Short Sales, Foreclosures and Traditional Sales
May 18, 2009
Three quarters of our current real estate listings and sales are either short sales or bank owned properties. The remainder of the properties are what we now label as "traditional" sales. How does this mix affect the price at which a property is listed and offered for sale?
The pricing for traditional sales has always been a negotiation between the seller and an agent. The agent prepares a CMA (Competitive Market Analysis). This analysis looks at similar homes currently on the market, currently in escrow and sold within the past 3 months. From this data, the agent recommends a listing price, the seller may then share the price that they would like and a negotiation will arrive at the price at which the property is listed. Sometimes in this process, the owner may owe more than the price recommended by the agent. If the seller still wishes to put the property on the market at the recommended price, the property is listed as a short sale - negotiations with the lender will have to take place. (At this point, the lender may be unaware that the property is being offered for sale for less than what is owed to them.)
Short sales have developed a reputation for being lengthy and for difficulty in obtaining a response from a lender. Added to the need for negotiation between the lender and the seller is the need for a seller to stop making payments as the lender believes that "hardship" must be present for authorizing a short sale. Some progress has been made and through government intervention, lenders are beginning to drop this requirement. Buyers need to be aware that the listed price of a short sale is not the lenders agreed upon price. It is simply the price selected by the agent and the seller.
Bank owned properties are generally priced by the lender hiring a real estate agent to do a BPO (Broker Price Opinion) which is pretty much the same as a CMA. The lender then reviews the BPO and gives the agent the listing with the lender's price. A motivated lender may well select a listing price significantly under the price indicated by the BPO. They want to sell quickly and for the most part lenders have been successful. Bank owned properties may receive multiple offers and often sell above the list price.
Buyers faced with these different seller motivations should also ask their agent for a CMA or BPO. Once they have educated themselves as to current prices, they need to understand that the different types of sellers will respond differently. However, in all instances, ridiculous offers have little chance of success. Yes, this is a market that encourages negotiation, but negotiation is a two way process and all the parties need to be willing to talk.
A reminder to both sellers and buyers: Market value is the price a willing buyer, ready and able to purchase and a willing seller agree upon. Admittedly, in today's market, a third party has entered the process, the lender. Whether listing or purchasing, the sellers and buyers need to consider the lender's role.
Three quarters of our current real estate listings and sales are either short sales or bank owned properties. The remainder of the properties are what we now label as "traditional" sales. How does this mix affect the price at which a property is listed and offered for sale?
The pricing for traditional sales has always been a negotiation between the seller and an agent. The agent prepares a CMA (Competitive Market Analysis). This analysis looks at similar homes currently on the market, currently in escrow and sold within the past 3 months. From this data, the agent recommends a listing price, the seller may then share the price that they would like and a negotiation will arrive at the price at which the property is listed. Sometimes in this process, the owner may owe more than the price recommended by the agent. If the seller still wishes to put the property on the market at the recommended price, the property is listed as a short sale - negotiations with the lender will have to take place. (At this point, the lender may be unaware that the property is being offered for sale for less than what is owed to them.)
Short sales have developed a reputation for being lengthy and for difficulty in obtaining a response from a lender. Added to the need for negotiation between the lender and the seller is the need for a seller to stop making payments as the lender believes that "hardship" must be present for authorizing a short sale. Some progress has been made and through government intervention, lenders are beginning to drop this requirement. Buyers need to be aware that the listed price of a short sale is not the lenders agreed upon price. It is simply the price selected by the agent and the seller.
Bank owned properties are generally priced by the lender hiring a real estate agent to do a BPO (Broker Price Opinion) which is pretty much the same as a CMA. The lender then reviews the BPO and gives the agent the listing with the lender's price. A motivated lender may well select a listing price significantly under the price indicated by the BPO. They want to sell quickly and for the most part lenders have been successful. Bank owned properties may receive multiple offers and often sell above the list price.
Buyers faced with these different seller motivations should also ask their agent for a CMA or BPO. Once they have educated themselves as to current prices, they need to understand that the different types of sellers will respond differently. However, in all instances, ridiculous offers have little chance of success. Yes, this is a market that encourages negotiation, but negotiation is a two way process and all the parties need to be willing to talk.
A reminder to both sellers and buyers: Market value is the price a willing buyer, ready and able to purchase and a willing seller agree upon. Admittedly, in today's market, a third party has entered the process, the lender. Whether listing or purchasing, the sellers and buyers need to consider the lender's role.
posted by shirley harry at 7:35 AM
0 Comments:
Post a Comment
<< Home