Hold on and grab the popcorn, short sales could become more interesting

Do banks now have more leverage in short sales?

Dean Ouellette of the East Valley Team talks about how the price per square foot for East Valley short sales has grown closer to the price of foreclosures. Does that give banks more leverage in negotiating short sales?

The East Valley Short Sale market is changing, and maybe not for the better for sellers. The gap on price per square foot between foreclosures and short sales is narrowing quickly and dramatically. This is good news for buyers, but not good news for sellers and banks.

When a bank was getting 40% more for a short sale than a foreclosure, and did not have to incur the costs of foreclosing and the carrying costs on that property for a couple months, it made short sales no brainers, and gave the seller a lot of leverage over the banks.

While a foreclosure still is, and probably always will be more expensive than a short sale, the numbers are getting closer. This may be one reason that banks are asking for more sellers to come to the table with money. Than bank still wants to lose as little money as possible so a short sale in the East Valley will still yield better results most of the time, but look for banks to start making stands on principle.

I know, banks and principle sound funny in the same sentence, but the banks have been able to run over agents for years doing short sales, and that is when the seller and agent had a lot of leverage, now that they leverage is not as great, look for that railroading to become worse.

It is going to be an interesting development over the next six to twelve months. If the numbers continue to close so that they are basically the same, look for more people being required to sign a promissory note to complete the short sale, and many will. This could also lead to more foreclosures too in the East Valley where most sellers are protected from deficiencies.

It is about to get really interesting, hold on and grab the popcorn.