Short Sale is Not A Good Buy Anymore

Unlike 2 years ago, short sales are not a good buy any more from the 3rd quarter of last year.

Lenders normally use 6-month's data to come up with their BPO price. 2 years ago, when the market was experiencing a sudden surge from the down turn, the previous 6 month's data gave a lower than then current market price, so buyers got very good deal from short sales. But now, lenders not only are appraising the value according to 6-months back data which was literally the highest of 2013 (In 2013's May, June and July, properties were priced the highest), but also factoring the appreciation thinking that the properties ought to appreciate every month which pushes the final approval price even higher. No wonder I heard a lot now that lenders are getting greedier. I've seen bunch of listings recently that the previous buyers walk out because bank's final approval price was way above the offer price and in a few cases even higher than that of a traditional sale and the properties had to be put back onto the market.

It's a pity to see that banks are legging behind on the appraisal process. When the market was up, their appraisals didn't reflect the up trend, and when the market is gradually running towards the course of balancing, they think the property value is going to be up double digits as what happened in the last year or two.

I recently had a case with Chase. With my previous experience with Chase, this bank is quicker on approval and lenient on the appraisal price. My client offered the full asking price @353K with all cash. Both the listing agent and I used the same comparable of a very same one sold as a regular sale @351K, so we thought this price is reasonable and should be approved without problem. 2 months later, the approval price came back @380K. Listing agent and I were appalled. Of course, the listing was back to market and is still in the market after weeks.

In short sale, homes Sell "As Is", lenders ask buyers to purchase the home in its present condition. Lenders typically will refuse to pay for suggested repairs disclosed on a home inspection, termite inspection or work necessary to issue a clear pest report. Lenders don't pay for home warranty. And buyers incur higher closing cost because lenders rarely pay for any extras (like a seller would be willing to do) if you want any of those extras, you will pay for them yourself. Sometimes lenders will refuse to pay for standard seller closing costs such as transfer taxes and HOA documents too. If you want specific inspections, home warranties or a termite treatment you will more than likely pay for them yourself.

So, when you see a short sale that is priced well, it doesn't mean you will get it. The sellers' bank may not accept it. These types of listings receive many offers. To get your offer accepted, it will need to be priced near or at market value. If you're not prepared to pay above a superficial price on a lowball short-sale listing, then pass. In my opinion, short sale is not worth waiting any more.