Short Sighted Real Estate Practice Will Ruin This Market
October 14th, 2008 categories: opinion
Our local MLS (the online housing directory) is a service provided to Realtors and home buyers to help them see what homes are for sale and what homes are NOT for sale. When a home is no longer “for sale” yet still has an active status in front of it, this service is no longer a service but a hastle since you homes are not accurate in their description.
This is exactly what is taking place in our current real estate market and what is causing much of the housing issues. Homes classified as SHORT SALES are homes that a seller is seeking to sell for less than they owe the mortgage holder. To do this, they many times need a contract first to convince the mortgage holder to accept less than it’s value. The problem is that many Realtors are recieving offers on properties that home owner agrees to, yet leaves the MLS status as ACTIVE in the computer. Under a traditional sale the home would be considered UNDER CONTRACT so that potential buyers do not waste their time viewing the home while it is not available.
For example; Jan and Will have the money to purchase a home and want to be in to one in a couple months. They begin their home search online but find that many of the homes are under a SHORT SALE status but still appear available. They speak with their Realtor and plan a trip to visit 5 homes on a Saturday. After viewing the homes the come back and decide that they want to purchase home #3 which is a short sale. They send in a contract and begin the waiting process. They understand that the bank will take some time to respond so they hold their breath. After a month of waiting they get a call from their Realtor who tells them that their home has been beat out by another offer that came in. They wonder what happened only to find out that the listing agent never stopped marketing the property for sale and now they have wasted a month and only have 1 month left to find a home.
This morning I was preparing to show around 8 homes to a client similar to Jan and Will who need a home soon. Before viewing the homes I called each of the agents and found that almost every one of the homes that were active actualy have a contract on them. The ones that do not have a contract, I found that the agents do not plan to change the status in the MLS to UNDER CONTRACT once an offer is accepted by the seller and awaiting the bank to agree to it.
The local mls board in the Northern Va area, MRIS, has sought to address this issue by adding the following policy; The status or any listing where a ratified contract is subject to a lender approval must be changed to CNTG/KO (contingenct/ kick out) or CNTG/NO KO (contingent/ no kick out), indicating a third-party approval contingency. These status changes remove the home from being ACTIVE in the MLS but still leave them under a status that allow buyers who want to compete with other offers available.
The delimna here is that there is a loop hole. This policy only removes homes from the market that are signed by the seller. If a seller does not sign a contract that is sent to them by a purchaser and they send it to the bank for review, they do not have to remove it from ACTIVE status in the MLS.
Why Will This Short Sighted Practice Ruin This Market?
Let me give you an example… I had a home for sale in Ashburn last month. It was at a great price but only had 2 bedrooms. There was a 3 bedroom home for sale in the same neighborhood that was ACTIVE as a short sale. The showings on my home were very few while this home was ACTIVE because it’s short sale price was so low (remember that the short sale price is not approved by the bank so they are usually low). I called the short sale agent to find out that the home was actually UNDER CONTRACT but that they were keeping it ACTIVE in the mls to get more leads and contracts.
Once I discovered this we confronted the Realtor, had them change the status, and we recieved a contract on our home within a week. Imagine how many legitimate buyers are in this market who would be willing to buy your home if they were not tied home looking at homes already under contract.
Finally, it is important that I point out that the 800 pound gorilla in the room that no one is wanting to take on is the bank. The banks are providing a lot of business to agents these day and no one wants to address the fact that their way of forcing business to be done is causing brokers to turn a blind eye to ethics and buyers best interests. My office has had large and small brokerage companies in the areas tell us that with the way business is being done at this time they are left with no other choice than to use the loop hole to their advantage.
This article is just the beginning of what is going on in the market… Therefore, if you are wondering what is causing the clogging of the system when it comes to your home selling or why it is taking you writing 8 contracts to get 1 through… this could likely be your issue.
; ?>/images/MatoChiclet.gif)
In NW Arizona we’re seeing short sale homes listed as regular resale homes at a seemingly great price…The banks are very slow to respond to offers and appear to be using the offers as an idea of what they can expect once the property is out of foreclosure. Interesting times….We’ll be glad when it over!