Market Make-up or What's so Short about Short Sales
I have been doing a bit of calculations on the make-up of the market for Area 1 in Santa Clara County which consists of Morgan Hill, San Martin and Gilroy. Last week I went through all the listings and found out which were a Regular Sale – which I call a seller with equity who has decided today is a great time to sell, a Short Sale – which I call a seller with no equity and needs the banks help in order to sell his property and a REO/Bank Owned property which is basically a foreclosure.
I wanted to know how much of the “actives” on the market were really saleable. Which means homes where the principle owners is the decision makers – such as the Regular Sale or the REO/Bank Owned properties and how many “actives” were homes that were in great distress and where the owner needs the bank to forgive some debt in order for the sale to proceed. My thoughts are that the “Short Sales” aren’t really saleable in the traditional sense of the word, that we have added an additional party that needs to be negotiated with in order for title to transfer.
This is not to say that you can’t sell a “Short Sale” it is just that it takes a very special skill set from the listing agent to get a “short sale” sold. When the lender is taking it in the “Shorts” (by the way that is not where the term “Short Sale” comes from) they are not too happy about letting the borrower off the hook, paying what would be considered normal and customary sellers fees and are really not too pleased about paying a realtor anything at all. The banks know they need us, like we also need Proctologists, we just don’t like seeing them very often and in the case of the banks when they are writing off sometimes hundreds of thousands of dollars if they can take from the agents, they will.
Another disheartening aspect of Short Sales is that if we can’t get all parties, including the bank(s - there most often is more than one) to agree, the house could be sold at auction out from underneath the buyer. At that point in the near future you should see that property come back on the market as a REO and your chances are excellent at getting a closed sale. Banks love money but hate Real Estate – unless they can loan money against it and get paid back.
So… here are the stats and I for one thing they are very telling.
As of June 22, 2008 in Morgan Hill 74% of all listings were of the Regular Variety, 6% were REO’s and 18% were Short. Of all the Pending Sales in Morgan Hill 57% were Regular, 13% REO and 30% Short. That tells me that 30% of all the sales out there may or may not be sales and that depending upon the Agents and the Banks may or may not close.
As of June 29, 2008 in Morgan Hill we have added 20 new listings and 9 homes have gone pending this week. Of these homes 50% were Regular, 15% REO’s and 35% Shorts. A disturbing trend if the coming weeks continue to see the erodsion of our Regular sales and an almost 100% jump in our Short Sale percentage. When we look at Pending Sales we see in Morgan Hill of the 9 sales that went pending last week 44% were Short and 56% were Regular sales, there were no REO’s that went pending last week. Again a jump in the Short Sales going pending, but if the Agents are following the MLS rules that only means that they received an offer on the property and they are beginning the long and often protracted negotiations with the bank.
Looking at Gilroy for June 22, 2008 51% of all the Active listings were Regular, 18% were REOs and 39% were Short Sales. Of Pending Listings there are only 23% of all pending listings in Gilroy of the Regular kind, 35% are REO’s and 42% are Short Sales.
When we look at this past week in Gilroy they added 20 new listings and 40 homes went pending or into contract. Looking at the make-up of these listings and sales 40% of all the new listings are Regular Sales, 30% are REO’s and 30% are Short Sales. It is the Pendings in Gilroy that really tell the story, only 18% of all the Pendings were Regular, 28% were REO’s and 55% were Short. So here it looks like “Gilroy is Selling” which is what I heard from more than one local agent – I am not so sure if 22 of all the sales this past week were Short Sales. I would say that Gilroy is trying to sell – maybe the agents should focus on the properties that are a bit easier to sell first.
If you just look at Actives vs. Pendings and don’t take into consideration the Make-up of those numbers you can get a skewed perspective of what is happening in the market.
There is no question that Short Sales are a drag on this market, however if you are going to try to purchase a Short Sale make sure you have boundless energy, limitless patience and a great agent who knows how to negotiate the many pitfalls that accompany Short Sales.
My advice to all my clients is to look at the Regular Sales and the REO’s first, there is great value in those properties and you can negotiate a great deal. If the Short Sale is the home of your dreams, then by all means work hard to get it, but be prepared for the process.
I wanted to know how much of the “actives” on the market were really saleable. Which means homes where the principle owners is the decision makers – such as the Regular Sale or the REO/Bank Owned properties and how many “actives” were homes that were in great distress and where the owner needs the bank to forgive some debt in order for the sale to proceed. My thoughts are that the “Short Sales” aren’t really saleable in the traditional sense of the word, that we have added an additional party that needs to be negotiated with in order for title to transfer.
This is not to say that you can’t sell a “Short Sale” it is just that it takes a very special skill set from the listing agent to get a “short sale” sold. When the lender is taking it in the “Shorts” (by the way that is not where the term “Short Sale” comes from) they are not too happy about letting the borrower off the hook, paying what would be considered normal and customary sellers fees and are really not too pleased about paying a realtor anything at all. The banks know they need us, like we also need Proctologists, we just don’t like seeing them very often and in the case of the banks when they are writing off sometimes hundreds of thousands of dollars if they can take from the agents, they will.
Another disheartening aspect of Short Sales is that if we can’t get all parties, including the bank(s - there most often is more than one) to agree, the house could be sold at auction out from underneath the buyer. At that point in the near future you should see that property come back on the market as a REO and your chances are excellent at getting a closed sale. Banks love money but hate Real Estate – unless they can loan money against it and get paid back.
So… here are the stats and I for one thing they are very telling.
As of June 22, 2008 in Morgan Hill 74% of all listings were of the Regular Variety, 6% were REO’s and 18% were Short. Of all the Pending Sales in Morgan Hill 57% were Regular, 13% REO and 30% Short. That tells me that 30% of all the sales out there may or may not be sales and that depending upon the Agents and the Banks may or may not close.
As of June 29, 2008 in Morgan Hill we have added 20 new listings and 9 homes have gone pending this week. Of these homes 50% were Regular, 15% REO’s and 35% Shorts. A disturbing trend if the coming weeks continue to see the erodsion of our Regular sales and an almost 100% jump in our Short Sale percentage. When we look at Pending Sales we see in Morgan Hill of the 9 sales that went pending last week 44% were Short and 56% were Regular sales, there were no REO’s that went pending last week. Again a jump in the Short Sales going pending, but if the Agents are following the MLS rules that only means that they received an offer on the property and they are beginning the long and often protracted negotiations with the bank.
Looking at Gilroy for June 22, 2008 51% of all the Active listings were Regular, 18% were REOs and 39% were Short Sales. Of Pending Listings there are only 23% of all pending listings in Gilroy of the Regular kind, 35% are REO’s and 42% are Short Sales.
When we look at this past week in Gilroy they added 20 new listings and 40 homes went pending or into contract. Looking at the make-up of these listings and sales 40% of all the new listings are Regular Sales, 30% are REO’s and 30% are Short Sales. It is the Pendings in Gilroy that really tell the story, only 18% of all the Pendings were Regular, 28% were REO’s and 55% were Short. So here it looks like “Gilroy is Selling” which is what I heard from more than one local agent – I am not so sure if 22 of all the sales this past week were Short Sales. I would say that Gilroy is trying to sell – maybe the agents should focus on the properties that are a bit easier to sell first.
If you just look at Actives vs. Pendings and don’t take into consideration the Make-up of those numbers you can get a skewed perspective of what is happening in the market.
There is no question that Short Sales are a drag on this market, however if you are going to try to purchase a Short Sale make sure you have boundless energy, limitless patience and a great agent who knows how to negotiate the many pitfalls that accompany Short Sales.
My advice to all my clients is to look at the Regular Sales and the REO’s first, there is great value in those properties and you can negotiate a great deal. If the Short Sale is the home of your dreams, then by all means work hard to get it, but be prepared for the process.
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