Developer · Houston, TX · Member since 2008 · 488 posts · 121 votes
I'm wondering if anyone is even considering short sales as a buy. I've never had a good expierence with a short sale, always due to the bank dragging their feet and delaying the deal.
Buyers get antsy and walk away. Deals are not approved before they are listed. BPO comes in higher than list amount. Banks must get approval from 15 different departments.
Is it worth buying?
I'm going to do a analysis on the Houston market for short sales compared to foreclosures, on list price to sale price percentage, to see which ones get the steepest discounts.
I'm guessing short sales, but who wants to go through that process? Who does?
I put in a decent number of offers on short sales that are being listed and negotiated by someone else. It doesn't take much time to put in the offer, and even if I only get 1 out of 20 for the price I want -- and even if it takes 6 months -- it's still another deal.
I just put in an offer on a short sale. It has been on the market 3+ months. It is the exact type of property I want in a good area, so for me...it's worth it to jump through some hoops for it.
I have no idea how long I'm going to get stuck dealing with the bank, but I don't have any money tied up in it until they make a decision, and I have the ability to walk away from the offer at any time if they don't respond within 21 days.
It might be a pain to deal with, but if I end up with the property in 3 months at a price I like, then I'm okay with waiting. Afterall, I'm not planning on retiring tomorrow, so I'll need something to do in 3 months anyway.
I'd be very interested to see the dynamics between short sales and foreclosures.
You hit the nail on the head - short sales have become an absolute dread!! The banks require a deluge of paper work and processes. Often by the time we muscle thru all the paper work the deal falls apart. We have had several deals fall apart at the closing due to bank mismanagement - typical scenario is that the bank manager attending the closing is from a different bank department than that which handled the paperwork prep and the bank finds it's own paperwork incorrect or inadequate. It is a "big business" circus - avoid. How's that for optimism - LOL
Short Sale Avg Price: $124,180
Short Sale Avg SP/LP: 97%
Short Sale Avg DOM: 135
Amazing results. I know I only did it on 6 zip codes (all I work in / or care about). My market may not be simialr to yours.
Crazy that REO's are selling $15k under the retail / short sale price in less amount of time.
REO/Retail/Short Sale are all averaging out to 97% of sale price to list price. Interesting. This proves that short sales, on average, do not get as steep of a discount as one might seem.
Also interesting is that the short sale avgerage price is much higher. Maybe this is because people got over leveraged and need to sell short. Higher loan amounts = more over leveraged, increasing the average short sale price?
Let me know your thoughts. This data was compiled from around 2,500 home sales off the Houston MLS.
Danny, I have found it very rewarding to buy short sales because I can get them at great prices and there are less competition as there are with REO's. There difference is to hire the right short sale mitigator that way you don't have to deal with the bank at all.
Danny,
I just closed one a few months ago with BoA...amazing. I used a very strong local attorney for the facilitation. The factors that helped me close the deal were # of days on market (+180) and my detailed report on the necessary repairs/upgrades to make the house marketable. Strong, professional documentation on my end made it hard for bank to counter. ARV on this house was about 40k with a mortgage balance of 68k (yes!)...I paid $7,500.
I'll keep pursuing these deals but expect them to get more complicated...but everything I am reading in my market is that shorts will be more prevelant than foreclosures.
I put in a decent number of offers on short sales that are being listed and negotiated by someone else. It doesn't take much time to put in the offer, and even if I only get 1 out of 20 for the price I want -- and even if it takes 6 months -- it's still another deal.
my line of thinking is similar to j's..i don't count on the short sales ever to get back to me..when they do a few months later, it sure is a good surprise :)
We just bought a short sale last month, but to hold, not flip. It took a little over 3 months to close from initial offer (BofA held 1st, name of 2nd position escapes me).
When you're trying to efficiently deploy your capital, having a bunch of outstanding short sale deals in lala land makes it difficult to determine what else you can do in the short term, such as evaluating available REOs. I can certainly see why alot of these deals fall out of escrow, as I'm sure in many cases buyers have already spent funds.
And does any realtor out there EVER wait until the short sale amount has been approved prior to posting to the MLS?
Not worth it. There's no standardized process and most listing agents aren't capable of handling all of the required paperwork with any kind of effeciency. Last year in Columbus, OH only 25% of all Short Sales that were listed actually made it to closing. Can you say #epicfail?
Danny -
I dont have a problem moving my shorts...they are being bought by ho's and investors. Ive pulled similar stats from my mls before, (with very different results) however the results arent really reliable if youre just pulling by zip. I think youd have to make the criteria for the actual homes the same also...some types of houses are more likely to short or fc than others (for example here in CT a lot more mid range homes are being shorted than high end). So its hard to get an apples to apples comparison. Plus shorts get easier and faster all the time..my 2 cents anyway. With lenders preferring to short over fc, its gonna be hard to avoid the ss inventory.
I always have a few SS offers out like J does. I think I have 5 or 6 out right now. The key is to keep some money off to the side because one of two of them might go. I am not always looking for a crazy discount. I am just looking for a deal that works.
Ms. Petrucci is correct in her comments. You dont just go after a shortsale for the price but because of the competition. If you can wait you might get a reward. Make lots of (offers as always) and one will stick.
I've purchased a number of shorts over the past 3 yrs. These were/are buy and holds. I am closing on one in a week or two that will be a flip. I recently "walked" on a couple where the bank came back at the last minute with a much higher approved price.
Just bought one in October. Less than 45 days to close but it was from a local credit union. I had all but given up since I hadn't closed a short sale in over 3 years but glad I kept trying. The others are right it doesn't take that much work to put in the offer and the competition is becoming more scarce due to all the bad experiences.
Danny, shortsales in my opinion is one of the best way to get good deals in this market, but you need a good realtor who can negotiate them for you. Everyone's skill level is different, but I can tell you that short sales in top 1 or 2 in my book because it works big time if you know what I mean.
Danny, many people feel the way that you do regarding short sales. I think however, it makes a huge difference if you work with a professional short sale management company. Many of our clients are investors and they would certainly tell you short sales are worthwhile...........good prices and no competition. We also work with many Realtors who want to spend their time doing what they do best.........listing and selling, rather than on the phone with the bank. In my opinion, working with someone that knows the best way to navigate the short sale process will ease the frustration and get better results.
I purchased my first short sale last month. It took 30 days for seller to respond to my offer which was $3k over list. They said I was the highest and still need me to come up another $1k I paid $4k over list. We closed 60 days after my initial offer on a cash deal. It was worth it. I have another offer on a short sale that the listing agent said was the highest and best after the good ole "multiple offers" notification. My offer is this time is $3k over and if the bank ask for anymore I will walk. This will be a great deal for a flip.
Listed short sales are tough because you have to pretty much offer full BPO price. Getting a contract on a property in preforeclosure that is not listed and having a qualified agent negotiate the sale is the key. where I'm at the average REO flip nets you about $10k-$15k. A short sale flip is more in the $20-$25k range. There are over 10,000 bank owned properties in my county and only 250 listed on the MLS at any given time. On the flip side there are 40,000 properties in pre-foreclosure that aren't listed for sale. When each REO listing gets 10-20 offers and there are 40k short sale properties to chase after, which one has less competition and a better chance for a better deal?
When you're trying to efficiently deploy your capital, having a bunch of outstanding short sale deals in lala land makes it difficult to determine what else you can do in the short term, such as evaluating available REOs. I can certainly see why alot of these deals fall out of escrow, as I'm sure in many cases buyers have already spent funds.
This is exactly what I am thinking David when I see a short sale that looks good to flip and then I just move on to analyze the next REO instead.
It will take too long and in the end I may not get it due to more likely an incompetent listing agent not pushing through and following up enough with the short sale dept and then the home forecloses.
All this time I could have looked at faster closing REOs.
Well, I have been thinking this way because I am using my own cash, which is limited.
So I wonder, JScott and Bryan A., Do you guys have a huge piggy bank so you can buy today and whenever the short sale is approved too, OR you guys have in place a couple of investors that loans you money whenever your cash is tied up on other project, but a deal comes up?
Man I am like a sponge absorbing at the light of speed here at biggerpockets.. what a cool forum.. thanks for the information!! Seriously grateful.
I make a lot of offers on short sales. We win some, we lose some.
It is the wave of the future as banks are getting more & more skittish on foreclosing.
One recent example was a short sale (yes, listed on MLS and yes, our offer was close to full asking price). Waited 6 to 8 months for the bank to approve the deal. Rehabbed and flipped it. Result: over $50K NET.
So I wonder, JScott and Bryan A., Do you guys have a huge piggy bank so you can buy today and whenever the short sale is approved too, OR you guys have in place a couple of investors that loans you money whenever your cash is tied up on other project, but a deal comes up?
We have a decent amount of cash, but if the deal is good, we'll find the money even if we don't have the cash on-hand. Between private lenders, equity partners and even HML if necessary, I'd rather pay to borrow the money than to let a good deal fall through.
Btw, the last time I posted in this thread, we had just started making offers on short sales. Here we are 8 months later, and we got approval on three short sales this week -- one with an original offer back in March, one in May and one just a few weeks ago.
So, like I mentioned earlier in the thread, the value is in building the pipeline...
So I wonder, JScott and Bryan A., Do you guys have a huge piggy bank so you can buy today and whenever the short sale is approved too, OR you guys have in place a couple of investors that loans you money whenever your cash is tied up on other project, but a deal comes up?
We have a decent amount of cash, but if the deal is good, we'll find the money even if we don't have the cash on-hand. Between private lenders, equity partners and even HML if necessary, I'd rather pay to borrow the money than to let a good deal fall through.
Btw, the last time I posted in this thread, we had just started making offers on short sales. Here we are 8 months later, and we got approval on three short sales this week -- one with an original offer back in March, one in May and one just a few weeks ago.
So, like I mentioned earlier in the thread, the value is in building the pipeline...
Thanks for the reply and congrats on the short sales..
I put an offer on a Short Sale with Chase for an investor and remember the negotiator pretty much yelled the they would not allow investors making offers. Things probably changed a lot.. but that was 2010 and they didn't want an LLC as the buyer. Go figure.
I need to start looking for ways to get private lenders.. good luck with the short-flips