As we all know, or should know, is that the banks will always counter the offer that is sent to them on a short sale. The initial selection of the winning offer (in California anyway) is done by the seller with or without the listing agent’s blessings. Sure, some sellers will actually listen to their agent’s recommendations during this very difficult period, however many don’t. So the decision is up to the seller to choose, and is based on their lack of knowledge of the short sale system and their difficult current emotional state.
The listing agent also plays a role in this pricing game. I have found in almost every short sale listing that the price isn’t even close the the final offer submitted to the bank. They are priced as “loss leaders” and are only meant to mislead the public into making an offer on the home they have listed. And while there is nothing illegal (unfortunately) about doing this is certainly raises questions of ethics.
A couple of examples: 1. Listing price $204,000; listing agent’s full knowledge that the bank had approved a price of $250,000. 2. Listing price of $170,000, reduced to $150,000, and then the bank countered, interestingly enough, at $170,000. In this case the buyer paid $155,000 for the home. My client had offered $157,500 and didn’t get the home. 3. Listing price of $175,000 bringing in 14 offers. Final winning offer seems to have been $225,000!! Two days after the winning offer was selected the priced in the MLS was raised to, you guessed it, $225,000. That is over a 25% increase. When I emailed the listing agent and asked why the price was raised to $225,000 she said it was because that was the value of the home.
If that was the value of the home why wasn’t it listed at that value initially? Simply and unethically to bring as many offers as possible. Of course the bank will counter and this may close at a price over $225,000. We’ll see.
Finally if you buyer is bringing an FHA loan your offer will be at the bottom of the list. Agents and sellers are not well enough informed to understand that and FHA loan, like any other, will turn into cash well before the short sale is finally approved by the bank. But they are concerned that the FHA appraisal will require repairs. They might. They might not. But the buyer can, if they choose to, put 150% of the cost of repairs into escrow to cover those repairs and do those repairs after the COE. They have a set time period and have to put 150% of the estimate into that escrow account. It’s called a “hold back” and it’s done all the time when agents are knowledgeable and work with their lenders.
A recent short sale listing had 6 holes in the ceiling for the seller’s surround sound system. He removed them and their covers. The seller and the agent were worried that they would have to be fixed before closing. However the buyer would have happily replaced the speakers and the covers after closing, had the inspector come out, approve the work, and the buyer would have received their refund. Simple.
I think I want to be a short sale listing agent. I like my buyers but the agents on the other side seem to be ill prepared for the short sale process and make it almost impossible to have the winning offer. Even when its $18,500 over the asking price of $175,000!
Sad reality in today’s market.