Is That Sacramento Short Sale Really a Short Sale?

Home buyers in Sacramento need to be very careful when they attempt to buy a Sacramento short sale. Buyers need to differentiate between the short sales that will close and the short sales that sport a sign in the yard but are not really a short sale. Not every short sale that is offered for sale as a short sale is actually a short sale. That’s been a problem since Day 1 back in 2005, and it continues to plague us even now.

Because short sales have become such a hot commodity, many real estate agents have taken a few hours training and decided that they are now “short-sale certified,” which in their minds makes them a short sale expert, even if they have never closed a short sale. Not every real estate agent is faring well in this Sacramento seller’s market, especially if they don’t have any listings. Listings tend to rule. So, some agents are jumping on the short sale bandwagon and throwing homes on the market in desperation without any knowledge of whether these homes are likely to be approved as a short sale. They figure they took a class, so the transaction will close, and by the time you, the unsuspecting home buyer finds this out, you will have waited 3 to 6 months for nothing.

There are also a group of agents who used to sell REOs for the banks who have switched over to cold-calling sellers from the lists the banks provide to them. Banks give the agents a list of homeowners who are delinquent and underwater. Then they turn the agents loose on these unsuspecting homeowners to try to hammer these people into trying to do a short sale. If an agent calls a homeowner out of the blue and pushes that homeowner to list with her as a short sale, that homeowner might want to explore other options and find her own Sacramento short sale agent. She might not want to choose an agent working with the bank, or an agent who has no experience.

You may ask: how can you tell if a short sale will close? There are many ways; here, I will give you an actual, “real world” example. A few days ago a woman called me to ask about a short sale in the Pocket. She wanted to buy it. I pulled up the listing in MLS and then ran the listing agent’s ID number for the past 6 months to see what kind of activity and closings the listing agent has done. Turns out this particular Sacramento short sale agent had closed one short sale in that period of time. That was a red flag.

The next thing I did was look at the listing itself. The photos were horrible and very dark. The property was obviously vacant. That makes it unlikely that the short sale would be a HAFA because there would be no incentive to the sellers. I looked at when the present owners bought the property. They had refinanced it since then and pulled out cash. That’s a bad sign for a short sale. Not only that, but there were two loans, and the second loan was National City.

That means that PNC is the lender because PNC took over National City loans. It’s a hard-money second, and PNC knows that if the home goes to foreclosure, it can personally pursue the seller for the full amount of its unpaid balance. There is no incentive for PNC to grant this short sale. Now, PNC might elect to do it if the seller paid down part of its loan, but since the sellers have already abandoned the property, it is very unlikely that they would be willing to pay down the loan balance just to do a short sale. When they moved out, the sentiment was probably that it was OK if the home went to foreclosure.

I’ve worked with PNC a lot, and I know what it demands when there is a hard-money second. Since this is not a HAFA, PNC is also very unlikely to take 6% of the unpaid balance, which is probably what the first would offer it.

In short, this short sale is not a short sale. It’s not going to close. I would bet my 39-year career on it going to foreclosure. There are just too many things against it.

You can ask your agent to look up this kind of information for you before you put in an offer on a short sale. Remember, your first red flag is whether the listing agent has sold very many short sales.