Are Short Sales Really Bringing Down Property Values?

"Yes, short sales liquidate housing inventory, but they are like poison to Brentwood real estate agents. Brentwood agents have been pricing the short sale below market value in order to attract buyers. Since to a lender there is a calculated value on the profitability of doing a short sale; Brentwood homes are often selling for 80% of their true market value."

Anyone else notice this in your neighborhood?

Edited: 06/26/2010 at 10:04AM by Administrator : Link Removed - please use bulletins to promote any articles you've written

P NW

· OR

1,467 posts
7 awards
56 influence

Oct 14 '09, 06:50 AM

There's so little selling that it is difficult to determine FMV. But it seems to me that short sales are offered pretty close to FMV, with the notation that they are a short sale, which should tip any buyer off that "best offer" is what it is going to cost. I don't look at the listing and say "gosh, what a deal"

The foreclosures, however, seem to be offered as low as 50% of FMV. You see the asking price and the photos of the property and it's almost stunning. You get this "holy cow!" reaction.

I hope that the foreclosures aren't selling that low, but even if they aren't it destroys the buyer's expectations when they see the ads (I've spoken to people who have tried to buy several and couldn't). They look at a house that's listed at FMV and all they can think is that they've seen one like it offered at $99,000 instead of the $200,000 for the normal listed one.

I think the banks are slitting their own throats, because there are people with $200,000 mortgages that see a similar house for sale for $99,000, and they decide to walk away rather than to pay $200k for a 99k house (even if 99k is not the actual final sales price)

Edited: 06/26/2010 at 10:04AM

Eddie Ziv

Real Estate Investor · Studio City, California

1,803 posts
9 awards
56 influence

Oct 14 '09, 07:16 AM

Originally posted by P NW

There's so little selling that it is difficult to determine FMV. But it seems to me that short sales are offered pretty close to FMV, with the notation that they are a short sale, which should tip any buyer off that "best offer" is what it is going to cost. I don't look at the listing and say "gosh, what a deal"

The foreclosures, however, seem to be offered as low as 50% of FMV. You see the asking price and the photos of the property and it's almost stunning. You get this "holy cow!" reaction.

I hope that the foreclosures aren't selling that low, but even if they aren't it destroys the buyer's expectations when they see the ads (I've spoken to people who have tried to buy several and couldn't). They look at a house that's listed at FMV and all they can think is that they've seen one like it offered at $99,000 instead of the $200,000 for the normal listed one.

I think the banks are slitting their own throats, because there are people with $200,000 mortgages that see a similar house for sale for $99,000, and they decide to walk away rather than to pay $200k for a 99k house (even if 99k is not the actual final sales price)

It's time to get it into our heads! In many areas of the county, prices are not what the used to be. If you bought a house for $320,000 three years ago in, lets say Atlanta GA and the bank is selling a similar house next door for $95,000, this IS the FMV. Otherwise, the bank would have sold it for more (I'm not talking about a wreck of a house. I'm talking about a house in fair condition). That house should have never cost $320,000 in the first place, but market and mortgage manipulation brought the prices to that level. Yes, we may have rolled back those prices to less than inflationary level, but IMO, in today's market, the highest price that someone is willing to pay for any given property, is its fair market value...

Edited: 06/26/2010 at 10:04AM

H Mann

Real Estate Investor · Bay Area, California

215 posts
2 awards
50 influence

Oct 14 '09, 07:45 AM

Are you in Brentwood, CA?

Edited: 06/26/2010 at 10:04AM

Scott Hubbard

Rehabber · Tucson, Arizona

1,031 posts
11 awards
57 influence

Oct 14 '09, 02:36 PM

Using NAR statistics short sales sell for a higher median sales price than do REO's. Additionally, again based on NAR data, short sales actually close at a higher price than originally listed.

Lastly, unsuccessful short sales are tomorrows REO's.

The decline in property values are not caused by shorts sales or even REO's. Instead the cause is a multitude of economic and political factors not mention good ole' fashion GREED. Even in Brentwood, the market will determine price.

Edited: 06/26/2010 at 10:04AM by Scott Hubbard