List Price of Short Sales Often Misleading

It happens every day.

I receive a call from someone searching for a home or condo in Sarasota. They have found what seems to be an incredible opportunity - every other unit is $300K, this one is $150K!

Invariably, it is listed as a short sale.

Now, I am not claiming to be an expert in short sales. To be honest, I don't seek them out. The simple reason is, I have not found them to be an opportunity for my buyers. Ok, ok, I will admit that if someone has the time, patience and inrtestinal fortitude to wait out the lenders, they may get a deal.

Maybe.

The list price of a short sale is rarely reflective, I have found, of what the bank will actually take. I am not blaming listing agents, they are often given no guidance as to the reality of a list price. The bank will not even comment until an offer is made.

But even I can figure out if there are two mortgages on the home for $350K, and the home is listed at $150K, that there is little chance of a full price offer being accepted. Explaining that to a buyer, however, is difficult. They see the price. Given the market, they want to offer even less than list. They don't understand why they have to wait 2 months (likely for a much higher counter offer, not an acceptance). Even those willing to offer "full list price" are shocked when the banks return a counter of $75,000 higher. But they shouldnt be.

By definition, a short sale indicates the bank will get less than is owed on the home. This has occurred, in large part, to the banks originally allowing too-high mortgages on homes that were artificially inflated in value. I am not here to condemn anyones practices, I am simply pointing out that if the Seller bought high, and has a mortgage to reflect the height of the market - the current market cannot possibly support the amount owed on the home. If it is a smaller amount, fine. Hundreds of thousands of dollars? Houston, we have a problem. The common statement "The banks are desperate, they will take anything I offer" is simply not true.

For me, the far better opportunity lies in the fantastic deals in the general market. With ample inventories and lower prices, buyers have more bargaining power with a Seller who purchased over 5 years ago than they ever will with a bank.