If you are in the market for a new home, you can be taken advantage of yet again by banks. What, when, how, why, you may ask?

First let’s define a short sale. Many individuals bought homes at the height of the market and now need to sell for a variety of personal reasons.  However, due to a precipitous drop in home values ranging from 10%-50%, the home cannot be sold for enough to cover the mortgage amount due.  This results in the bank taking control of the real estate transaction and negotiating the price with a prospective buyer of the short sale.

What banks are doing is they are now instructing their asset managers and listing agents to price a short sale ridiculously low, or at least well below what most people would perceive as market value. The banks then post the listing on the Multiple Listing Service data base of all homes for sale in the particular state.

Real estate consumers will see the photos of the home photo-shopped to perfection, love the home and the idea of living the American dream, go out and take a look at the home, and can’t believe their eyes……..and price!  They will  then make an offer significantly below the list price because that is just what you do when you buy real estate, right?  Well, let’s drill down a bit more.

What is price and who determines the price of a home? What determines the price of a home?  Price, in economic terms, is known as whatever a buyer is willing to pay in the marketplace that currently exists and always within the framework of supply and demand in the national and local economy or in the neighborhood where the home is located.

Who determines the LIST price of a short sale, also known as asking price?  The list price is determined by 3 different Brokers and is also known as a Brokers Price Opinion. Often times, as many as 3 individual real estate brokers will investigate factors such as comparable sales, location, condition of the house, and then separately determine the price point at which they feel demand will almost assuredly be brisk enough and the banks will most assuredly get the home sold for the most money possible in the shortest time frame.

Contrary to possible myths that exist about home sales, and due to the unchangeable and natural law of supply and demand, the demand for lower priced homes can be very brisk in certain locations or neighborhoods. That is just a fact, a law. More people can afford lower priced homes and far fewer can afford higher priced homes.

Take, for example, what is known in the real estate world as a “cream-puff”, a home that is staged and photo-shopped to perfection and listed as a short sale on one of the online real estate websites.  Remember, the law of supply and demand translates into the fact that there are many more home consumers who qualify for homes listed within a lower price-range than exist in a higher price-range.  Subsequently, all of these qualified buyers will see the same house, see its ridiculously low price, can’t believe their eyes, and also want to own that very same house. Remember, if it’s too good to be true, it probably is.

Now there is a bidding war going on with 4 or 5 or more parties who want, love, have to have the house.  And, sometimes there isn’t a bidding war going on; the banks just instruct their asset managers and realtors to SAY there are multiple offers on the table. The buyer(s) is/are asked for their “highest and best” offer so the banks can squeeze as much money as possible out of the buyer(s). This very likely can result in a situation where the buyer(s) inevitably end(s) end up paying MORE than anticipated for the house they fell in love with. What is this love affair with homes all about? Let’s take a look.

Studies show that the fear of loss is MUCH stronger than the desire for gain and can easily cause people to make irrational choices. Marketing science knows all about this. This phenomenon about human behavior in making purchases makes it easy for banks to drive up the price of short sales. Homes are bought on emotion and then justified with logic. That is a fact.  The emotional draw the house has for the buyer cannot be underestimated. In addition, you may already be aware of the fact that you always want something more when you think you’re going to lose it. Banks play these factors up to the hilt.  So you can end up paying the same or, in some cases, even MORE for a short sale than for a conventional straight sale!

My suggestion is to be aware, keep a level head, and know in advance the price you are willing to pay.  Don’t forget to look at homes that are not short sales and to work with a trusted REALTOR who is working for YOU as a BUYER’S AGENT and to get and sign a Buyer’s Agent contract to work with you as the voice of reason and keep you on track with the purchase of your most important asset, your home.

1. Date

2. Condominium Project Name

3. Address

4. Name of Primary Contact Person

5. Primary Contact Person

6. Primary Phone number

7. Type of Condo Project    Proposed  ____   Under Construction   ____    Existing  ____    Conversion _____

8. Total number of units ________   Total Number of Phases  _____   Number of Units in Phase  ________

Number of Units for Sale  ______   Number of Units Sold  _____   Number of Units Rented   ______

9. What is the total number of units with FHA insured Mortgages? ___________________

10. Does any single entity own more than 10% of the total units in the project?   Yes ________  No ________

11. How many owners are in arrears on association fees? (More than 30 days past due) ___________

12. How many units are Owner Occupied?  ____________

13. Are the homeowners in control of the Homeowners Association (HOA)? Yes________ No _______ Date of transfer?  _______________________

You may be thinking, “I have so much stuff!!  Where do I start?!?”   Well, mindset is an important consideration. The first thing to do is to step out of your “seller shoes” mentality and take an objective and critical look at the home from the eyes of a potential buyer who is looking for a bright, shiny, clean new environment to call home for the next several years.

Do the fixtures work properly or are they looking a bit tired and outdated?  Are the drawers and closets stuffed with papers and things you don’t really use or need?  Is there dust under things and in corners? Are the floors spotless and shiny?  Do you have collections that need to be sorted through and disposed of?  Are there odors or leaks?  What about the roof?  Furnace?  Water Heater?  Septic System?  Have you maintained all of these home systems?

Have you constructed rigs in places which you have gotten used to but that take away from aesthetic beauty of the house when seen from an objective buyer’s point of view?  Are the windows, light fixtures, tile and grout polished and shiny?

Make no mistake, cleaning, decluttering and preparing a home for sale is not a quick and easy job. In fact, it is a lot like moving and may give pause as to just how much “stuff” we as human beings accumulate throughout our lives and think we really need in order to be comfortable and happy!

It may require a year or two, or more, to go through everything in the house and either keep it or dispose of it, depending upon your living habits and whether or not you have accumulated a lot of stuff over the years.

But, after it has been done the whole house will smell, look and feel really beautiful!  And, you just may find that your mind is as free, clear and uncluttered as your house!
Cheryl Flynn is a licensed Real Estate Broker affiliated with Byron Realty Corp.  She specializes in Concord MA Real Estate, Sudbury MA Real Estate, Berlin,  Bolton,   Stow, Maynard, Hudson, Marlborough, Framingham, Southborough, Clinton, Lancaster, Sterling, Westford, Waltham, Wellesley, Andover and Dover MA Real Estate.