Short Sales a Loser for Bargain Hunters

In an email from Kristy Black at Fidelity National Title, under the heading, “SHORT SALES MAY BE A FORCE OF CHANGE IN THE EXISTING HOME MARKET” Steve Bottled and Larry Murphy suggest, “ Of the 3,785 existing home sales in January, short sales accounted for just 20%. But, short sales commanded the highest prices -- even more than non-distressed property. Given that approximately 70% of Las Vegas home mortgages are “under water,” this may be a signal that there could be a significantly higher proportion of short sales in the future. Such an action would be an impetus to pushing prices higher.”

I think they are WRONG. The few short sales that actually close are higher because, when the bank stepped in and raised the contract sale price to current median market value and also demanded cash from the seller, only 750 out of 12000 anteed up for reasons of their own.
The rest, having sufficient oxygen to their brain, wisely walked away.

Right now in the Las Vegas MLS, there are 12705 short sales either available or pending at this writing (ER, P or C status). So, short sales are 56.7% of all transactions. And 49% of all short sales, 6271, are in escrow – half of all short sales, more or less are ALWAYS in escrow, but, according to Bottled and Murphy, only 756 short sales closed in January – that is less than 6% of the total short sales out there and only 12% of the number of short sales actually in escrow.

Only 9688 properties in the same status (ER,P,C) are NOT short sales and of these 3638 (about 37.5%) are in escrow. Among non short sales, 2574 closed in the past thirty days. That is equal to 26% of the total and 70% of the number in escrow.

Bottom line, short sales don’t close and they aren’t the bargain everybody dreams they are. Lose-lose. Why? Because the banks only approve sales at a price well within the comparable sales regardless of the contract the buyer thinks they made with the short sale owner. When the bank steps in, the party is over and the bargain hunter leaves empty handed.

But never fear. Some of those short sales that went on to foreclosure a couple months ago are back on the market as REO’s and they can obviously be closed cheaper than they could as short sales! And, they close 70% of the time. Win–win.
The mantra is: Short sales bad. Non-short sales good. Repeat until calm ensues.
Good hunting.