Checking The Pulse Of The Kansas City Real Estate Market
Many buyers call in wondering why a particular home appears to be such a great deal. It’s become routine really. I get the call, I log into MLS and check the “Showing Agent Info” section of MLS and, bam, there it is… SHORT SALE, SUBJECT TO LENDER APPROVAL. The public can’t see the Showing Agent Info section of MLS, so it takes an agent logging into the Kansas City MLS to actually tell (in most cases) whether a home is a Short Sale listing. Once I know we’re dealing with a Short Sale, I always provide an abbreviated layout of the Short Sale process. At this point most buyers choose to go a different direction with their home search.
The main reason most Kansas City home buyers won’t mess with a Short Sale is because they need a closing date they can rely on. Short Sales however rarely close on the date written into the contract. In the last year, I found around 1,200 Short Sale listings came on the market in the Kansas City metro area. I then searched to see how many Short Sale closings occurred and found 375. At that annual sales rate and considering the , that’s 13 months of Short Sale inventory in the Kansas City area. I’m betting that more than half of the current Short Sale listings do not make it to the closing table — which means they’ll head into foreclosure.
Still thinking you want to mess with buying a Short Sale? Let’s dig into WHY Short Sale listings are such a challenge. The definition of a Short Sale is the homeowner is “upside down” on what they owe on the home. Many buyers think of Short Sales as the same or similar to a Foreclosure and that couldn’t be further from the truth. A bank foreclosure is a listing ALREADY taken back by the bank (the homeowner is out of the home), the bank now has ownership of the property and can sell it in any fashion the bank sees fit. A Short Sale on the other hand still has the homeowner in the home (in most cases) and they may be struggling to get/keep their house payments current still.
In a Short Sale, the seller is HOPING their lender will accept a “Short” payoff of what’s owed on the home. The problem for buyers is you have no idea whether the seller’s lender will be willing to accept losing the money necessary in any particular Short Sale contract proposed to the lender. So a buyer and seller can be on the same page in regards to the contract price, but what REALLY matters is if that price is high enough for the lender to accept the Short Sale, rather than just letting the home go into foreclosure. If a Short Sale offer is too low, the lender could easily determine they’d do better by foreclosing on the home, taking possession of the home and selling it after the foreclosure process is complete. Either way, the bank loses. So it becomes the bank choosing the lesser of two evils.
Some buyers are willing to take the chance and feel all they have to waste is some time. That may be true and the inspections are often allowed to be postponed until after finding out whether the lender will accept the proposed Short Sale. But most buyers can’t wait 2, 3… 6 months to find out. If you can, then you may be the perfect Short Sale buyer. But there’s one more trait that any buyer must have for me to work with them on a Short Sale purchase — complete patience with the process. There is little a buyer’s agent can do to move the process along. The success of the transaction lies with the listing agent because they are the only one the seller has authorized to have discussions with their lender.
It’s also not out of the question that the lender will never respond to the Short Sale contract that’s presented. You’d think they’d provide a yes, no or some type of other response. But they’re not required to do so and sometimes you never even hear back. For this reason, there’s a place in the base Short Sale addendum we have where we can write a maximum amount of time the buyers are willing to twiddle their thumbs waiting for a lender response. 60 to 120 days is pretty common. One more tip. Before you EVER think about making a Short Sale offer, have your buyer’s agent ask the listing agent “have you received a complete short sale package from the seller that’s ready to be submitted today to the lender?” If the answer is no, the chances of that particular home making it the closing table just dropped into the single digits.
Click this link if you’re considering selling your Kansas City area home in a Short Sale.
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