A client forwarded me the link on Inman News to this broker in Nevada who blames short sale agents and sellers for the mess.
Prices keep falling because the short-sale agents are listing at 5 to 10 percent below comps in order to try to get an offer, and often are accepting offers at even less. The banks come back at a higher price, and then the buyer walks. The downward momentum has been coming from the short sales, not from the REO listings.
All real estate is local, and perhaps there are many under-priced short sales in Nevada, but isn’t Nevada also one of the highest foreclosure states in the USA? It most certainly is. As a matter of fact, it is the NUMBER ONE ranked state for foreclosures, with 1 out of 97 households with filings, a staggering number when you consider that 2nd-ranked Arizona is at 1 out of 205.
I commented as follows:
I can only speak for my local market and not the author’s marketplace, but if the claim is true, then all those bank owned REO listings that have undercut the market have taken their queue from short sales.
I find that hard to believe.
Since lenders render a decision based on market activity, I wonder what sort of agent would ever responsibly list a short sale at such a fantasy price as 10-15 % below comparable sales.
What may be closer to the truth is that the author sees short sales selling 10-15% below unrealistic asking prices, which sit and rot while losing the war of attrition with buyers who won’t bite, while short sales are listed and sold at a number in line with actual sales.
“Market value” is what buyers are willing to pay, not what some sellers wish they could get.
Short sales reflect the market. They do not set it.
I know of no empirical data that suggests that the problem started with short sales. Banks only approve short sales based on market sales. Not asking prices. A short sale could very well be listed 10-15% below the competition. But the competing listings are probably overpriced, because guess what? They aren’t selling! To price a home to sell, you have to look at the sales, not the asking prices. Some of these unsold homes are on their 4th brokerage and are still chasing the market (and not running very fast either).
I do agree that banks often counter at higher prices, and that is because the historical comparables are from the last 6 months, and when the market is falling, historical look-backs are at a time when prices are higher. Short sales reflect falling prices. They don’t cause it. You can’t sell a house for “below” market value, because guess what? If it were underpriced, the buying public would bid it up. Where do we see that most often? Yup, you guessed it- bank owned foreclosures. Not short sales.
Market value is only what people are willing to pay. NOT what sellers or their brokers wish they could get.