Short Sales; Some Disturbing New Trends

As a Realtor, I am still astounded at how some neighborhoods remain awash in distressed properties, be they short sales or foreclosed homes. Of course, it's not too surprising, especially when you realize that pretty much any home built or sold after 2004 is worth less today, than it was then, at least in the Phoenix area. Many subdivisions that were built in 2006 and 2007 have virtually no original owners. Most have simply walked away, as prices halved, whether they could make the payments, or not. That is a subject for another day, although I will allow that the economy likely hurt many of them, while another large section of buyers took on debt they could not really afford, in the hope of continued appreciation that failed to materialize. All the while, aided and abetted by voracious bankers.

Recently, I was working with an elderly couple who were looking to downsize into a newer home. As usual, we ran into the problem that many homes on offer were short sales. They had neither the time, nor the inclination, to embark on what can be a lengthy process, so we concentrated on REOs and regular sales.

However, whilst skimming through some short sales, I was taken aback by the conditions of many sellers. I am used to a seller demanding the buyer qualify with a pre-selected lender, and I am used to not complying with that request. I see no benefit in my client divulging all their personal financial information to some lackey at a random bank. As I said, I was taken aback by a listing agent that disclosed that the short was being negotiated by a special company and that the buyer was required to pay the $4,000 fee associated with this service. This fee coming on top of the 6% listing fee that is customary in our market. Then, and at least they disclosed it, they revealed on their business affiliation disclosure, that the crack negotiating team was, in fact, a subsidiary of their own real estate company. All this on a $200,000 listing, which means the additional burden on the buyer was 2% of the asking price. Here's a newsflash! If you are unable to negotiate short sales, do not accept listings that require them!

In another short sale offering, the lister disclosed that the bank may, or may not, at its discretion, impose an extra 1% fee on the potential buyer. Genius! Punish the very person who is getting you out of the mess that you were, at the very least, partially responsible for creating. Some of these banks are as useful as a screen door on a submarine.

It will get worse. The ill-advised first time home buyers tax credit of $8,000 will be expiring at the end of June. Watch how many well-intentioned and eager would-be purchasers get entangled in the net of indecision that plagues most banks and their alleged decision makers.

Watch how eagerly our elected officials will scramble to re-fix the fix that they caused to be broken in the first place.

It's gonna be a bumpy ride.