Home Sellers Frustrated as Short Sales Collapse

I saw a article with the same title as this blog here: http://www.usatoday.com/money/economy/housing/2009-08-04-short-sales-mortgages_N.htm?csp=usat.me

I found no irony in this as I have been commenting on this very subject for the last couple of months. What I do find ironic are the many realtors I talk to who believe Short Sales are the wave of the future and aggressively pursuing them. I have called Short Sales ticking time bombs waiting to be taken over by the bank.

I have a perfect example of this exact scenario. My client really likes this house. It turns out its a short sale. So I call the agent to find out what the story is with the property in regards to the seller, talks they have had with the bank, the amount the bank is going to forgive, etc. Well, it turns out the seller is the agent. Conflict of interest: You BET! But, my client really wants the property so I dig deeper with warning signals going off in my head. The property had been on the market for year. Initially listed at $455,000. Then about 9 months later reduced to $419,000. The agent (who is also the seller that is getting a divorce and behind on her payments) is trying to convince me that she has 3 buyers ranging from $485k to $500k. Bing! Warning bell: how can this property that has sat for a year at $455k, reduced to $419k suddenly be in a multiple bid situations for $500k ish??? I asked what the bank has agreed to. She doesn't know and says they better take it. Bing! Another warning. The bank has not agreed to anything and she has no clue (let me remind you she is a licensed real estate agent who should know, so do your homework before hiring a realtor.)

I go back to my client, explain the situation and we agree that something fishy is going on. So we pass, and move on. Well guess what happened? The property got foreclosed upon by the bank and now the property has been listed as a REO (which means Real Estate Owned) as in owned by the bank.

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