Maybe you have seen a real estate listing that has a price that is too good to be true?
More than likely, that property is listed as a short sale.
Short sales are those homes for sale where the seller wants the bank to accept less than what they owe, so they are able to sell the home.
When you buy a home, you agreed on a price. The bank sent out their appraiser and that appraiser verified a price. The appraiser further established that the value you agreed to pay was accurate and at Fair Market Value – FMV.
Sometimes “life happens”. People get struck down with disease, job loss, divorce, life changes etc. It can happen that the circumstances of life start a chain of events that would cause a person not to be able to make their mortgage payments.
Most of the people in those circumstances attempt a loan modification with the bank to get some relief.
However, most of the time those “loan modifications” are hard to get so the next step would be a short sale.
Recently in the Santa Clarita Valley we had a listing being offered for sale by an out of area agent at over $200,000 less than fair market value.
Of course the listing, online and within the buyer’s I’m working with, received a huge amount of attention.
Getting this home at this price would be like finding the bag of money on the train.
Here are the Red Flags that exist on this one:
- Drive by only – no viewings of the property allowed.
- Owner Occupied – Not tenant occupied – making the “no viewings” rule even more apparent to be a game.
- Offer subject to interior inspection – even with short sales, this is quite rare. This was typically only the case with tenant occupied short sales and that was rare too. Write an offer sight unseen is what this really means.
- Home listing price $200,000 under fair market value – The bank is not stupid – they are going to verify value and come back at FMV. What if the buyer, that was in place, is unable to qualify for the higher amount?
- Maybe the bank will not allow any more time to the real estate agent to find another buyer and the property will foreclose. Then the seller has become a victim of a bad real estate agent.
- No key safe – while not too unusual, this comes back around to the home not being shown.
Short sales were a majority of the real estate market in the recent past. The market had a lot and we knew the agents that were experts in their handling and those who were gaming the system.
The short sale disclaimer on every listing is as follows: “Short Sale price, terms, commission and all are subject to bank approval…”
Therefore, the bank reserves the right to change the price, so the agent “albeit it unethical”, can price the short sale at $200,000 less than fair market value in order to generate leads.
It happens – but I don’t agree with that strategy.
Be safe and let me know when you are ready for our help. I’m Connor with REMAX.