OK, I love listings.   Always have.   I rarely work with buyers- only with personal referrals, friends, relatives or repeat customers.   All of my buyer leads go to my team.   I also love short sale listings.    I have been presented with hundreds of short sale offers, so I know the typical pitfalls of poorly written short sale contracts and how to avoid them.

This week I worked the rare buyer.   My cousin, “Sue”, has never bought a home, and at age 23, is now stepping out in the world.  Delighted and excited, she was looking at townhomes in Destin Florida in the $120,000 price range.   We found a complex she really liked, close to her work and fairly new.   There were five listings to show her.   All short sales.

First of all, it’s a big concept to even “buy” a home to a first-time homebuyer.   But to add that the property is a “short sale” can cause instant confusion.   I explained to my cousin Sue simply,

“Since the downturn in the economy, many people bought homes where the values have declined dramatically.   Many homeowners have also lost their jobs and income, and cannot afford to make their mortgage payments and keep their properties.   For example, in this complex, most owners paid around $200,000 for their townhome, and have a $180,000 mortgage.   But now the units are only worth $120,000.   If they have to sell, they ask their lender to forgive the $60,000 deficit due to their economic hardship.   That is a short sale.   The lender will also want to review the seller’s financial situation to ensure they truly do have a hardship, and order an appraisal to make sure the offer is fairly close to market value. That process can take three months or more.   And it is not guaranteed.   So you might be waiting that long and find out you do not get the property.”

Sue looks a bit disappointed after I explained all this to her.   I added,  “Unfortunately, most of our market on the Emerald Coast of Florida is short sales, so we have to deal with this if you want a home”.

Of the five properties in her price range, two stated on their MLS printouts:   “We submit all offers to the short sale lender”.   I advised Sue if she wanted one of those townhomes, she would be, in effect, participating in an “auction” and was rolling the dice, as she could wait for three months, then any offer could be chosen, and not hers.   I told her I recommended against her looking at those units.   She readily agreed.

Of the other three units, she found one that was absolutely gorgeous.   (Makes me want to paint my house NOW).   It was perfect for her, all custom tile, molding, paint, fixtures and like new!   She decided she wanted to write an offer.   Here is what I did:

1.  I called the listing agent to find out how much time she would need for lender approval.   Our standard Florida Association of Realtors short sale addendum has a 45 day time frame.   I find this is usually too short.   I also don’t abide by the philosophy that a short approval deadline will make the lenders “speed up” their process, that is completely false.

2. I asked the listing agent who her preferred title company was .   Most short sale lenders will pay title insurance, so we would allow the listing agent and seller to use their preferred title company.

3. By making this phone call, I also gleaned that the sellers were prepared to make their short sale package quickly, which is helpful.   I also established a “team” approach with the listing agent, not adversarial, which is good business practice.

4. We wrote the offer asking for closing costs I KNOW the short sale lenders typically pay, title insurance, our state conveyance tax (called documentary stamps on the deed in Florida) and Realtor commission.

5.  We used the “as is” with right to inspect contingency, that’s what most short sale lenders want. 

6. Added that the buyer had the right to approve and review the association financial documents within five business days.   I did that because Fannie Mae is not underwriting loans in my market with more than 15% delinquency in HOA dues.   I did not have time to investigate prior to writing, as Sue was in a big rush. 

7. Instead of full price, we wrote the offer a little lower , but higher than the foreclosure that had sold recently.   Sue did not want to go less than that, as she really wants the unit.  

8. Sue was going to put $1000 in earnest money (escrow) now, because she is serious.

9. Finally, we stipulated that the seller would  “only submit this contract to the short sale lender for consideration”.   We don’t want to be in an auction.

The reason I prepared the contract like I did, was that I know what works.   I know what will waste time, get rejected, and possibly lose the home of my buyer’s dreams.

Now we wait.

It's Wendy!

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Destin FL Real Estate

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