like this.

I disagree with you that the Lender has more duty than to tell the Realtor and Seller to read their Recorded Mortgage. Without a memorandum to the contrary, the price is the payoff.

I'm not sure that I understand your post, aabsolute.

It sounds as though you think the buyer submitting an offer isn't aware that the lender must approve the price, which is incorrect. Short sales are sold "As-Is" and require the Short Sale Addendum to the Sales Contract to which the buyer must agree to as part of the offer. The buyer is well aware of the short sale when it comes time to write an offer. Also, if a buyer is working with at least a half-smart Realtor, the Realtor has the ability to filter out short sale listings, foreclosures, REOs, etc., or include only short sales, foreclosures, REOs, etc. If you want to know more information about a property than you see on Realtor.com or whatever site you use, ask your Realtor to assist you. If you don't want to play this game with the lender, don't pursue short-sales. It is just that easy.

Regarding your last statement, no, the price is not the payoff in a short sale, if the market value is less. The property must appraise, and the seller would have a deficiency -- that is what a short sale is all about. You seem to be forgetting that if it won't appraise, it won't sell. If there is no deficiency, it is a normal sale.

[Joe Mammy]

I've considered bringing the Destin short sale market to a screeching halt myself. It is conceivable that one buyer could make 375 offers on every Destin short sale without putting up a penny in deposits. Find out how in my latest Market Pulse.

[Bobby J]

I've considered bringing the Destin short sale market to a screeching halt myself. It is conceivable that one buyer could make 375 offers on every Destin short sale without putting up a penny in deposits. Find out how in my latest Market Pulse.

I like this idea.

[Smiling JOe]

Yes, one person could make an offer on 375 properties, but not legally, since there must be good faith and intention from the buyer. However, technically a buyer could do that by including a contingency for self inspection. I'm not sure that most would be able to get by without having an Earnest Money Deposit, and since most lenders of short sales require letters of financial commitment, I'm not sure that the buyer could convince his own lender to write 375 financial pre-approval letters.

I'm sure that someone is willing to try it and may succeed, but I'd go back to the part about there needing to be good faith on behalf of the buyer.

If Realtors really wanted to bring short sales to a halt, I guess it would be easy enough for each agent to not take those listings, but I, like many others, would rather focus on selling the seller's property, so they can get on with their financial life and begin to rebuild.

[Bobby J]

I really think the short sale mess will begin to fix itself as many agents begin to step away and the foreclosure begin to show up. Why would one bother if it is completely hopeless. I have a few short sales left in my inventory and if the clients do not meet the criteria that Joe Mammy brings up we have to let them go.
The short sales that we have managed to get closed are very tedious and make you really wonder if the bank is in touch at all. I now know why the term mortgage in French means "dead pledge"!

[Joe Mammy]

Yes, one person could make an offer on 375 properties, but not legally, since there must be good faith and intention from the buyer. However, technically a buyer could do that by including a contingency for self inspection. I'm not sure that most would be able to get by without having an Earnest Money Deposit, and since most lenders of short sales require letters of financial commitment, I'm not sure that the buyer could convince his own lender to write 375 financial pre-approval letters.

I'm sure that someone is willing to try it and may succeed, but I'd go back to the part about there needing to be good faith on behalf of the buyer.

If Realtors really wanted to bring short sales to a halt, I guess it would be easy enough for each agent to not take those listings, but I, like many others, would rather focus on selling the seller's property, so they can get on with their financial life and begin to rebuild.

All you need is the pre-Q letter, not a pre-A. One is all it would take. And who is to say that there is not good faith? Maybe the buyer will buy the first hundred or two that answer with an acceptance. And the EMD submitted X days after acceptance date is common.

Wouldn't it be nice to see all of the shorties off the active market?

My point is that now the system is not working. I really hope that Fannie will get good results in their test areas marketing the actual acceptance price by the lender.

[Smiling JOe]

me, too. I cannot think of a single reason why the test markets wouldn't do well, unless Fannie isn't going to release their real bottom-line acceptance level. The crazy thing is as someone else noted, the lender will often reject reasonable offers in a short sale, but when the property later goes to foreclosure and the lender takes it back, the lender will list the property at a rock bottom price to move it quickly. Seems like they could make more money by giving a real price up front, but what do I know?

I recently closed a short sale, four-plus months after writing the contract. Let me just say that the bankd which rhymes with skank of Tamerika is a real pleasure, I mean pain in the @ss. Because the bank took so long to give us a yeah or nay, the contract expired after three months, and our second contract (same buyer and seller) was even less than the first. Good news for the buyer, bad news for skank of Tamerika.

[AAbsolute]

I'm not sure that I understand your post, aabsolute.

It sounds as though you think the buyer submitting an offer isn't aware that the lender must approve the price, which is incorrect. Short sales are sold "As-Is" and require the Short Sale Addendum to the Sales Contract to which the buyer must agree to as part of the offer. The buyer is well aware of the short sale when it comes time to write an offer. Also, if a buyer is working with at least a half-smart Realtor, the Realtor has the ability to filter out short sale listings, foreclosures, REOs, etc., or include only short sales, foreclosures, REOs, etc. If you want to know more information about a property than you see on Realtor.com or whatever site you use, ask your Realtor to assist you. If you don't want to play this game with the lender, don't pursue short-sales. It is just that easy.

Regarding your last statement, no, the price is not the payoff in a short sale, if the market value is less. The property must appraise, and the seller would have a deficiency -- that is what a short sale is all about. You seem to be forgetting that if it won't appraise, it won't sell. If there is no deficiency, it is a normal sale.

So if Seller has a mortgage of 865,000 on a property worth about that, income to make payments and assets to cover a deficiency, is this a lender approvable short sale in your experience?

[Smiling JOe]

If the property is worth the amount of the payoff, there would be no deficiency, and thus no short sale.

[Smiling JOe]

Am I really making it sound that complicated? If there will be a deficiency (when the seller can not pay the difference between the selling price and the amount owed), it will be a short sale, and it would need to be contingent upon the lender approving the sale.

[Miss Critter]

Am I really making it sound that complicated?

No.

[Camp Creek Kid]

I think listing a short sale is pointless because the buyers are aware that the sellers are desperate and will therefore make a low-ball offer expecting the buyers to take whatever is offered. What the buyers won't acknowledge is that if a short sale is approved, it is likely that the bank will require the sellers to sign a promissory note agreeing to pay back the balance of the deficiency. If the deficiency is a large amount, the seller is looking at bankruptcy down the road. Therefore, the seller still needs to sell for a higher price than the buyer wants, and the buyer can wait until the property goes into foreclosure and get their target price anyway.

[Miss Critter]

I think listing a short sale is pointless because the buyers are aware that the sellers are desperate and will therefore make a low-ball offer expecting the buyers to take whatever is offered. What the buyers won't acknowledge is that if a short sale is approved, it is likely that the bank will require the sellers to sign a promissory note agreeing to pay back the balance of the deficiency. If the deficiency is a large amount, the seller is looking at bankruptcy down the road. Therefore, the seller still needs to sell for a higher price than the buyer wants, and the buyer can wait until the property goes into foreclosure and get their target price anyway.

My understanding is that deficiency judgments are the exception, rather than the rule. Most short sellers are out of funds, so there's little likelihood that they could pay a judgment anyway, and would likely file for bankruptcy. But I'm not in the short-sale trenches; I just read alot.

I do question buyers' pursuit of short sales, since short sales will ultimately become foreclosures, and the price (at least the way things are now) would most likely be better for the buyer when that happens, especially since foreclosure inventory seems to be mounting at an accelerated pace. SJ, Bobby J, Joe M - your thoughts??

[Camp Creek Kid]

My understanding is that deficiency judgments are the exception, rather than the rule. Most short sellers are out of funds, so there's little likelihood that they could pay a judgment anyway, and would likely file for bankruptcy. But I'm not in the short-sale trenches; I just read alot.

I do question buyers' pursuit of short sales, since short sales will ultimately become foreclosures, and the price (at least the way things are now) would most likely be better for the buyer when that happens, especially since foreclosure inventory seems to be mounting at an accelerated pace. SJ, Bobby J, Joe M - your thoughts??

I know the details of a couple of short sale and they've all had at least a partial deficiency judgement.

[AAbsolute]

Am I really making it sound that complicated? If there will be a deficiency (when the seller can not pay the difference between the selling price and the amount owed), it will be a short sale, and it would need to be contingent upon the lender approving the sale.

I understand. I believe that some Realtors may list something as Short at a low price, with the lender approval caveat, in order to help their property gain attention. If they get attention by offering $100,000 to $200,000 below current payoff and get an offer or two they kinda have fish in a barrel while they wait for the lender's kick out. Now the Buyer has invested good will in the property and is probably not in the fairest negotiating position.

I haven't heard anyone say this is against Realtor Ethics.

[ClintClint]

Let us face a harsh reality. We, myself included, are reaping what we have sown. The entire real estate industry and consumers alike got drunk on a witch's brew of easy money, corrupt lenders and appraisers, lax regulatory oversight, ratings agencies with conflict of interests, brokers with only commissions in mind, and the bigger fool theory. It was the perfect storm!
It was in fact the Bermuda triangle for ethics and honest dealings. Good people with good intentions entered but soon lost their way. Their moral compass became disoriented and they allowed the intoxication of money to override good judgment.
Ultimately, their money went to money heaven. Millions of people have been hurt, many destroyed. It will take many years to heal but the toothpaste will never be put back in the tube. The lucky people are those that are able to blame others, justly or unjustly, for their misfortune. For it is those that realize their prostitution of their values has self inflicted monetary and self esteem consequences, that will bear the ongoing burden----and rightly so.

[SHELLY]

Let us face a harsh reality. We, myself included, are reaping what we have sown. The entire real estate industry and consumers alike got drunk on a witch's brew of easy money, corrupt lenders and appraisers, lax regulatory oversight, ratings agencies with conflict of interests, brokers with only commissions in mind, and the bigger fool theory. It was the perfect storm!
It was in fact the Bermuda triangle for ethics and honest dealings. Good people with good intentions entered but soon lost their way. Their moral compass became disoriented and they allowed the intoxication of money to override good judgment.
Ultimately, their money went to money heaven. Millions of people have been hurt, many destroyed. It will take many years to heal but the toothpaste will never be put back in the tube. The lucky people are those that are able to blame others, justly or unjustly, for their misfortune. For it is those that realize their prostitution of their values has self inflicted monetary and self esteem consequences, that will bear the ongoing burden----and rightly so.

... so, in other words, the baby boomers aren't all going to flood into Florida and buy up all these beach homes and condos???

Bummer.

.

[traderx]

... so, in other words, the baby boomers aren't all going to flood into Florida and buy up all these beach homes and condos???

Bummer.

.

Interesting word choice.

[Joe Mammy]

Let us face a harsh reality. We, myself included, are reaping what we have sown. The entire real estate industry and consumers alike got drunk on a witch's brew of easy money, corrupt lenders and appraisers, lax regulatory oversight, ratings agencies with conflict of interests, brokers with only commissions in mind, and the bigger fool theory. It was the perfect storm!
It was in fact the Bermuda triangle for ethics and honest dealings. Good people with good intentions entered but soon lost their way. Their moral compass became disoriented and they allowed the intoxication of money to override good judgment.
Ultimately, their money went to money heaven. Millions of people have been hurt, many destroyed. It will take many years to heal but the toothpaste will never be put back in the tube. The lucky people are those that are able to blame others, justly or unjustly, for their misfortune. For it is those that realize their prostitution of their values has self inflicted monetary and self esteem consequences, that will bear the ongoing burden----and rightly so.

WoW! I've reread your post 6 times, and still absorbing.

Lucky for blaming others for their misfortune? I'm either spellbound or stymied...

The prostitution of their values has really aided in the correction of the market, that was dearly needed.

Once this shortie situation is cleared up things will get better quickly. Obama's possible bad bank is probably playing a big role in the timeliness of banking decisions. Why write down a loan if by waiting the gov will take it off my hands as a toxic debt?

[ClintClint]

Joe, I agree with you 100% about the short sale situation being slowed down by the uncertainty of the whole bank bailout resolution.
I think you misunderstood a couple of my phrases. Clumsy literary license on my part---let me explain. When I said the lucky ones were able to blame others, I meant that by blaming others you are "lucky" not to face the consequences of accepting responsibility yourself for your situation. When I said the prostitution of your values, I meant selling out of your core inner values in pursuit of money------not related to real estate "values".
I didn't mean my post to be a condemnation of the real estate industry or mankind in general. I do think the words"greed" and "corruption" would be aptly applied in some situations, but they have connotations that I rather not apply with a broad brush. I think temptation and the adrenaline rush ( the juice if you will ) are the more likely motivational demons. Hell, temptation and the fight against it goes back the Garden of Eden. Man is not perfect and who am I to judge your soul. No one needs to redeem themselves to me or anyone else. The healing emanates from within and begins with forgiving yourself and then making a vow to yourself to realign your priorities and do better next time the excesses and lures of money and the juice of the whole game arise. Fortunately, the new paradigm ahead will afford everyone willing to accept it, the opportunity to rehabilitate themselves. For the terminal crooks, no indictment or impuning of your reputation could ever be enough.

[AAbsolute]

I guess you can see how following the 10 commandments would have helped avoid all this. It's not easy but it is simple.

[fisher]

Once this shortie situation is cleared up things will get better quickly. Obama's possible bad bank is probably playing a big role in the timeliness of banking decisions. Why write down a loan if by waiting the gov will take it off my hands as a toxic debt?

Unfortunately, it's gonna take a lot more than clearing up the shorty situation to make things better. It goes way, way beyond bad mortgage loans at this point in time.

[AAbsolute]

Unfortunately, it's gonna take a lot more than clearing up the shorty situation to make things better. It goes way, way beyond bad mortgage loans at this point in time.

If migration rates to the 30A Corridor increase over the next 4 years there could be a balance in inventory. The 30A corridor is very small in relation to other major Florida markets. That's the micro side of it as I see it. Do you think there is a macro condition that is going to counter this?

[fisher]

If migration rates to the 30A Corridor increase over the next 4 years there could be a balance in inventory. The 30A corridor is very small in relation to other major Florida markets. That's the micro side of it as I see it. Do you think there is a macro condition that is going to counter this?

Yes. Look at the headlines. Look at GDP. Look at job losses. Look at bankruptcy filings. Look at corporate profits. And on and on and on. The micro 30A corridor is not immune from the larger problems in this world.

What makes you think migration rates to the 30A corridor will increase? Where are the jobs that would create such an influx?

The only thing that made this and other real estate hot in this country was rampant speculation. The only thing that can turn this market around is a major influx by wealthy folks back into the second home market place to stay (not to flip), and that isn't going to happen anytime in the foreseeable future.

[traderx]

If migration rates to the 30A Corridor increase over the next 4 years there could be a balance in inventory. The 30A corridor is very small in relation to other major Florida markets. That's the micro side of it as I see it. Do you think there is a macro condition that is going to counter this?

I know a few folks who had planned to retire to SoWal but their stocks have been decimated. When stocks come back, and assuming that they can sell their homes in Atlanta, they will move down. I think we are looking at least two years out.

[Smiling JOe]

clintclint, I really don't understand your statement about people giving up their moral compasses in pursuit of money. I know that some people maybe never had morals before all of this, but many people are capable of acting with morals while trying to put their money in the place for the best return. Many people didn't lie, cheat, or steal when they purchased or sold property. To give another example, if a person with strong morals and ethics has worked hard and managed to accumulate $500,000, they need to determine a place to invest that money so that it works best for them, within their tolerance of risk. Some people, like my Dad, would place it in 5 CDs, while others may put it all in one penny stock which they read about on an online stock bulletin board, and others may put it into real estate. The desire for the best return doesn't make one immoral.

EDIT: I just read your follow up post, #33, which I do understand, and it is well stated.

[AAbsolute]

Yes. Look at the headlines. Look at GDP. Look at job losses. Look at bankruptcy filings. Look at corporate profits. And on and on and on. The micro 30A corridor is not immune from the larger problems in this world.

What makes you think migration rates to the 30A corridor will increase? Where are the jobs that would create such an influx?

The only thing that made this and other real estate hot in this country was rampant speculation. The only thing that can turn this market around is a major influx by wealthy folks back into the second home market place to stay (not to flip), and that isn't going to happen anytime in the foreseeable future.

There aren't that many thousands of homes on the 30A corridor. I still talk to people who are entering retirement and are doing the property search now. There is a regular influx of people buying and I think the vacation market continues to develop. Permits are way, way, way off as well.

[traderx]

There aren't that many thousands of homes on the 30A corridor. I still talk to people who are entering retirement and are doing the property search now. There is a regular influx of people buying and I think the vacation market continues to develop. Permits are way, way, way off as well.

I searched the public MLS site for the followinging areas: South Santa Rosa Beach, S. Walton West and S. Walton East. The following are the numbers returned:

Single Family Homes: 1,331
Condos: 1,417
Townhomes: 163
Land: 1,127
Fractional Ownership: 39

It appears that S. Walton West includes Sandestin (?) so the numbers may be skewed a bit.

I don't remember the annual demand numbers but that seems like a lot of properties on the market. It is also my sense that most properties are overpriced so there is a reckoning to be had in this market.

[Busta Hustle]

CC also do not forget that some of the catastropic melt down is based on just plain incompetence and not moral breakdown. You know, people truly believing the boom would not be followed by the bust. Those that never saw it coming, do not know why it happens and think the next boom is right around the corner.

[AAbsolute]

I searched the public MLS site for the followinging areas: South Santa Rosa Beach, S. Walton West and S. Walton East. The following are the numbers returned:

Single Family Homes: 1,331
Condos: 1,417
Townhomes: 163
Land: 1,127
Fractional Ownership: 39

It appears that S. Walton West includes Sandestin (?) so the numbers may be skewed a bit.

I don't remember the annual demand numbers but that seems like a lot of properties on the market. It is also my sense that most properties are overpriced so there is a reckoning to be had in this market.

I don't know how to come to the truest count of homes for sale along the 30A corridor. There's a lot of conflicting stat's. If you look at the absorbtion rate in months compared to units for sale it looks as though we have more than 10 years of inventory, but it is a bad stat. As the rate of sales picks up there is an instant reduction in the inventory numbers and this moves the months of supply number downward in an exaggerated way.


The supply measured in months will drop, by many months at a time, when the market turns back on. If the market stays on for 5 months we'd have a frenzy again.

[ClintClint]

With the myriad of serious challenges in the last few years, the average and prudent man has had an introspective and reflective examination of some personal and closely held beliefs. To confront core beliefs in how our economy works and rewards it's citizenry can reinforce the good or mandate wholesale immediate foxhole conversions.
A commitment not to repeat the mistakes of the past, is the essence of the motivation.
There will always be blind spots and dark corners for the dishonest to hide and operate within. Let the past be a guide of what to avoid and what to embrace and not a harbinger of the future.
Accept the fact that honesty and integrity are like virginity---there is no halfway. Prosperity is not a zero sum game where if I prosper, someone else loses. Just as surely as you try to keep up with Joneses, you will follow them down.
Owning a home with all the work and happiness that goes with it is part of the American dream. And as such, everyone should endeavor to have realistic expectations and honest dealings.

[Miss Critter]

The supply measured in months will drop, by many months at a time, when the market turns back on. If the market stays on for 5 months we'd have a frenzy again.

Are you selling that kool-aid by the glass or by the pitcher?

[30ashopper]

Te Lis Pens filings they is a populaarr in Walton Counte! I wonder if the 180 limit is the result of the county's ability to process filings rather than the actual number they receive each month.

[fisher]

I don't know how to come to the truest count of homes for sale along the 30A corridor. There's a lot of conflicting stat's. If you look at the absorbtion rate in months compared to units for sale it looks as though we have more than 10 years of inventory, but it is a bad stat. As the rate of sales picks up there is an instant reduction in the inventory numbers and this moves the months of supply number downward in an exaggerated way.


The supply measured in months will drop, by many months at a time, when the market turns back on. If the market stays on for 5 months we'd have a frenzy again.

Frenzy? Never, ever gonna happen again.

[AAbsolute]

With the myriad of serious challenges in the last few years, the average and prudent man has had an introspective and reflective examination of some personal and closely held beliefs. To confront core beliefs in how our economy works and rewards it's citizenry can reinforce the good or mandate wholesale immediate foxhole conversions.
A commitment not to repeat the mistakes of the past, is the essence of the motivation.
There will always be blind spots and dark corners for the dishonest to hide and operate within. Let the past be a guide of what to avoid and what to embrace and not a harbinger of the future.
Accept the fact that honesty and integrity are like virginity---there is no halfway. Prosperity is not a zero sum game where if I prosper, someone else loses. Just as surely as you try to keep up with Joneses, you will follow them down.
Owning a home with all the work and happiness that goes with it is part of the American dream. And as such, everyone should endeavor to have realistic expectations and honest dealings.

CC, I lived through the very cold and very hard times of the construction downturn in the late 80's. I never forgot it for 1 day since then. We have been happy to bid and gain work ever since. I don't know anyone in the business who gave a damn whatsoever about the big downturns of the past when things were chugging along in '04 and '05. I mean not one person at all.

[traderx]

CC, I lived through the very cold and very hard times of the construction downturn in the late 80's. I never forgot it for 1 day since then. We have been happy to bid and gain work ever since. I don't know anyone in the business who gave a damn whatsoever about the big downturns of the past when things were chugging along in '04 and '05. I mean not one person at all.

The difference may be that we do not know how severe this downturn will be. It could be severe. You talk to anyone who lived thru the Great Depression. It fundamentally changed their outlook on life.

[AAbsolute]

Are you selling that kool-aid by the glass or by the pitcher?

I have found that the masses have very short memories and even less fortitude. I know people right now who desperately wish they could sell their property who would hold out for price on the same piece if they had 3 offers on it at the same time this mid summer. I've watched several people pass on offers that were more than acceptable and slowly ride the property to 1/3 while getting offers all the way down.

On the kool-aid tip, I don't know if you read my history, but I served myself some State time as a youngster for selling stuff that made people euphoric. I've done my share of thousands of push ups, thanks.