Realtor Denial Syndrome

Yesterday, I read two different blogs in regard to disclosing of number of days that a property has been on the market. One author is convinced that less transparency in real estate is what is necessary to “protect sellers,” while the second author stated that according to Altos Research, Miami has the highest average days [172] on the market out of all the top metropolitan areas in the country.

To the author of “Posting Days On Market Unfair To Sellers,” I say give up your license and find a new profession. We NEED more transparency in real estate and trying to withhold important information from buyers is the last thing we should be doing.

In regard to Miami having the highest average days on the market, we have certainly had an increase in the average number of days on the market. Which market hasn’t? However, based on recent statistics provided by the Southeast Florida MLS, the data is very different to what Altos Research is publishing. The following closed sales statistics are for Miami-Dade County during the last 30 days, from October 11, 2008, through November 11, 2008:

• Condominiums/Townhomes: 448 closed sales, average number of days on the market = 126
• Single Family Homes: 469 closed sales, average number of days on the market = 108

David Knox, of David Knox Productions in Minneapolis, has termed the new seller disorder “PDS” or Price Denial Syndrome. I think that he brings up a very valid point as it also applies to real estate practitioners, particularly here in Miami. I think that the majority of realtors do not “say it like it is” to their clients. They are too concerned with obtaining the listing and then dealing with the high price later. 

In a declining market, this “Realtor Denial Syndrome” and lack of responsibility will have a direct effect on the results. Buyer interest is always at its peak when the property is just listed, so pricing it too high will turn buyers away. Additionally, if you are so overpriced that you are constantly making price reductions, buyers will sit on the sideline waiting for further price decreases. Furthermore, if you are priced too high, many people will just consider your price unrealistic and not even contact you.

The bottom line is that property that is overpriced is simply not going to sell in a declining market, and this responsibility rests directly on the shoulders of the listing agent. Blaming the seller suffering from Price Denial Syndrome is just an excuse.

Short Sales 101

Whether a seasoned real estate investor, first-time home buyer, distressed seller, or real estate agent, being educated and knowledgeable in short sales is very important in today’s market. To back this up, consider the fact that according to the Southeast Florida MLS, there are currently a total of 11,212, or 26.7%, of the entire inventory of condos or homes available for sale in Miami Dade County, that are listed as short sales.

A “short sale” refers to the sale of real property for a price that is less than the owner’s outstanding debt secured by the property. In a typical short sale scenario, the seller is in financial distress and is currently defaulting on the debt secured by the seller’s property, or will likely default in the future. Additionally, the property securing the seller’s debt has declined in value due to market conditions and the seller wants to sell the property to satisfy as much of the debt as possible.

The short sale typically involves three parties; (i) a real property owner, (ii) a lender that holds a lien against a seller’s real property, and, (iii) a buyer.  So far it sounds simple enough, however, negotiating and completing a successful short sale may be complicated and time consuming. While most lenders or banks will require similar documentation, they do have their own specific requirements or procedures. 

The lender’s loss mitigator will require the following documents:

• A signed Letter of Authorization from the seller authorizing their lender to discuss the loan with the investor or negotiator.
• A fully executed purchase and sale agreement contingent upon the lenders approval of the short sale. Please note that they will be looking for minimal contingencies so keep it clean!
• A hardship letter from the seller clearly explaining why they are behind on their mortgage payments and why they will not be able to make payments in the future.
• A financial declaration from the seller itemizing their monthly income and expenses.
• The most recent three to six months of the sellers bank statements.
• The most recent two years tax returns of the seller.
• A HUD-1 Settlement Statement showing an accurate statement of closing costs and net payoff to the lender.
• If necessary, a property condition and repair statement [use a licensed contractor for the estimate].

It is important that you do not piece meal the lender’s representative, so submit all your documents at the same time. Once the complete package is submitted and accepted, they will then order a Broker Price Opinion (BPO) to assist in their decision.

While there is no perfect method to work on short sales, by following these basic steps you will separate yourself from the rest of the pack and receive faster feedback from the mitigator.

If you would like further information on properties available for sale, please send us a comment or click here to search for properties.

Valuable Tip: If you are purchasing a property in an approved short sale, and you are successful in obtaining financing with a high loan-to-value ratio ["LTV"] that requires mortgage insurance, remember that according to today’s guildelines that the MI company will use the appraised value and not the purchase price to determine your LTV. Therefore, if the property appraises higher than the purchase price, the cost of your mortgage insurance may be lower than anticipated!