Should You Raise Your Short Sale List Price? Massachusetts and New Hampshire

Should You Raise Your Short Sale List Price?

People always look at me funny when I say I love short sales.  Every sale is different and maybe that’s what I like.  I like getting the approval, and hearing the relief in the voice of a homeowner.  I like my team and all the brokerages we work with.  I will say though, that anyone that tells you they are an EXPERT in short sales you should always speak to them with caution.  I don’t claim to be an expert because this industry changes DAILY.  It’s almost impossible to be an expert.  I think what homeowners should be looking at when they hire a short sale negotiator is their approvals.  The proof is in the pudding so to speak.

So TWICE I’ve had something happen that I’ve been rather shocked by.  I had to write about it because I don’t know if it is the “norm” or the “exception”, but the question of the blog today is – SHOULD YOU RAISE YOUR LIST PRICE? – My knee jerk reaction immediately after saying it out loud is NO, ABSOLUTELY NOT.  Not in this market.  Heck no!  No way.  THEN, I had two properties close after some struggle in which we HAD to raise the list price.  Let me explain both.

Short Sale Property #1 sold in Hampton, New Hampshire last year.  It was the first resale out of a condo complex built in 2006.  These condos originally sold between $650,000-$800,000.  They were on the water and I remember having a long discussion with Tom McGuirk, the list agent about the fact it was the first resale out of the building.  Tom has worked in the seacoast market for years.  He’s in my opinion just about the best agent you can find in the Hampton market.  The seacoast in my opinion doesn’t seem to sell like the rest of the property in New Hampshire.  It’s a very unique market.  Anyways, Tom listed the property for $350,000, which he felt was competitive based on other condo resales in Hampton with a water view.  We were up against multiple auctions which is never fun.  We got two offers in.  The first was for $310,000 financed and the second was for $300,000 cash.  Now, normally I would take the cash over all day long over the financed, but it was executed first so that’s what we went with.

This property had one lien with Bank of America.  We went in with the offer and immediately were told it was too low.  They did the valuation and it came back at $400,000 and if we couldn’t get an offer in that range, the file would close.  Tom and I both knew the valuations person could NOT have understood or taken into consideration this was the first RESALE out of this building and the negotiator indicated that all the comps were from that building.  Everything was thousands of dollars higher because they were all new unit sold comps.  We were dead in the water, and Tom and I had a nice discussion about what to do.  He said, “Let’s show them it’s not worth $400,000,” and of course I thought, well how do you do that?  Anyways, Tom listed the property at $400,000.  The first buyer file was closed because they would not increase their offer to within the $400,000 range.  We knew we had a bit of time before the auction was reset so, we waited with the second offer in hand.  Not one other inquiry happened when we increased the price.  Obviously people understood that it wasn’t worth $400,000.  We waited until about 2 weeks before the next auction and we submitted the $300,000 lower offer.  We also submitted the same rebuttal value information that we did with the first offer.  The new negotiator ordered a new BPO.  This time, we were within range.  By the time the sale closed BOA and the buyer agreed on $317,000 and the homeowner had a perfect approval with no deficiency.  Unfortunately what did I learn?  That raising a list price does NOTHING but waste everyone’s time, however when we showed the bank the list price and there were no showings, they started to listen.

The second short sale that we raised the list price on we just closed and was located in Middleboro, Massachusetts.  This was similar to the first one, however took MUCH MUCH longer.  We initiated a sale in 2010 in the fall on this house.  After extensive conversations with the homeowners, and listing agent, they agreed to list it at $199,000 because the house needed work.  An offer came in close to list price and was presented to the lender.  I remember the negotiator saying, you only listed this so you could get a quick offer and he shut down the file and said the offer was too low.  I asked him what the BPO came in at and he said the $260,000 range, so we relisted at $254,900.  Tick tock tick tock from January 2011 to October 2011, small progressive price drops and then down to $199,000.  We finally got an offer in October, at just about the same price as the first one.  It just closed.  So in each case relisting at the higher amount did NOTHING but waste the homeowner’s time, banks time, list agents time, and above all drain the homeowners more financially.

Raising the list price does nothing but appease the bank, which you MAY need to do in some circumstances, but overall it’s a waste of time.

Your favorite short sale approval gal!

Tags: , , , , , , , , , ,

Leave a Comment