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Disclaimer: Due to a different status code in our MLS for short sales, some of the short sale listings appear to be ‘Active’ but actually have accepted offers but are still waiting for bank approval. Contact us for more info.
A word on short sales in Mammoth Lakes. Early on (2008) when no one knew how to deal with them and banks were only helping those in true need (as opposed to those who own 2nd homes up here), they were not happening. Only in rare cases where the borrower had true hardship (loss of job, death in family, etc) and where the property was their primary residence were these approved. If it was a 2nd home and the bank saw you had other assets you could sell off or cash limits on credit cards to tap into, they would deny the short sale.
Then short sales picked up steam in 2009 and were a way to prevent foreclosure. Banks like Wells Fargo were quick on the ball to approve them (if they fit their formulas) and get them closed. Others, like Countrywide/BofA and WaMu, took forever to review/evaluate.
Then in late 2009 we saw more banks opt to foreclose than deal with a short sale. Maybe it is not as expensive as we thought for banks to foreclose instead of approve a short sale. One recent short sale had three all-cash offers at what we considered was market value, but the bank went ahead and foreclosed on the borrowers and will probably list the property below the price of the three offers.
Then in 2010 we saw the reverse. More and more short sales were getting approved. But often times they were approved only to see that the buyer had lost patience and moved on to another property. So the listing agent scrambled to find another buyer and they were able to at the same price, then the short sales often worked.
In late 2010 we saw banks (esp. BofA) ask sellers to pitch in to the short sale. Sometimes they are asking for large contributions from sellers and steep reductions in commissions. Sellers are countering back at lower contributions and are often getting them accepted. However, the bank’s approval letter have language such as “…may pursue a deficiency judgment for the difference in the payment received and the total balance due.” It is advised to speak with a real estate attorney and a tax professional about any short sale.
In 2011, we saw banks stop asking for sellers to pitch in to the short sale. More short sales were approved, even if it seemed like the borrow did not have ‘hardship.’ Banks finally streamlined their processes and became much more efficient. They were able to respond to offers much quicker than in the past and some even reach out to contact the agent to check in rather than the other way around…amazing.
In 2014, short sale inventory dropped way off, but there was always a few short sales going on. Savvy short sale investors who knew how to work the system started gobbling up the remaining inventory. We also saw the first short sale denial by a bank in many years, hearkening back to the days when they would deny it based on lack of hardship.
In general, Short sale list prices are attractive, but it is not even a real list price. It is a price that may entice an offer, but then the borrower has to submit a 50+ page short sale application to the lender. And most often, it is not just one lender. Many people took out a ‘first’ and a ‘second’ loan to purchase the property and have to get agreement from both to reduce the loan amount due to them. In some cases, the 1st will pay off the 2nd at 10 cents on the dollar or $3,000, whichever is less.