A story in the latest issue of the magazine highlights the increasing number of homes being listed as “short sales,” i.e. they’re selling for less than what the homeowner owes against them. It’s a sad situation indeed that many borrowers are now underwater in their real estate investments and lenders may have to take a loss as well. In Sacramento County, for example, local broker Pat Hake tells me there are 1,079 short sales listed, more than 10% of the total listings.
There’s some debate in the real estate community as to whether these homes are actually buyable at the prices advertised or if real estate agents are listing them as short sales to attract the attention of bargain hunters. “It’s become a hot term,” says John Karevoll, who analyses real estate data for DataQuick Information Systems. “We’re seeing more property marketed as a foreclosure, default or short sale.”
The Beverly Hills Greater Los Angeles Association of Realtors is offering a special class on May 2 for agents interested in selling properties that are either bank-owned or in the process of foreclosure. “Two years ago everyone had seminars on how to make money,” jokes Fred Cannon, a banking analyst at Keefe, Bruyette & Woods Inc. “Now, they have them on how to loose less money.”
Javid Jaberi, who is in charge of collecting payments at one of the nation’s largest mortgage lenders, GMAC ResCap, says short sales are for real. “If the borrower has a $1 million mortgage and he makes $50,000 a year in income, there’s no way I can help this borrower,” Jaberi says. “He bought something he can’t afford.” Jaberi says he’ll sometimes pay moving expenses to get the owner to leave the home and sell it to someone else. Sometimes he’ll even pay them bonuses if they leave the house in good condition. “I’ll work with borrower, I’ll take a short pay, you bet I will,” he says.
Gary Laturno, an attorney and real estate agent in San Diego who has both bought properties for less than their mortgages and sold properties for others in short sale situations, warns that just because an owner seems desperate, that doesn’t mean you’re getting a screaming deal. “You’re paying market value,” Liturno says. And only time will tell if the price was right.