Agents often assist in maintaining better prices in a short sale scenario than the banks alternative method of property disposal…yes I’m taking about the-
A Foreclosure is the selling of a stigmatized asset…not the negotiation with a lender for forgiveness. More to the point: If my seller has a third party approval sale (a euphemism for a short sale) I’m going to try my level best to get my client his properties true market value. When his lender has effectively killed the deal by delaying the process to the point where the buyer bails and moves on. Then the bank eventually forecloses on my client.
Here are some hard numbers on a recent scenario: A property owner owes $180,000 of his home, we have determined the current value to be in the range of $155- $160,000.
A short sale offer (subject to lender acceptance) at $157,000 is presented to the lien holder. We supply a blood and stool sample from the seller, and put the buyer through a battery of circus obstacles…but get no where for months. The lender drops the F-Bomb- Foreclosure, an Auction in the driveway, neighbors standing on their door steps muttering “their but for the grace of God go I”.But wait A wild card Bidder from out of the blue with a good faith check of $5,000 in hand and the ability to close in 30 days…stands ready and in a strong and clear voice says I bid $140,000. The bank says $188,623.43
And gavel meeting wood…we are done for the day folks nothing more to see here go back to your homes this is not your concern (or is it?).
Fast forward a month…The property is now listed for sale by the lender at $125,000
The foreclosure attorney, the auctioneer, a winterization company, and the new listing agent have been or will be paid from the proceeds of this sale. Assuming;
The house goes at asking price vs. my short sale offer- the bank will get $32,000 less than the buyers offered plus additional legal proceedings to deal with the foreclosure.
And let us not forget the seller client…their credit is worse off with the foreclosure on their record. We were offering their lender the option to accept a short sale that would have netted them about $40,000 more…than the path they chose to take.
This harms the neighborhood values and if I have done a reasonable job illustrating my point…it hurts our seller clients and the real estate market in general moving forward. A short sale can be current market value…a Foreclosure very rarely is.