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Preparing Buyers for the Short Sale Wait

By
Real Estate Agent with Karen Parsons-Fiddler, Broker 949-510-2395 BRE# 01494165

Short Sales are so frustrating for everyone, but none so much as for the buyers.

When a home buyer writes an offer on the home, they often spend a sleepless night wondering, hoping, praying...."Will we get this home"? Normally the wait time is about 1-2 days and then they can relax and start planning for the move. Not with Short Sales......the "wondering, hoping, praying" can take months. How can we as agents make this any easier for our buyers?

I'm not sure I know!

The first thing is to know exactly where we stand with the listing agent and the Short Sale Negotiator. Are we the only accepted offer sent to the bank? Are we one of many? Do we have an open escrow? We need to be in touch with the listing agent to be aware of our standing. Based on the listing agent's approach, we can prepare our buyers.

If we are the only accepted offer, and there is an open escrow with a deposit.....we can be very comfortable that the bank is going to act on our offer and not see multiple offers. This is how I proceed with my listings and what I push for with my buyers. To me this just makes sense. The bank does not own the home, the seller does and it's up to the seller to find the best offer and then send a package to the bank for approval. But this is not the way many agents work. This approach provides some level of confidence for both buyers and sellers. The buyers know that no one is going to outbid them at the last minute, and the seller knows the buyer is committed and they can put the home in back-up and make some decisions.

A variation of this is when the listing agent only sends our offer to the bank and puts all others in back-up, but without an open escrow or deposit. I have a couple of Short Sales in this situation. The disadvantage is my buyers often ask if I BELIEVE the listing agent.....that we are the only offer they are working. It's tough, I am honest and find most agents are honest too.....but it's often hard to reassure the buyer who has waited several months. Over time, I do get emails asking what if the agent is "lying" to us.

In this situation we have to do more hounding of the listing agent for information and more reassuring to the buyer. It creates more anxiety! In preparing the buyer for this type of situation, we have to be honest and clear. The process takes a long time. The good news is that we are most likely the first, or close to first offer they have. That's why we are lucky enough to be the ONE accepted offer....but since the process is just beginning, we will also be in for a long wait. It can easily be 2+ months.

Helping our buyers understand what happens during this time is critical. The misconception is that a completed file sits on an overworked and under-interested bank representative who has no urgency to act on the case. Overworked? Probably....but certainly motivated to make decisions.

The Short Sale process is time intensive and it seems all the steps take 1-2 weeks. At least that's what we hear when we call to get status. Other posts are available to discuss these steps in detail....but the short is:

1) Short Sale package assembled and submitted

2) File is assigned to a lender negotiator

3) Lender negotiator orders the internal appraisal

4) Appraisal received and lender negotiator approves the offer

5) Package goes to higher levels for approval

6) If there is PMI (Private Mortgage Insurance), file goes to PMI investor to approve

7) If there is a second loan on the property, file goes to the second to approve

If one assumes 1-2 weeks for each step? One can see how this can drag on. As agents, we need to explain this in detail....and over-and-over again! Often!! Our buyers need to hear from us that we are still thinking about them and checking in. I think the black hole of waiting can be brightened by constant communication.

Set the right expectations....and then check in and let our buyers know we are monitoring the process and are still there for them.

Comments (4)

Michael Wayne Jackson
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato

You are right on the money Karen. Comminication does need to fill the black hole of waiting.

Jun 18, 2009 04:31 AM
Vicki Pedersen
Pedersen Real Estate - Riverside, CA
Providing Exceptional Real Estate Service

Good post, Karen.  Preparing and educating our buyers is so crucial - but it is just a difficult thing to have to go through - the waiting and not really knowing what is happening with their offer.  We had a short sale listing and the bank had a terrific offer - but they just foreclosed on the house last week anyway.  Go figure?!

Jun 18, 2009 11:53 AM
Thomas McGiveron
BangThePhones.com - Sayville, NY
Thomas McGiveron Lic. R.E. Broker Associate

Karen -

I basically tell buyers to work with me if they are at all interested in considering short sales.

We find them together - and I do my simple, yet effective homework.

One call to the agent and I can sum up a listing in about 6 minutes.

I do not give out all the information you did in your blog - but it's spot on.

If an agent can't tell me exactly how offers are being handled - I know it's a nightmare.

If an agent can't tell me what bank(s) hold a mortgage - nightmare.

If a third party negotiator - other than a QUALIFIED ATTORNEY that I know or the listing agent has done business with in the past - nightmare.  These negotiators can be a total disaster. I avoid them at all costs. 

 

Jun 20, 2009 09:28 AM
Janice Grounds
Bosshardt Realty Services, Inc - Gainesville, FL

First of all your suggestions are spot on but for me personally, I will no longer 'do' Short Sales but refer them out.  This is after several deals (12) in the past year that have been either not accepted after months of waiting, or created extreme stress to my Buyers. 

I have many examples of over 75 emails to negotiators and their managers, resubmitting the entire package via fax, email, certified mail, and Fed Ex and then to be told 'they never received it'. 

I have phoned and had 20 minute discussions moving up the 'food chain' of management - always geeting different answers. 

I have had months of waiting to be told that the lender wants money from the seller - who has no money - demanding a lower Brokers' commission rate, and a higher price from the buyer - then told that I had 3 days to get agreement on all these items.  When I said that NONE of these conditions would work, the neogitator had the gall to call my seller and leave a message about what a terrible Realtor I was - since my Seller knew full well the months of hard work I had put in, she forwarded this to me.

This led me to the conclusion that it was not worth my reputation to contiue 'working' short sales on the Buying side but refer them out.  The pay off of money is NOT worth the loss of confidence of Buyer, the loss of enthusiam and excitement for their first home, the constant calling or emailing with no response or answers.  I have submitted offers on homes where we were told they were '5 minutes' from getting an answer because the last deal was canceled right before closing due to financing.  This is never true in my city.  The banks start back at square one with each new offer....forget it.

Even for the deals that have closed after 6 months of grueling work, I have never skated over any of the ethical lines to 'make' the deal.  In one instance, I was asked by another agent (the listing agent) to make a side deal with my Buyer as you describe but did not.  We just found another home and she closed in 30 days.

I do know several agents in my area that are referring out short sales. 

 

 

Feb 21, 2010 01:21 AM