Last night, my sister sent me a Facebook message telling me that I just had to look up this certain MLS # because she just couldn't believe how bad the photos of the house were. Not because it was bad photography, but because the house was a complete mess. She said that the photos should be used in a "real estate training" class of what NOT to do. She basically thought that the agent must be a complete idiot and doing such a disservice to his client for taking pictures of the house in such a poor condition!
My comment back to her, was "It's not the agent's fault!" This little conversation gave me the idea for my very first blog. Why would someone let their house be photographed for the market, with dirty dishes, and laundry strewn throughout the house?
Immediately when I looked up the MLS # that she sent me, I saw that it is a "Short Sale" listing. Definitition of a short sale, for those of you that don't know: It doesn't mean it will be a QUICK sale! Usually, it's quite the opposite! What it means is that the BANK who holds the mortgage has agreed to SETTLE "SHORT" of what they are owed on the mortgage. The only reason a bank would agree to do this is because the current homeowner is not able to keep up with the payments, and hasn't been paying the mortgage for at least 2 months. Also, in most cases, the market value of the house is less than what is owed on the home. It is extremely expensive for a bank to foreclose on a house, so they would rather settle short now, than go to the expense of foreclosing. If a house is listed as a short sale, the mortgage is not currently being paid. In fact, the homeowner is INSTRUCTED by their agent to stop making all payments on the mortgage. Reason being is what incentive does the bank have to settle, if they are receiving the monthly payment?
So back to the pictures. For reasons just discussed, the homeowner is living in the house for FREE at this point, right? I need to repeat this: The homeowner is living in the house for FREE at this point, right? All of a sudden, do the UN-flattering pictures start to make a little more sense, already? As soon as the house SELLS, the homeowner is OUT! There aren't many places to live for FREE, so what's the incentive for the homeowner to stage the home beautifully for the photos, or for the showings???? Many banks put a hold on the foreclosure proceedings if the house is listed for sale. So, because the house is listed for sale, the foreclosure process has stopped, and the homeowner isn't making payments. Not a bad deal for the person living in the home. Why would they want it to sell??? The banks have started figuring this out, and are offering $1000 to the homeowner for a successful "short sale" closing. At closing the bank gives the "homeowner" a check for $1000. This always seems strange to me, but I understand the bank's dilemma.
With all this said, I want to mention that not all homes that are listed as a short sale, are a mess. Many people are having legitimate financial difficulty, but still have PRIDE. These are the people that want to have the house looking nice, so that they can have a quick transaction, so that they no longer have the worry of the house on their shoulders. These are the people that SHOULD get the help--the people that deserve it. These people care that their credit remains as strong as possible, even though they can no longer afford their previous lifestyle. They just want to move on to a less expensive housing payment. I should also mention that it is less of a "hit" on your credit to do a short sale, "deed in lieu of foreclosure", than have a foreclosure on your credit history.
I just wanted to get this "out there", because I was so surprised by my sister's comment. I know a lot of people hear the term "short sale" and have no idea what it means, so maybe this will help explain.
There's a lot more to be said about the process of BUYING a house listed as a short sale, but I will save that for another post.
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