Short Sale Listings Obscure Actual Real Estate Prices
In some pockets of Orange County, shortsales account for as much as 70% of the homes for sale. This often gives buyers an unrealistic impression of where housing prices are.
The price of a short sale home is determined by the bank holding the mortgage. In a perfect world, an Orange County real estate agent would be able to call a bank’s short sale department, present them with their market analysis and ask what price the bank will approve before placing it on the market. Unfortunately, banks usually won’t start processing a short sale until they have an offer from a buyer.
Agents need an offer in hand before they can approach the bank…any offer. Some agents accomplish this by listing a home well below the fair market price. Their hope is that this drives a lot of traffic to the listing and they get their offer to submit to the bank quickly. Almost invariably, the bank declares the original offer to be too low and counters back with a price much closer to the fair market value. The agent now knows what the bank is willing to accept. If the original offeror decides not to meet the bank’s counter offer, remarket the home as “an approved short sale” at the bank’s counter offer price.
Why do many agents do this? Well, their client, the home owner, doesn’t care what the home sells for. By short selling they don’t receive any proceeds from sale. They get relieved of their mortgage burden without losing the home to foreclosure. The agents are happy because the short sale process can take months, and the sooner they begin, even if it is with an hopelessly low offer, the sooner they can hope to finish the transaction successfully.
SO HERE’S HE BIG TAKEAWAY: Buyers usually begin their home search online, looking primarily at what’s available. The prices they see are often artificially low, leading them to think they can get an unbelievable deal. The truth is, prices are fantastic. Orange County real estate is “on sale.” But to get the true sense of where prices are, you need to get in touch with a qualified, experienced Orange County real estate agent. They need to show you CLOSED SALES of homes similar to what you are looking for in a particular area. Only then will you get a sense of what banks are approving and what the real price tag is on Orange County real estate.
I’m happy to provide this information. Please contact me if you are beginning your new home search.