I was showing one of our brand new Ole South homes this week to a first-time home buyer. They loved the home and all of its many features, especially the fact that everything was NEW and under warranty too.
They had learned through others that new homes offered the best value for the money, and that in most cases, a new home could be purchased for the same price, or even less, than an older resale home comparable in size and features. They had looked at other resales, and told me everything that was important to them, even the price range. Well guess what? We have the perfect home nearing completion!
This particular home was $169,990, complete with all appliances and closing costs paid. Using THDA’s Great Start program for first-time homebuyers, their monthly payment, yes PITI, would be approximately $1153 with zero cash out of pocket at closing. If they chose to place their own down-payment of approximately $5950, their monthly payment would drop to approximately $1076.
They really liked the -0- down option, but developed a perplexing look on their faces. They really wanted a NEW home, but there was another home, similar in size, just 2 miles away they had seen online. It was listed for $84,900. It was a “short sale.”
They asked, “Just what does that mean?” I explained the basic process where the bank would hopefully agree to allow the current owner to sell the home for less than the bank was owed on the property. “You mean to say the bank is going to let them sell that home for 84,900?” No, not necessarily. “Then why is it listed for that price?”
Great question. And we Realtors know the answer. It is just like fishing. We know the list price is just to attract a prospect, who will then be encouraged to make an offer, which the bank, at some unknown point in time, will accept or counter. We all know that in most cases, the bank will not approve a listing price on a pre-foreclosure home until an offer of some kind is on the table. The general public does NOT know that.
So, in the meantime, those shopping for homes receive a unrealistic picture of home values. Neighborhoods suffer. Those trying to sell their homes without financial difficulty suffer. Zillow’s “z-estimates” seem to pick up on the suffering too, lowering those home values that are automatically calculated. People believe those values because they saw it on “the internet.”
Okay, let’s go ahead and open the can of worms.
The “short sale” can be a great alternative to foreclosure and I know many Realtors that are very successful negotiating the sale of homes in this situation. It can be a win-win situation for all involved, but only if extraordinary levels of patience can be applied.
Let’s be serious. Wouldn’t our whole real estate economy be better off if a property could not be listed at an arbitrary price that is basically pulled out of the sky?
Many will disagree, but ANY home listed for sale on our MLS should be able to be purchased at the price listed. Period.
Why can’t our MLS require all short sales to be classified a separate way without a list price, followed by the instructions? Or, if a price has to be present, enter $1.00. At least that way, the playing field is more level. I know there are data fields already for short sale notations, but that still leaves the “pie-in-the-sky” listing price. Simply put, it is “bait and switch.”
Again, there are many great Realtors that specialize in “short sales.” If you would like a recommendation, please feel free to contact me anytime.
Bad things happen to good people all the time. If you know anyone that has suffered a 30% drop in income or more, that may need assistance in avoiding a foreclosure or short sale, don’t forget about THDA’s newest program, www.keepmytnhome.org.
And always remember, better times are ahead.
Trey Lewis is a licensed Real Estate Broker in the State of Tennessee with Ole South Realty, 615.896.0019 direct 615.593.6340. Specializing in new homes in the Greater Nashville area to include Nashville, Murfreesboro, Smyrna, Clarksville, and Spring Hill, Tennessee.