I have been wondering how negotiable asking prices are for short sales, so I decided to take a look at the multiple listing service (MLS) statistics for real estate sold in Gainesville and Alachua County. In this article I am comparing the list prices to the sale prices based on the situation of the sale so we can understand how likely it is for offer to be accepted if it is below the asking price.
Short Sale Defined
In short, a home is in “Short Sale” status when the owner of the home owes more to the bank for their property then the property can sell for on the open market. The owner can’t or doesn’t want to bring additional cash to the closing table to pay off their loan, so they are asking the bank to forgive the difference.
This can be a lengthy process, you can read This Post for more detail of what it means. In general, a lower sale price is the buyer’s motivation to deal with the headaches and heartaches of waiting for the bank to respond to their offer.
Is it Priced Right?
Since January 2008 Short sales sold for 97% of the asking price, compared to 94% for homes with more “normal” selling situations. So, when they get a contract short sales sell for very close to what they are asking.
But, if we compare the original list prices to the selling prices instead of the price a home was listed at went it got an offer we see that short sales closed at 84% while regular sales closed at 88%.
It looks like once a short sale home is “priced right” there is not a lot of negotiation off the asking price. I don’t know if that is because the buyers aren’t asking for a discount or if the banks are less negotiable on price. I have a few ideas of what could cause this:
- Once buyers decide the price is a ‘good deal’ they don’t want to risk someone else overbidding them.
- Agents may be adjusting the final list price based on what the bank accepts.
- Once a home goes under contract the bank often wants to see any other offers that come in, and they end up accepting the highest one.
When a home is first put on the market it is more likely to be overpriced if it is a short sale than homes with normal contingencies, but short sales are also more likely to have price reductions.
For the short sales that SOLD: The short sales started out by asking only $3k less than homes with normal contract contingencies. The short sale homes were on the market 45 days longer and sold for about $12k less. (Selling at $103 per square foot instead of $113 per square foot.) They ended up selling for an average of $181k after 220 days on the market. From the time they were first listed for sale their asking prices were reduced by 14%.
The short sales that didn’t sell yet: These homes are smaller and started out by asking $35k less than homes selling with normal contract contingencies. They are actually listed for less than many short sales that have sold. They have been on the market 229 days on average and are now asking $163k.
Only a 9% Discount??
I was a bit surprised to see that short sales sell for just 9% less than traditional homes. Twelve Thousand Dollars is a lot of money, but it doesn’t seem like enough incentive to deal with the hassle and it certainly doesn’t qualify as an “amazing deal” in my book.
Then I remembered that it takes many months to get bank approval for a short sale, and sometimes over a year. In a declining market that means prices on normal homes have slowly caught up to the prices of short sales that are under contract. When the buyer put in a offer on a short sale the price was amazing, but by the time they were able to actually move in it the price was good but no longer amazing.
Want a current list of Short Sale homes for sale in Gainesville or Alachua County? Just email us
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Information based on 562 “short sale” properties listed for sale since 1/1/08. 117 properties sold. 53 were taken off the market and then re-listed – of those 16 sold eventually and 37 have not sold to date.
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