The government is pushing the lenders to approve short sales to help out home sellers and ease the problems of the banks. 

A quick definition of a short sale is selling the property for less then is owed on the property.

These are good thoughts, but until the lenders allow short sales to be approved and sold to at least within 60 days this practice is going to hurt the overall market values of a neighborhood and a city.  Thus causing more people to become upside down in their mortgages.

This is my own opinion based on my observances of the Greeley and Evans Colorado markets.  I do what's called a broker price opinion.  This is an opinion of values generally ordered by a lender when either thinking of foreclosing, motifying a loan or approving a short sale.  I do about 360 of these valuations a year.

This is what I've seen of this short sale fiasco.  Short sales are sold for quite a bit less then even a regular foreclosure or a bank owned sale.  They generally are even in better condition then a foreclosure.  

 For example yesterday I went and visited a home that is in the short sale process.  It is currently under contract.  The list price is $189,000.  It is a nice two story home with a finished basement in Country Club West in Greeley Colorado.  I don't know what price the property is under contract for.  But $189,000 according to my valuation is about $36,000 less then it would sell as a bank owned home.  The original list price on this home was $254,000.  Which actually is a fairly good price for a regular resale home.  But since it was a short sale many buyers don't want take the risk of making an offer only to find 3 months down the road the lender still hasn't approved the sale.  So then every two weeks the listing realtor has lowered the price by about $10,000.  This is the short sale strategy.  Lower the price until you get an offer. 

If this home is actually sold for $189,000 this will help lower the values for other homes in this area that are similar.  This home was in good shape.  Move in ready.  So if a few short sales are approved and sold at this lower value the appraisers are going to start appraising all properties lower and the values fall. 

Buyers aren't too afraid to buy foreclosure homes now as they know that it will be able to be sold in as little as 30 days.    I've heard recently the average time to sell a short sale is about 6 months.  What buyer that is planning to live in the house reallly wants to wait 6 months.  And many times they wait 4 months and the bank doesn't approve the sales price. 

Sure the lenders save some money approving a short sale in the short run.  Approving a sale of 80% of market value is probably less then it costs a lender to foreclosue.  Plus there isn't as much of a risk of an angry owner damaging a property.  But neighborhood values are figured from final sales prices.  If you have 10 homes in a neighborhood currently valued at about $100,000 and 5 are sold as short sales for $80,000 and 5 are sold at $100,000 then the average overall values slip to $90,000.  Then say there are 10 more homes in the neighborhood that are suddenly under water with their mortgages and the banks have to foreclose they've found that they can only get $90,000 out of them.  So can you kind of see that short sales don't help anything? 

Appraisers are supposed to make adjustments for short sales and foreclosures.  They aren't supposed to really compare them to regular resales.  But eventually it makes an effect even then. 

This is just my opinion based on my observations of the Greeley Colorado market.  I could be wrong.  And I hope I'm wrong.  This short sale fad sounds great for Realtors to make money and say they are helping sellers.  It does help sellers.  The current sellers.  That is sometimes up for debate as well.  But in the end hurts other sellers and property values. 

This is one of the reasons I do not list short sale properties.  I have others, but I won't share them at this time. 

If you have Greeley Colorado and Weld County real estate questions please call me at 970-302-1233.  Or you can send me an e-mail by using the following form.

Or visit my Greeley Colorado real estate market website at www.greeley-weldcountyhomesforsale.com.

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