Is it possible that the time has finally come for investors to buy short sales and get smokin’ deals? Over the past year or two, it has become increasingly more difficult for investors to purchase short sales for cents on the dollar. Banks see the properties listed for short sale as pristine and scarcely want to give them up for a song.
However on Wednesday, March 30, 2011, bank regulators and the Attorneys General met with regard to a proposed settlement associated with the robo-signing debacle of 2010. You may remember that in late 2010, some servicers (most notably GMAC) were foreclosing on properties without verifying the validity of the debt.
As reported by dsnews and the Los Angeles Times, those servicers involved in the robo-signing settlement may now be forced to permit modifications, principle reduction settlements, and short sales. While the terms of this proposed settlement are still being negotiated, the impact of the settlement could have some positive effects for both short sale sellers and purchasers of short sales. As a result of the settlement, it would seem that banks would have to be significantly more flexible with respect to their determinations of value.
As it stands right now, it is often difficult to come to some sort of agreement with the short sale lender on the value of a subject property. Frequently, values need to be appealed using comparables or a full appraisal conducted a certified or licensed appraiser. The Los Angeles Times compares distressed properties to “day old bagels”: the point being that banks need to reduce the price of their assets in order to unload their inventory. However, the additional costs associated with foreclosure don’t always make foreclosure the best option. So, even the most difficult lenders (if they are part of this proposed settlement) would now be compelled to consider short sale more seriously.
As a Realtor® and founder of a third-party short sale negotiation company, I can tell you that at present the only party who thinks that a property should be given a distressed value is the buyer. Short sale lenders (particularly, short sales with Fannie Mae as the investor) are sometimes asking for above market value on their properties. Bank-owned homes (at least those in San Diego County) are frequently listed with a sales price equivalent to market value—not the distressed value associated with vacant and abandoned homes. The buyer wants a deal; the buyer wants a day old bagel. But, the question is, will the bakery ever lower the price? In order to find out, I guess we will have to wait and see what happens as a result to the settlement.
What say you?
Photo: flickr creative commons by ezra.wolfe