Feb

Status Report – Short Sales Abound, Even in Seattle

By Emily

Wow, in the last month, I have been surprised by the number of short sale homes in the Seattle area. I have recently started showing homes for Redfin, a low-cost, full-service real estate brokerage started by some local entrepreneurs here in Seattle. (The super-cool connection is that it was started by two guys in my high school class that I ran into last summer.)

How Does Redfin Real Estate Work?

The way it works is that clients do MLS-style neighborhood searches to find the homes they want to tour, then they sign up for a tour for free with a local neighborhood realtor. Once they identify a home they want to put an offer on, they call the “lead agent” who negotiates the deal and handles the paperwork for them.

None of the agents work on commission, so they are free from any sales pressure. It’s all about customer service at Redfin. As a result of doing their own neighborhood research and using the firm, they can save about 1/3 of the commission. Also, statistics are showing that Redfin agents negotiate better (they don’t get paid more if the buyer pays more for the house) so our buyers are getting better prices on the homes they buy, too. All-in-all clients are saving about $10,000 when they buy a home in the $500,000 price range.

Why Real Estate Agents Don’t Like Their Buyers To Pursue Short Sales

Anyway, one thing Redfin DOESN’T support is showing or supporting transactions on short sale property. Short sales don’t make a lot of sense to buy for the individual home owner because they take so long to negotiate. It can take 3-6 months in many cases to pursue a short sale, and even then, you have no assurances that the bank will say yes to your offer.

Although this long turn around time isn’t necessarily a big deal for a real estate investor, it can really slow down the average home buyer who might be looking for a personal residence sooner rather than later. Also, most realtors don’t want their clients to be tied up waiting that long (they’d rather sell them something and make a commission sooner) especially since short sale attempts frequently don’t work out.

Realtor’s don’t like the back-and-forth of the negotiating with the bank – it’s a lot of work – and they don’t like the extended time table to close. The hassle factor keeps many realtors and their clients AWAY from the short sale negotiations table.

How That Makes Short Sales A Great Opportunity For Real Estate Investors

So, what that means to us as real estate investors, is that we really don’t have as much competition for the short sale properties as we might on a regular home. Sure, we’ll have MORE competition from other investors, like us, trying to get a good deal on the home… but that’s an opportunity, too.

If the primary buyer pool for short sale homes is investors, the home owners and the banks will have to settle for working with the lower-priced offers investors are inclined to make.

Plus, in today’s economy, there are really a lot of short sales to go around. Many more than there have been in the past. I was amazed when I was out showing homes this weekend, to see how many of the homes we had to scratch off our tour list because they were involved in short sales.

And THIS in SEATTLE which has historically been a very stable market. It is still one of the strongest real estate markets in the country, so the fact that we have an abundance of short sales here, indicates to me that there are many more available elsewhere in the country.

In fact, my buddy Phil Pustejovsky has been investing in short sales for the better part of a decade and he says he’s never seen anything like this in terms of an abundance of short sales available now. In fact, he’s got the corner on the market on his state, and is partnering up with investors from out of state so he can participate in short sale deals all across the country.

If you’re interested in partnering up with Phil, you can learn more about him and the success of the people he’s started working with here. This is not some seminar salesman mumbo-jumbo… that’s HYPE. Phil is not about Hype, he’s focused on HUD-1’s.

How Long With The Opportunity Last?

I’ve started working with Phil to help him market his short sale business. It’s going very well, as there is a lot of interest amongst active investors and promoters in short sales right now.

A lot of the techniques, like buying on terms that were big a few years ago have fallen by the wayside now… you can’t do a short sale or lease/option deal on an upside down property and still be conservative and make money, it’s just not a good idea.

This is a short sale market – that’s where things are right now. Phil doesn’t know how long this window will last, he thinks probably just 12-24 months, but for those who are working the short sale business NOW, there is a lot of money to be made. Phil is out there making it, and it’s very exciting to see! (He does about one $50K short sale deal per month since he’s cherry-picking them) and he’s making another $10K/month in realtor commissions on the short sale deals that don’t pan out with the bank.

If you want to know more about his methods, you can check out his website, Short Sale Teaching.

Hope this helps!

Emily

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