Short Sale Arizona Homes for sale

HOME

What is a short sale in Arizona real estate?

A short sale is where a property is being sold at less than what the current owner owes on the property. All lien holders on the debt of the property (for instance a primary mortgage, a 2nd mortgage, and a pool builder lien) must approve any potential transfer of ownership, because they will be asked to forgive or restructure the balance of the current owner's debt and release any claim to the property so that the potential sale can occur.

Fannie Mae & Freddie Mac Announce HAFA Programs
Fannie Mae's HAFA Requirements (6/1/10) - Freddie Macs HAFA Requirements (6/1/10)
HAFA (Home Affordable Foreclosure Alternatives)

Short Sales in Real Estate
The Nightmare, and the Sad Reality

by Tony Pomykala – www.HomeListingsArizona.com
West USA Realty - November 20, 2008

Short Sales – A Buyer Agent’s Nightmare

It’s so typical. A real estate agent is looking thru MLS listings with his buyer-client and they come across a home that is priced just at the high-end of what the client is pre-approved for by their own lender. The photos of this home make the client’s eyes light up.

“Stop!” they say, “I want to go see this home now!”

It’s almost too good to be true. The house has got more square feet, more bedrooms, and more extras than anything else for their price range than they’ve seen so far.

The real estate agent, who is happy they've found a home that might work, is stunned that this home is available. It looks far too nice to be obtainable at this price. Then he looks through his MLS notes. His heart sinks as he sees this home is a Short Sale. Inside his head the cursing begins, and he knows he now must explain how this home will likely become the source of frustration, anger, sleepless nights, worry, and many other bad vibes along the way, only to likely end with a fruitless pursuit of a home that they probably aren’t going to get after all is said and done. Oh, and he’ll have to endure this for months, and more months. And, if the real estate agent doesn’t go through the time to educate the client, he will likely find out in 4 or 5 months that his client has left him to try to purchase a home without him and with another Realtor instead. The client will almost certainly blame this agent for all the misery that the experience of trying to buy a short sale home will bring. Even though he will consul this buyer about all of this, the dream of owning THAT home will be enough for that buyer to say, “Well, let’s try anyway. What can it hurt?”

UGH!!! In fact, short sales are often priced way below what they will eventually sell for, and everyone knows it except the consumer. Unfortunately now however, the consumer will believe that there actually ARE better homes out there like this in their price range. Especially the consumers not yet working with Realtors, who have only been window shopping thru various online websites. What they don’t understand is that the listing agent has purposely priced the home very low just to get some fool to make an offer, ANY offer, so that the seller’s lender will order a BPO (Broker Price Opinion) to get the short sale timer ticking towards an approval. Well, of a future approval anyway. After that “sacrificial lamb” offer has been rejected, the listing agent then knows what price the lender will actually accept and can price the home accurately to sell. But that poor soul who made that first offer was left hanging during that lengthy wait, and wasted their hopes, dreams, and family’s anticipation in the process. Yes, now that client is mad! They think, “Hey we offered what you asked for, how can you now ask for $60,000 more from us???” They feel betrayed. Heck, they had an accepted offer, didn’t they?

 Well, no not really. Clients rarely understand completely (even though you told them) that the lender must sign off on the sale, in addition to the sellers, before the contract is truly executable and that the lender will demand as close to fair market value as they can get. The agent for the seller has taken advantage of that, to misleadingly price the home way below its value.

Now if the buyer’s agent was smart enough to educate his clients about what they are looking at, and if he proves to his client the actual neighborhood comparable values of what to expect this home to be sold at, perhaps he can have his clients make an offer realistically priced closer to the homes actual value. The seller’s lender might actually accept the “sacrificial lamb” offer in that case. But getting buyers to submit an offer that is sometimes tens of thousands of dollars above the asking price (artificial as that asking price is) can be like pulling teeth. Usually it takes the painful experience of a couple of long rejections before they begin to see the light.

But what about the clients in the example I began the story with? They were already topped out at the upper limit of what they were qualified for. So there is no happy ending for them. Just the reality that they aren’t going to get as nice of a home as they thought they could and they wasted gas and time when they went to see it.

Short Sales are here to stay for a long, long time.

If anyone believes once the market normalizes that short sales will disappear, they are seriously delusional. Short Sales will be around for a very long time. In fact, they will be around for a very, very, very long time indeed.

 Let me explain.

Traditionally in Arizona, we see that in a normal real estate market home value appreciates on average about 3% every year. This is when inventory and buyers are fairly balanced. Supply and Demand aren’t out of whack one way or they other.

Now consider that so far, in Arizona we are seeing home values that have plummeted below what they cost in 2000-2001 in many places.

If a homeowner bought or refinanced their home in 2005, let’s say it was at $250,000. That’s what most “starter homes” were selling at in many places at that time. Now, those same homes in many places can be bought today for about $100-$120k.

Most experts think it will be at least 10-18 months before the market normalizes. I think that’s optimistic. I agree prices may stabilize, but the market won’t be normal for some time in my opinion.

At any rate, let’s take that house that’s now worth $100,000.00, but was bought for $250,000 in ‘05. If we see the historical appreciation of values kick in right now, the 3% appreciation rate means that the house will once again be worth its $250k in approximately 32 years!

That my friends, means short sales are here for a very long time!

07/02/09:
Concerning HOAs
& Short Sales:
by Bonni Olson

Home Owner Associations are still owed their money, even if you short sale your home or "give it back to the bank" by letting it get foreclosed on. 
“When Short Selling your home, please keep paying your HOA dues and fees. Keep them current prior to the Close of Escrow. The HOA's seemingly have more power than even the banks in Arizona. Plus, they add such huge fees when delinquent that the bill becomes astronomical by the time of Closing and it has caused many issues in trying to get these deals done."
Know that if the property does go to foreclosure, your HOA debt does NOT "get wiped out". It is a personal liability and they can and WILL come after the homeowner after the sale, for a deficiency judgment. They can also issue a warrant for the homeowners' arrest.
The HOA's will usually negotiate the debt, if the homeowner can just call and stay in contact.
For more information, call Bonni Olson (602) 284-7510
Focus Point Properties, LLC.

Click to view these
IMPORTANT RESOURCES:

12/20/2007 H.R. 3648
Mortgage Forgiveness Debt Relief Act of 2007 (.pdf file)
-source US House of Representatives
(note: 1099 relief bill that was set to expire at the end of 2009 has been extended thru 2012)

Arizona's status as a
non-deficiency state
-source Arizona Legislature

REVISED LAW 9/2009
Click for Update