Edgewood, WA Real Estate Blog

The number of listings offered as short sales has climbed dramatically since the onset of the financial/housing crisis.

Rather than settle for the anecdotal and second hand information, I decided to take a closer look at the activity over the past 6 months of short sale activity.

The results are interesting, especially for a buyer considering a short sale.

There were 35 total short sales that actually closed for the areas I selected over the past 6 month period.  One often hears the horror stores about how long they take to close – if they ever close.  I wanted to know how long they actually took to close.

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As you can see, it’s true that many short sales take relatively longer than the typical organic pending period of 30-45 days… some an awful lot longer.  As a buyer the question of “is it going to take 30-40 days or 110+ days to close?… and am I OK with not knowing which?” is important to be answered before entering into a short sale.  Of course investor buyers have a lot less concern here as compared to an owner occupied type buyer.

Next I wanted to determine if it’s possible to glean any insight as to which short sale transactions will actually close so I decided to take a look at how many times a short sale property went pending before it actually closed.  Keep in mind the following graph includes only those properties that actually closed in the end, and doesn’t include properties that haven’t closed or those that slipped into foreclosure.

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As you can see, more than 50% of short sales that closed went pending more than once.  To me this implies that a buyer has a better chance of closing if they enter into a transaction for a property that has failed to close previously.  One explanation may be that the lender(s) need to be softened up by the market before accepting a price.

Another thing to note is the number of pending sales and the ratio of pending sales to closings will be really distored when short sales are included.

The last parameter I looked at was the number of price changes made before a property closed.  Here zero price changes mean the listed price wasn’t reduced before entering into a sale that closed (although it could have had transactions that failed to close multiple times).

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Note there is no information here regarding the size of the price change.   And there were a couple of examples where the price actually increased.  I was surprised to see this number of price changes.  I don’t know whether this has to do with sellers being unwilling to come to grips with the market or whether agents are attempting to provide documented evidence to lenders regarding the veracity of their sales price versus the market.

Never the less, it remains that successful short sales experience a high number of price changes.