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Hi folks. Having success with Short Sales requires being in charge of the situation from the get go. Buyers and their agents MUST have realistic expectations about Short Sales or...........well just read this.
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48 Comments on Taking Control of the Short Sale Transaction.
I appreciated your article, but as a Buyer's Rep here in the La Jolla-UTC area of San Diego, where most of our Just say, "Home, James! ®" buyers are all-cash and where we have had short-sale-condos-galore typically taking 6-12 months to process through the banks, we counsel our investor clients NOT to expose any Initial Deposit funds until the BANK ACCEPTANCE. We are happy to provide photocopies of bank statements showing Proof of Funds, or to submit a photocopy of a check made out to Prudential California Realty so the Listing Agent has something to submit with our offer, but we have found no reason from the Buyer's side to have any funds exposed until the bank commits to the deal. Practices and purposes may differ in other areas? I appreciate reading others' comments.
ON THE BUYING SIDE:
I wrote an offer in February on a short sale where the listing agent said we should get an approval in a "few months". She said the process had already started, and that the bank countered the previous buyer but the buyer walked away. So she listed it at the price at which the bank countered. We wrote an offer at thAT price and kept our fingers crossed. The "few days" turned into a few MONTHS.As of July, no acceptance.
Still, my buyers were hopeful, even though we specified an expiration date for our offer. We did specify in our short sale addendum, however, that the initial deposit will be held uncashed until we receive a formal acceptance.
Tired of waiting and afraid to lose out on another opportunity, my buyers started looking again, and recently got accepted on an REO.Glad we didn't tie up their initial deposit check on the previous property.
ON THE LISTING SIDE:
On a property that I listed, we opened escrow on a short sale in December last year. By May, we still didn't get an acceptance. When we finally received the news that the second lien holder would not agree to the short sale, we cancelled the escrow. But that was 5 months of waiting and tying up the buyer's $$.
I have another listing, with one accepted (by the seller) offer, and a back-up offer since March. There are two loans with Bank of America. That is also taking a long time. And now, the HOA filed notices to foreclose on it. And still no approval.
What I'm seeing is that when there are two lenders, it's nearly an impossibility to get the short sale approved. I've advised another client that perhaps, rather than selling as a short sale and running into problems with getting apprvals from the lenders, that they pursue a lease-purchase option instead.
Here in california we have a "Short Sale Addendum" to the purchase contract which also has a box to check that the EM deposit will be held uncashed until confirmation "in writing" from the bank. The in writing never comes into play, but if you're the buyers agent, it is responsible to check that box.
Also on this addendum it has a box to check that the time periods do not begin until acceptance from the bank as well. I don't think this protects one agent over another, because if it wasn't in place there could be lawsuits which affect both agents.
What I do on my listings is open escrow and have the Buyer deposit EM making it non-refundable for 60-90 days (as long as I can get). That way we have some assurance that the Buyers aren't out putting multiple offers in and they're showing some committment. On the other hand the Buyer can bail after that 60-90 day non-refundable if they see no progress with the bank.
Why would I tie my Seller's up in a deal with a Buyer that wasn't willing to commit anything. I'm in the East Valley in AZ and get multiple offers on listings. I know 1/2 of them are tire kickers. I wait until I have a real Buyer that I can submit to the bank, whose agent knows I'll do my best to get the deal done, will keep them updated and keep their offer in 1st position. I don't blame Buyer's for not wanting to tie up EM for months on end but if they're serious about the purchase they better show me the money.
Great words...I'm all for setting the expectations up front - That way there's room for mis-understandings down the road.
Best,
Dan
I could not agree with you more. In a current short sale I am involved with, I had to do something very similar. The buyers wanted a 14 day window of acceptance. Dream on. We, sellers and myself, were not excited with the offer even though it was reasonable with these kind of terms. We let them know we would be glad to accept the offer if they would put realistic dates of acceptance. I think there are a lot of buyers that simply believe they are going to get something for nothing. When it comes to short sales, I would like to add to my sign: " Only the serious need apply".....Bryant, I love your verbage and look forward to taking one of your classes. Thanks....
After consulting with a friend who works in the loss mitigation office for a local lender, I've realized that unless my buyer has some "skin in the game" via a non-refundable EMD of at least 1% of the purchase price, their offer will not even be considered. According to my loss mitigation friend, any file coming in for their scrutiny/approval will promptly be placed on the floor if it doesn't have a "proof of escrow deposit" from a lawyer or a title company.
Just an FYI.
Connie Addison
Realtor/CDPE
RE/MAX Realty Group
Fort Myers, FL
Hi folks. Been a very busy day!! OK so if I were working with a buyer on a short sale I would not hesitate to have them place a deposit BUT I would certainly have time limitations in the contract and of course other contingencies to protect the deposit. As a listing agent I would expect the deposit to be protected however I still want one at time of contract.
My expectation is that every short sale I list will close. I have qualified the seller, qualified the listing and priced it where I know the lender will accept it. Why wouldn't it close? So now the only thing left is to qualify the buyer.
Other than the time involved a short sale transaction is the same as any other transaction. Negotiate the deal, place it pending and get it closed.
I think I feel another post coming on.
Bryant, this is one way to discourage buyers from making offers on a bunch of short sales hoping that one of them might work out.
Having buyers commit is crucial. Money up front is a good way to do that.
Bryant, great post! Just the idea of having a buyer disclosure to make sure the buyer (and buyer's agent) understand what to expect makes a lot of sense.
In my state, the buyer isn't required to deposit earnest money until the lender approves the short sale, and most buyer's agents advise their buyers not to deposit anythnig prior to approval. Short sales here almost always go for below market value. Buyers expect price concesions in exchange for the inconvenience of waiting an indefinite period of time for bank approval. Also, the buyer pool for short sales is also much smaller. As a listing agent, I specialize in short sales. However, as a buyer's agent, I recommed that my buyers avoid short sales whenever possible. The fact is, many buyers need a definite closing date.
If I had a short sale listing with a market value of $240-$250K, I would try to get as much as possible, but I also know that I could easily get $215K-$220K approved by most lenders. A lot also depends on how far away the foreclosure sale is. I'll be more flexible when three weeks away from the foreclosure sale than three months.
Bryant - Ahhhh, if it were only that easy. I haven't heard of a short sale going through in less than at least 4 months. I have heard other short sales, after 6 months, just getting cancelled due to no response from the sellers - and the buyers becoming impatient had found other homes. Also, how about how many times the agents are forced asked to reduce their commissions. Can you really ever have control over short sales?
Troy, One of my buyer's agents just wrote a deal for a buyer she was working with on a Short sale. She wrote the offer July 8th. It's closing next week!!!
The fastest approval I have had on one of my listings was 3 weeks. Most take several months. But it's all relative. I can get them under contract much quicker than a regular listing. So time from listing to closing is quicker than a regular listing. At least for me.
Bryant, who was the lender that approved so quickly?
David, It's Selene Financial. I had never heard of them before.
Before I post this i am going to take a stiff drink (coffee) and brace myself for the "boo's"
I believe that all short sales done by all REALTORS should have an addendum that shows the terms and conditions of their E&O insurancealong with information as to how a claim can be made.
Also the MLS should be held liable.
A short sale sholud only be allowed to be completed WITH AN ATTORNEY.
(Pause for the boo's)
You have in todays market, a real estate agent advertising a property for sale by someone
who is NOT the owner who can convey clear title.A real estate agent that will try to get a price that is lower than the amount owed,which is touted as a "bargain" for the buyer.
A real estate agent that will allow the alleged seller to sign and attast to a "loss deficiency"
that the lender could try to recover for years.
I am not an attorney,I am a broker owner.
Go back and read all the comments,read all the hidden agendae,read all the practicing of law involved in the short sale process;the disclosures not being presented!
Yes I list short sales But only upon the condition that the "seller" will retain legal counsel
to do the process after an offer is received PERIOD.
Perhaps a future ad ??
"Have you lost money using a real estate agent doing a short sale for you?"
call 1-800-for this legal group "You may be entitled to compensation"
The MLS needs to put proper disclosure on all "Short Sales" one of which should be
"You should consult with legal counsel as a short sale may have some financial dangers
that you need to be made aware of."
The real estate agent needs to disclose,"
I (We) are not an attorney and there are legal matters that have to be disclosed"
OR GO BACK TO THE SENTENCE-An adendum giving the E&O Insurance information.
For background info GOOGLE
"Short Sale Horror Stories"
"Should I stop paying my mtg"
Basilovecchio,
I appreciate your comment however it is loaded with incorrect information. Including this little diddy:
"You have in todays market, a real estate agent advertising a property for sale by someone
who is NOT the owner"
Last I checked my seller is the owner of the property. They have not been foreclosed on yet. Now I completely agree that we need to have disclosures out the ying yang and should definately check out E&O insurance to make sure we are covered.
A competant short agent can certainly know as much or more than an attorney when it comes to short sales. Although a smart agent will also suggest strongly their sellers speak with an attorney.
Short Sales are not for everyone. They do require a certain skill set. If you are not comfortable doing them then don't. It's not worth the risk if they are not your area of expertise.
Thanks for stopping by.
Thank you for clarifying these aspects of a short sale! you have some great posts!
Bryant, I want to be you when I grow up.
Great post Brian. We have to be willing to offer a discount to reward the Buyer's time. Otherwise...they may not be your Buyer anymore
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