Denny Grimes wrote a wonderful article in todays News-Press. He explains short sales and why they are so challenging.
What's the solution? I have a few ideas that I would like to share with the lenders. I called several If something sounds too good to be true, it usually is. Such is the case with buying, selling or working with a short sale. Sellers have hopes of getting the equivalent of a "mortgage mulligan" as their lender erases tens or hundreds of thousands of dollars of their mortgage debt. Buyers expect to get the steal of the century and agents feel like lottery winners because they believe short sales are easier to sell than tickets to see Hannah Montana. However, these grand expectations are rarely fulfilled.
You can see by the growing number of short sales coming on the market that a large percentage of sellers are choosing the short sale route. The local Multiple Listing Service shows that approximately 5,000 short sales are currently listed, which represents 25 percent of the existing inventory. However, short sales only account for about 10 percent of the existing home sales. If buyers perceive short sales to be one of the better buying opportunities, wouldn't you expect the percentage of short sales to be much higher?
The lackluster performance of short sales can be explained by the fact that short sales over-promise and under-deliver. Whoever came up with the term "short sale" should be sued for false advertising. A more accurate name would be "long sales," because everyone involved in the process must be long on patience and the probability of a successful closing within the buyer's lifetime is a long shot.
When you examine the inefficiencies of the short sale process, it is easy to see why the luster has vanished from what was initially thought to be an opportunity, second only to the Louisiana Purchase. Assuming the seller is already delinquent in mortgage payments, and the lender will entertain the idea of a short sale, the first step in a short sale is for the seller to list the property at a price agreed to by the seller and the agent.