Friday, January 2, 2009

Short sales, worth messing with?

In general my thoughts on short sales are "stay away from them". I'm not a patient person, nor do I handle cluster#u@&s well. So to keep my blood pressure nice and low I stay away from shorts. I usually don't even write about them. I know some are actually getting sold. A co-worker of mine just did one up in The Retreat. So they can happen. Now what got me thinking is this listing.

2534 Tara Ln in Riverside. It's a relatively new custom built over near Hawarden Estates. It's a nice sized single story home with 4 bedrooms and 3 baths. From the pics it looks pretty nice. And the price for the area is great. But will the bank go for the listing price of $349K? (last sold for $744k) The listing says "the lender indicated they will take fair market". I don't know how they would figure out what fair market is over there. There has been nothing sold in that area for months near as I can tell. Redfin show's one similar sized REO selling back in Oct. But that home is on the other side of Victoria St. Not nearly as nice an area as this home. So how would they estimate fair market when there are no sales? There were two nearby sales of similar sized homes about 6 months ago. Both of those were close to $500k. This looks like a great price to the area but is it worth the hassle? For me it's not. This house is smaller than I am looking for anyway but maybe someone wants to give it a shot.


Sara said...

I agree. It's not "worth the hassle," and there will be much nicer looking one story houses out there!

ButterMonkey said...

We just found a house that we like, but it's a short sale. Our agent said not to bother unless we're going to offer asking or above asking, which we sure as heck are not going to do since this sucker is at LEAST $50k over priced. Soooooo, we have no choice but to pretend to be good grasshoppers and have patience. SIGH.

golfer_X said...

is that the one on Daventry?

ButterMonkey said...

Yep, Daventry. :) Seriously, what on earth is that price? The hubby and I LOVE the yard, but the inside of the house needs work. This market is frustrating. Is it the bank, the seller, the RE agent, who sets this stuff? Why on earth would you ignore the fact that there are 4 comparable homes in the area that are way cheaper yet still aren't selling? The stupidity baffles me.

Sabby said...

ButterMonkey - your realtor doesn't know what they are talking about. We made an offer on a short sale at 25k below asking - and I thought asking price was a decent deal in this case, but we are looking for a better deal.

The bank took 6 weeks, and countered. But their counter was still 11k below asking. We countered back and are waiting to hear. Our realtor told us they basically have to counter to show investors they are trying to get as much as they can, and to go ahead and counter back.

My point is, asking price means nothing with a short sale. What matters is how much the house appraises for when the bank looks at your offer. IF you have time to wait, I would go ahead with a price you think it is worth.

Allison said...

Whoops, accidentally posted as my sister-in-law just now :) I made the previous comment.

Just looked at the Daventry listing - def. too high. Now that Hawarden Hills can be found in the mid 400s (take a look at, Victoria Woods has to be low to mid 300s in my mind, for that size of house anyway.

Good luck!

golfer_X said...

When you counter back, counter lower than the original offer. after all prices are dropping 5% a month!

ButterMonkey said...

Sabby, they're asking $399 and we're only willing to pay $325 for that place. I think that large difference is why our RE agent said not to bother for a while. Now, if we were willing to pay $375, she'd put in the offer, but that's not the case. Believe me, she wants a commission as much as the next RE agent, but I think she has a grasp on reality.

Sara said...

Given the magnitude of the crisis, collapse, crash...of the market, buying 5 or 10k below asking would still be catching a falling knife--big time. I mean you're talking pennies with your offer and their counter, etc. In about 16 months prices of most houses dropped hundreds of thousands and they're still dropping.

Allison said...

Golfer X - Yes, our next counter was even lower. You are exactly right - took them 2 months to respond so our offer went down.

ButterMonkey - True, I've heard 50K below asking is a magic number for the banks. So you are right, it probably has to get a bit closer before you make an offer. Most REOs look at price every 30 days, so maybe it will come down soon.

Sara - We aren't talking pennies here, since our counter offer went even lower. But still, your point is well taken. I am one of those who wants to buy a house. I know your views on want vs. need. I also know prices will continue to fall. I'm going ahead anyway, because I HATE the idea of renting, have three very young kids, and want to move into a house and live there for the next 20 years while my family grows, goes to school, etc. So I'm going to take the hit. I'll let you know how it goes!

golfer_X said...

It's not a bad gamble if you aver very selective on the deal. If you can buy today at 10 to 20% under market you can really minimize the downside risk. The longer you plan to stay also minimizes the risk. Keeping your DTI down further minimizes risk. Right now as far as I'm concerned it's all about risk management.

I too want to buy. My current house is just WAY too small for my family. My neighborhood is turning, and not it a good direction. So, I am willing to take some risk. But I will do everything I can to minimize it.

I will only buy if I can get 2000/2001 price levels. I will only buy if it's less than 2.5x our yearly income. And I will be very selective on the property I want. I might have to write 100 offers. The key here is to not settle because of the risk. Buying something you might hate in 5 years will kill you if you buy now. In 5 years the chances of getting even today's prices will be remote. You have got to buy the right house at the right price.

Risk Management, That's the name of the game! It's ok to buy, just buy smart!