Why are banks countering every short sale offer?
East Valley Team memberDean Ouellette talks about how banks are countering every short sale offer lately no matter how good the offer is.
It seems recently that banks are not approving any short sale at first, but they counter everything. Even if the offer is very strong and at market value they still seem to be countering asking for more money.
You cannot really blame them for wanting to get more money out of the deal, but they could be costing themselves some good deals. Most agents are not going to challenge the offers and most buyers are not ging to come up if they feel the offer is fair.
Banks need to be realistic, if the offer is a solid offer, then approve the deal, if you can get more money from a foreclosure, then counter. Listing agents need to know their offer is good, and if they know it is good then they need to take a stand against these meaningless counter offers.
Agents need to know the market, know the market value and keep track of the history of the transaction. What did you start the price at? When did you do a price reduction? How many viewings did you have at each stage (yes that means using a Supra Lockbox). Using this information you can make your case.
Who says you can't teach a rocket scientist new tricks. Since Kristin left her former profession for her new one she has built one of the fastest growing businesses in the East Valley. Kristin is known for her Youtube videos, make sure you check them out. 
After a long career in political consulting Dean transitioned to real estate and has not looked back. Dean is one of the sick ones who enjoys fighting with banks to get short sales approved and to help homeowners avoid foreclosure. Dean also loves making videos on the subject.
Dean, Great video and great advice. But, I offer the following items for consideration.
We are moving through the pent up backlog with the lenders. They are getting more active in review. Locally, the average sales price per square foot for a foreclosure is now within $9 per square foot for short sales. I am speaking Greater Phoenix Market. REO properties are selling within $3 per foot. These are averages and differing price groups of homes will differ.
Next we have to consider that sales commissions are higher in short sale than they are in REO. With REO having been bid up in price they directly compete now with Short Sales. In most short sales monies for closing costs and contribution to subordinate lenders is much greater than you would see in an REO transaction.
Next layer of issue is the quality of BPO. The lender’s are using comps from neighborhood first and 90 days. Listing agents are attempting to reach outside the neighborhood to support a lower price.
Bottom line, we are solidly in the “More profitable to foreclose than accept the short sale”
I think you offer great advice to address the what seems to be unreasonable counters form the lender but you might find it comes not from the value of the property per se but from the point of view of, if the home does not sell at that higher value the lender will choose to foreclose.
Those are my opinions only.
Right on the money as usual Dean.
All observers and experts in and around the housing and banking market have agreed that short sales will be on the increase in the next two to three years. (In our Phoenix Metro market in the last 12 months we have seen closed sides for short sales increase from 9% of market share to now about 22% of market share). Banks are definitely switching tactics on those parties involved in the short sales. Not just the buyer, but also the seller. Not only are we seeing almost every buyer’s offer countered, but the banks are also asking the sellers to come in with some money to close the deal.
Times are a’changing as they always do in real estate.
OK Kevin, going to disagree with you on a few points here.. just my opinion..
As far as the average sales price for short sales closing in on foreclosures.. bingo, you hit that on the head and I did a video on just that subject last week.
http://eastvalleyteam.com/hold-on-and-grab-the-popcorn-short-sales-could-become-more-interesting
I have do disagree with you on the cost factor. Even if they were selling dollar for dollar I believe a short sale is still a much better value for the bank.
First the 1% commission difference is not enough to make up for the cost difference. Both are going to see about 3% closing costs included. Almost every one of my reo offers has it included. The actual cost of doing the foreclosure, the carry cost, the clean up cost, many are making repairs to get them on the market, the cost of the asset manager FAR out weigh the cost of a short sale. When you talk to former loss mitigators they confirm this.
Then there is also the increased money they need to keep on books when they take the asset back, sure the 200k house is not much, but when you make that thousands of them, it adds up greatly. There is no way a foreclosure can be done cheaper than a short sale.
We agree that BPO quality is an issue, but the one particular case that sent me over the edge to do this I know our offer was in line with the BPO, it was a cash deal with no request for closing costs and it was well 5% higher than a nicer unit that just closed down the street. This one is a no brainer for the bank, yet they still countered asking for more.
The buyers are not willing to come up and I think I have more than enough evidence to fight this and win. I am confident I will, but if for some reason they do not reason they do not talk they are taking this back in foreclosure and will not get the same price we have on the table.
Now this one I think will be saved because I am not going to drop it for my clients, but I am sick of agents coming to my buyers and asking for money at the end when I know for sure our offer is very strong.
As always I respect your opinion, but I think this is a mistake the banks are making and I believe they know the houses are not worth what they are asking for often. Which is strange because when they list REO properties they often come in under market value.
We need another Phoenix Legal night soon.
All I can say is thanks. Some professional bloggers post couple of times a day on the blogs, simply because this consistent addition of new content helps the property to get regular readers.