Short Sales - Who Wins and Who Loses?

People are out there hyping SHORT SALES like they are the solution to everybody's problems.

I don't think so.

If you are one of the losers because of a short sale you didn't "solve" your problem you just added to your problem.

So who are the losers, anyway?

The biggest loser is everybody that owns property in the area of the short sale. Short sales drive prices down.

You say the prices are already down and the short sale just recognizes that. NOT TRUE.

To really understand this phenomenon you have to look at who is buying short sales. It is NOT Mr. and Mrs. Average Homebuyer. It is professional short sale buyers. You know those guys: Ali Baba and the Forty Thieves. They've always been around. They buy business assets when the IRS seizes your business for back taxes. They pay "pennies on the dollar." They buy "cash flows" from ignorant people that would rather have it all right now and don't care how big the discount is. They show up at Bankruptcy hearings and probate sales, and any other place they can find somebody whose bones they can pick over.

So why are they the buyers of short sales? Because the way short sales are handled by the banks only these guys can buy them. They need all cash on a moments notice. They may have to wait months for the approval, but be ready and able to close in two weeks or less.

They want to pay 60¢ on the dollar, and then they want to turn the property quickly so they offer it at 85¢ on the dollar. This is from the currently already depreciated values. In other words they are pushing the price ever lower.

Everybody loses!

Then there is the hapless seller who just wants to get out. Little does he realize that the bank is going to "collect" documentary evidence from him (the seller) which just might incriminate him for loan fraud. Prosecution will be easy because the borrower supplied the necessary evidence himself.

Then there is the real estate agent that is just trying to make a living. They assist the seller in preparing for a short sale. They tell them what the bank needs to "process" the short sale. They don't know or care what this documentation might do to their client. Until the client gets prosecuted for loan fraud and the clients attorney wants to know why the real estate agent "advised" them to provide this incriminating evidence. Do you think Errors and Omissions insurance is going to cover you? Think again.

All the discussion is about whether or not the seller/borrower is going to be liable for taxes on the "debt relief." This is a puny issue by comparison to everything else.

Then the BANK is also a loser. They don't like to lose. They will find a way to take it out on all of us. Maybe they just won't do any more home loans.

Who loses then?