There is a little debate going on among Realtors about the advisability of buyers looking at, and bidding on short sales. Short sales are homes that are for sale that the owners owe more money on than they are listing the house for. They are NOT planning on making up the difference, but are asking their mortgage company to take the hit on the property. The question for home buyers is: Should you put offers in on these homes or are they a waste of your time?
There was an article in this month in Commonwealth Magazine, which is a journal for real estate professionals published by the Virginia Association of Realtors. This article was put into a blog post for all to read.
I am quoted in the original article along with a few other agents, but I added a comment more fully explaining my position which I’ll quote here:
It is still very difficult for a typical buyer, who plans to live in a home, to purchase a short sale. In Fairfax there have been 72 short sales that have gone off the market in the last 60 days (These are the short sales that were disclosed in the comments of the listing, there may be more as apparently some agents do not disclose this very material fact in the listing).
Of these 72 short sales that went off the market, 24 actually sold. The other 48 were either withdrawn from the market or expired. Typically we think of expired/withdrawn listings of being overpriced. My experience tells me this was not the case with most of these houses. Almost all the short sales I’ve shown were priced very inexpensively.
In most of these cases, the reason the houses were taken off the market was because the owners were not able to obtain their bank’s permission to sell for less than they owed. That means, at least in Fairfax for the last two months, that only about 1/3 of the houses listed as short sales were actually for sale in the sense that their was a possibility one could buy them.
This is not very good odds for a buyer. Many have been tied up for months and in the ended simply get a “no.” Typical buyers cannot afford to spend that much time on a home, only to be turned down in the end. I think they very logically are avoiding short sales.
It is a different story for investors. An investor has all the time in the world to purchase, can put out offers on more than one house and take his chances, and still has a home to live in if a bank says “no” in the end.
Short sales are a great opportunity for investors, but I still believe they should be avoided by people who are looking for a home.