By: Maryann Little
I was recently asked the question: “should you ever raise your short sale price?” The normal reaction to this question would be: “In this market? Of course not!” Here are a couple examples I’ve come across in my recent experience, in which listing agents were forced to raise their prices:
Hampton, NH (Seacoast) – 2011
This property was the first re-sale out of a condo complex that was built in 2006. The condos originally sold between $650,000-$800,000 when they were brand new. The selling agent listed the property for $350,000, which was competitive based on other condo resales with comparable locations and layouts. We got two offers in. The first was for $310,000, financed and the second was for $300,000, cash.
We went in to the bank with the offers and immediately were told it was too low. Their valuation showed it to be worth $400,000. After some discussion with the listing agent, he said, “let’s show them it’s not worth $400,000,” so we listed it at that price. The first buyer offer was eliminated because they would not increase their offer from $310,00. We didn’t receive another inquiry after increasing the price. People seemed to understand that it wasn’t worth $400,000.
We waited until about 2 weeks before the next auction and we submitted the $300,000 offer again. The new negotiator ordered a new Broker’s Price Opinion (BPO), which is the process by which an institution determines the value of the home without a formal appraisal. After the new review, the listing was within range. By the time the sale closed, the bank and the buyer agreed on $317,000, and the homeowner had a perfect approval with no deficiency.
Middleboro, MA – 2010
This sale was initiated in the fall of 2010. After extensive conversations with the homeowners, and the listing agent, it was agreed to list it at $199,000 because the house needed some work. An offer came in close to list price and was presented to the lender. Just like the first time, the offer was considered too low by the bank. The lender considered it to be a listing that was being rushed just to get it sold.
In this case, the BPO came in at and he said the $260,000 range, so we relisted at $254,900. The listing stayed on the market, and from January 2011 to October 2011, small progressive price drops brought it back down to it’s original listing of $199,000. We finally got an offer in October, at just about the same price as the first one, and closed early in 2012. he initial offer was essentially accepted 2 years later without anything changing.
What this Means for Short Sale Sellers
In each case, relisting at the higher amount did nothing but waste the homeowners’ time, banks’ time, list agents’ time, and continued to drain the homeowners more financially. In some circumstances raising the price may be inevitable because of an aggressive BPO from the bank. All this will accomplish is showing the bank that the true value of the house is much lower than their agent believes. In the end the listing agent will likely be correct with the original listing, but a lot of time will have been wasted.
If you can avoid it, stay away from raising your short sale listing price at all costs!
Maryann Little is the VP of Mitigation and Negotiation at Short Sale Mitigation, LLC where she serves as a liaison between lenders and homeowners in New Hampshire and Massachusetts.
photo courtesy of: Images_of_Money