For several months I have been warning Central Coast buyers about the challenges of pursuing pre-foreclosure properties, or short-sales. There is an incorrect assumption that buyers can get a better deal on a property if they purchase it directly from the homeowner who is facing foreclosure. Time after time, I’ve watched my clients face huge frustrations when trying to buy a home during this stage. From a logical standpoint, you’d think that the short sale would be the preferred path. The banks could cut their losses prior to foreclosing on a home and the homeowner can be spared the shame of foreclosure. However, this scenerio has not played out as many thought it would
Too Many Cooks Spoil the Stew
An article in the April 17, 2008 Wall Street Journal clarified some of the reasons why you should think twice before buying a short sale home. Not only do the buyer and homeowner need to agree upon the sales price, but the mortgage-holder needs to be involved in that decision as well. In addition, if the loan was “packaged into securities..the mortgage servicer must consider the interests of the investors who own the loan. All of these “hoops” lead to long delays before a decision is reached. The WSJ article indicates that, nationwide, short sale deals are difficult to close and that buyers end up walking away from the deals out of frustration. I am finding the same to be true in the Santa Maria and Orcutt area, where most of the foreclosure properties I list are located.
But the WSJ article did not mention something that I think gives even more reason to avoid short sales. Buyers can save more money on properties that have already been through foreclosure. Here is a perfect example: I recently sold a bank-owned home that had been through foreclosure. Ironically, I was the listing agent for the same home several months earlier when the owner tried unsuccessfully to sell it as a short sale. Prior to foreclosure, we received an offer that the bank rejected. But the offer that the bank accepted AFTER foreclosure for the SAME home was LESS than the offer it had recieved while we were trying to sell the home as a short sale. To me the moral of the story is clear: it pays (in both time and money) to go after bank-owned foreclosures instead of short sales.
If you’re curious about how to buy a house in foreclosure, check out this article: http://www.homescentralcoast.com/tips_for_buying_foreclosures.html
The Eddie Stanfield Team just listed another bank-owned property today in Orcutt. The asking price is $264,900, which is $30,000 less than it was listed about a month ago, which is a sign of motivation. It’s a three bedroom, two bath home with a large backyard and located on a cul-de-sac. If you are interested in taking a look at it, give us a call at (805) 937-1764. 