Good morning! Good week! Starting off February, there are 47 single family homes showing as active on the market in the 90041 zip code, with 15 of them declaring themselves as short sales, and 7 as REO, or Real Estate Owned, which means foreclosure. So, almost one third of what is on the market is subject to lender approval, with another 15% bank-owned, which leaves us with 53% of what is on the market today as "normal" sales. In truth, several more of the "normal" sales are under duress. What does this mean?
1. A short sale is a swamp sale, by and large. By that I mean trying to do one is like slogging through a swamp, where your most likely result is that you'll get mired in mud, maybe even quicksand, and you'll come away with a peculiar rotten smell that's hard to wash off. It is subject to lender approval, which means that you make your offer to the seller, his agent in turn submits it to the bank. You might even open escrow. Then you wait, your agent calls daily, time passes as you think that any day now your sale will be approved and you'll buy this house. Unbeknownst to you, the listing agent is still taking offers and submitting them to the bank. Some poor clerk who makes minimum wage and who couldn't care less that you are salivating over your great deal is buried under a mountain of these and decides to take a few sick days. So many times, the offers trickle in until the property goes to foreclosure sale, the listing agent is out of luck (but many times won't admit it), and some time later the property shows up sold to someone else. Some person who is related to some officer of the bank. (Oh how cynical of me!) Basically, most short sales are a fiction and they clutter up our inventory with what look like great deals and they just aren't, they are no deals at all. My research shows maybe 1 in 20 have been going through, though that number is increasing as the economy has worsened. If you are incredibly persistent, you might end up with something. But don't think you're going to get it at that bargain basement price you saw on the MLS.
2. Foreclosures are almost as hard to do. Strange how the really good deals come on sold or you can't get an answer for days and then it comes up sold, or other frustrating scenarios. In truth, most REO listing agents get piles of offers, have lots of listings and do not behave like human being Realtors like me. They seem to wait for the highest offer to come in, counter that one, and open escrow. Sometimes that one doesn't work out and it goes back on the market and the same system goes on again. They don't take backups, they don't return phone calls, they don't care about you and your offer.
If you are a buyer and you want to buy a home to live in - you know, like a regular person who just wants to buy in this great market, you will find that the ones that are actually for sale that you can actually negotiate for and purchase number maybe 15 to 20 out of that 47 on the market. And the ones in your actual price range number maybe 3 or 4 at best. But you see these 47, priced from $240,000 to $899,000, and you think there are all these deals and there will be more, and you listen to all your friends that the market will drop another 20-50%, and you are stymied. Do you want to buy a house or do you want to sit on the sidelines?
An interesting exercise would be to look at what sold in the last month and see if you would have bought those deals. Would you be interested in a blog post about that?