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Can You Buy A Short Sale

Of course you can!

The big question is should you? Do you have the temperament to buy a Short Sale home?

Short Sales, where you buy your home for less than what the seller owes on the property are probably the best buys in real estate since Peter Minuet bought that island from the Indians.

Short Sales are normally even better buys than REO's, homes the bank owns after foreclosing on them. REO's have almost always been great buys and most still are.

Short Sales unlike many REO's are generally well keep and occupied like most seller occupied homes. You can see that the systems work the heat or AC is on or can be turned on at the thermostat to be easily checked.

Incredible values, better condition, easily inspected there is only one problem with buying a Short Sale home! Short Sale Sellers have no right to "short" the bank, most can't deliver title without the bank's permission!

The contract you execute with any seller is of no value unless the seller is prepared to pay off his bank or can reach an agreement acceptable to both the seller and the bank.

Don't make the mistake so many consumers and their agents make! Your contract is enforceable! As a buyer you might lose your deposit or worse, you might face a specific performance suit, possibly even a suit for damages!

If you are an Active Rain member see: http://activerain.com/blogsview/1189663/short-sales-who-gets-the-earnest-money-when-buyers-walk- in in which Ken Lawson, JD from Idaho believes their can be substantial damages due from a defaulting buyer to the seller! I don't necessary agree with Ken on this subject, but I highly respect him! State laws differ. The point is anyone thinking a buyer can just walk away form a Short Sale purchase agreement is wrong. Anyone advising you that you can just walk away from a contract should not be representing you! It doesn't matter weather Ken or I is right. if you default on a purchase contract and you're sued your attorney fees alone will spoil your day!

You're a good guy, why would you default? Time! Uncertainty! Frustration!

From a consumer's point of view there is nothing very different buying a Short Sale than any other house. The seller and his REALTOR® have control after the offer is made, you and your REALTOR® do nothing unusual except wait and wait and wait and wait and wait... As the seller through his REALTOR® or a specialize mediator deal with the seller's bank. The reasons for the delays are irrelevant here, they exist!

The question is are you willing to wait? Are you willing to possibly loose the house? Do you have the time?

If you need or want a home there are only two excuses for not availing yourself of the great opportunities offered by Short Sales, you don't have the time or the temperament.

Watch for our up coming blog "How To Buy A Short Sale"

Bill

William J Archambault Jr

The Real Estate Investment Institute

wja@reii.org 832-259-7078 or 702-516-1569

Back Cover One House At A Time

From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.

©William J Archambault Jr ©The Real Estate Investment Institute ©REII

Posted by William J Archambault Jr on 08/18/2009 12:48 PM

Comments (42)

short sale, time, uncertainty frustration, opportunity, savings, reo, reii, william j archambault jr, the real estate investment institute

Originally posted at: The Real Estate Sage at The Real Estate Investment Institute - REII: Can You Buy A Short Sale

Post is included in group: The Ninety-ninth Percentile
Post is included in group: Silent Majority
Post is included in group: Short Sales and Forclosures ONLY
Post is included in group: Short Sale REALTORS®
Post is included in group: Foreclosures & Short Sales

42 Comments on Can You Buy A Short Sale

AUG

William - I really like that you wrote this from a buyer's perspective. It has been my experience that if the listing agent knows what they are doing, the process goes a lot smoother.

Pam,

Your experience speaks well of you!

My concern today is the Buyer and the Buyer's agent's counseling. While the listing agent does the bulk of extra work the Buyer's agent needs to prepare the buyer and hold their hand. Not everyone has the time or patience to buy a Short Sale.

Bill

AUG

Bill, Right on brother Bill!!! Short sales are good deals and most close if handled properly. The key ingredient is patience.

Thanks Bryant!

My point exactly! "The key ingredient is patience." If you don't have the time or required patience it requires you're not going to enjoy the process required to profit from a short sale.

Bill

Bill, Short Sales are great deals for all the reasons you mentioned, but everything has to start with you first question

"Do you have the temperament to buy a Short Sale home?"

That question should not be taken lightly. If you are not the patient type, a Short Sale will have you bouncing off the walls :) :)

AUG

George,

"Do you have the temperament to buy a Short Sale home?"

I've been asking myself that question most of my life. When I got into lending it was never vocalized, but we always ask ourselves does the applicant have the temperament to pay back the loan? On to real estate the conscious agent always ask the client the same thing in one way or another!

Not everyone has the temperament for all opportunities. That explains condominiums, not everyone has the temperament or ability to maintain a home.

Much of our current problem in real estate involve people who simply don't have the temperament for ownership. This is excoriated by agents and LO's that don't have the temperament for fiduciary responsibility!

In deed: "That question should not be taken lightly. If you are not the patient type, a Short Sale will have you bouncing off the walls :) :)"

Bill

AUG

The big question is should you? Do you have the temperament to buy a Short Sale home? I hardly have the temperament to do the loans for my buyers Bill. I can't imagine just sitting there waiting.

David,

There's nothing wrong with that!

I want consumers, agents and LO's to think about it, before they get involved!

Bill

I find that even after explaining the whole slow process and the client says he understands fully, he gets frustrated and mad at some point while waiting. If you can handle that, go for it. I have had good success getting them sold, but not quickly! Thank you for pointing this out, very timely!

David C,

Welcome to the people business!

We're all like children, we hear what we want to hear. If you explain it's going to take 2 to 6 weeks and most likely at least 5 weeks. Then you ask can you wait 6 weeks and they agree. at 15 days you're late, you're a liar! It's universal, it doesn't even matter what "it" is.

Bill - You are right, buying a short sale is serious business. If: you really want the house, you make a decent offer, you are not thrown into an "auction", the seller is qualified, and the listing agent knows what he is doing, go for it!

Amen! Wendy.

I'm working of another post "How To Buy A Short Sale" But, I've deleted two drafts already. More than any other situation the "short sale" listing agent has to know his business and care about his client! It's allot easier for the buyer's agent if he and his client have the right temperament. Short sale aren't for every consumer or agent.

I should have ask Bryant, but how are your students doing?

Bill

If you don't know Wendy and Bryant have a class on short sales, they are nearly done but I think it's available on CD.

Bill short sales are still great buys you just need to be patient and be willing to jump through some hoops with everyone involved. We have closed 7 in the past 12 months and every buyer/seller were happy with the transaction. Great post!

Tim,

Great buys? "probably the best buys in real estate since Peter Minuet bought that island from the Indians."

I've closed a few hundred over the last 40 years, with discounts from $10.00 to $8,000,000.00. My first were as the banker taking the loss. Then I was a seller bring money to the table. As a REALTOR, as the buyers lender. As the Buyer's instructor/mentor and as the REALTOR'S consultant/instructor/mentor.

The only thing new about short sales is the overwhelming volume and the name, we use to call it "settling with the bank."

Keep up the good work 7 in the past 12 months is impressive.

Bill

Bill - I have the temperament, just not the desire. My time is invested better elsewhere, at least at this point. But they (Short Sales) sure can be a good investment.

Jason,

If you've got the temperament then you have no excuse not to get that woman a bigger house. From the buyers and his lenders point there is no more time in hours, it's just that their time is spread out over months instead of weeks.

Kiss the nice! Have a good week end. :>)

Bill

Hey Bill: Selling short sales is not for the faint hearted.

You are so right. Short sales are often great deals and in better condition. The biggest thing they require from the buyer is patience.

It does not seem to matter if the listing agent knows what they are doing or not -- its the banks that are pretty messed up- -at least that is the experience in Arizona.

AUG

Sandy,

Sellers facing short sales can't afford to be faint hearted! It's the difference between doing something to save yourself and drowning.

Bill

Christine,

And a good agent to hold your hand.

Bill

Bob & Carolin,

I disagree. The competence of the listing agent has never been more crucial than it is to a short sale. The banks are going to take their time, but the ultimate success depends upon a fair offer from the buyer and then the skill of the listing agent. Every mistake, every omission can change interminable into eternity!

Bill

Bill,

I too have found that the listing agent makes ALL the difference in how smooth a Short Sale is. The buyers and their agents on the Shorts I list will vouch for that!

You're on target that the patience factor isn't for everyone but that there are wonderful deals for those who are prepared.

Irene,

Thank you.

Watch for our up coming blog "How To Buy A Short Sale" That is if I can finally get the offense parts down to a minimum. We're going to talk to buyers and their agents about listing agents.

Bill

I can't speak for other states but Oklahoma has much more protection for buyers than sellers. If a seller wants the earnest money and the buyer balks, it can potentially hold up a sale, and in shorts sales that can be death. Also, the best buys are the ones that need fixing. We often get and extra 25% off. You just need the ability to do the work.

Joe,

"If a seller wants the earnest money and the buyer balks, it can potentially hold up a sale, and in shorts sales that can be death." That could be said of any real estate sale! The only thing I can think is if you meant the seller excepted to keep the deposit in lue of it going to the bank, in witch case the Lister didn't prepare them properly.

"Fixers" are often very good buys, but time, money and ability are always the big question.

Bill

People do not seem to understand that the contract is between the buyer and the seller, NOT THE BANK. The bank's approval is just a contingency as is the inspection, financing, rezoning, whatever. But when the buyer and seller both sign, there is an executed contract and both better be ready to perform. If you want some limit put on time for the bank to give its okay, just like its okay for a mortgage approval, I would think it had better be in the agreement somewhere. You may want to check with your state association's legal hotline for ways to protect you and your buyers.

I prefer the REO's, at least you are working with a buyer and a seller (the bank) only.

A survey was done recently of all Real Estate transaction where by the top ten lenders in the country were involved. REO's actually came out on top in regarding to the discount to fair market value. They were actually ahead of short sales by close to 10%.

Not all short sales drag out for months on end. It has been my experience that certain lenders process short sales very quickly and you can get to a closing within 2 -3 months provided the listing agent knows what he/she is doing.

Also, certain loan products ensure a much smoother process than others.

It also helps if the buyer's agent is familiar with those details so he/she can councel the client accordingly. Not all lenders will allow seller contributions, for example. Not all lenders will pay a 6% commission and so forth.

While dealing with short sales can be very frustrating, it has been my experience that generally the buyer can get a better deal (price and condition) than on a bank owned, and sometimes even close faster.

John,

"I prefer the REO's" too!

But, that's not my point, here.

Bill

Mr Gassett,

I don't dout you, but I do the survey. Could it be the reference to "discount to fair market value."

There is allot of redefining FMV by ignoring distress sales, and there is no seller more in distress than the Short seller.

Seriously Bill, post a link it could open allot of eyes.

Bill

Susanne,

When the consumer excepts 2 to 3 weeks and normarly get 3 to 4 weeks to close 2 to 3 months borders on entenrity!

"While dealing with short sales can be very frustrating, it has been my experience that generally the buyer can get a better deal (price and condition) than on a bank owned..." [agreed!] "...and sometimes even close faster." Strange things do happen once in a bule moon!

Bill

William, great post. We have developed an addendum that allows our buyers to void a contract at will. This might seem somewhat one sided for the buyer but a short sale scenario is generally one sided for the bank and if we are representing our client we cannot in good faith let our buyers flounder indefinitely.

Damon,

Thank You!

Your addendum is harsh, but you're representing the buyer! A sharp listing agent might not let this in, but today we're concerned about the buyers!

Bill

With all the public hoopla about short sales and foreclosures, so many buyers think they're going to cash in. Some might, but the average buyer - especially first-time buyer - isn;t going to be prepared for these issues. Try as you might to explain the potential wait - some will just not be discouraged. I don't care what anybody says about the listing agent's skill, experience, etc. I believe every lender and asset management company handles things a little differently and there's no predicting how it will go. Any first time buyer expecting the $8,000 tax credit is nuts to think it will work now on a short sale.

Pat,

No one is arguing with you.

Bill

AUG

BILL- Too often listing agents "take a stab" at it- then muddle their way in the quagmire they have created but ineffectively preparing the package. Is this true for all-No! Not all. But nothing beats experience- are short sales a good deal? Absolutely- IF time is not a problem. You are so right- It is better to have patience than to become one!

"It is better to have patience than to become one!"

Well put Allison!

Bill

AUG

I think you can walk away from a contract on a short sale up to the point where the bank accepts your offer. At that point if you walk, you should pay!

Todd Clark - www.LivingBeaverton.com

Todd,

You are absolutely right and wrong!

The answer lies in what's in the contract!

If you wrote a provision into the offer allowing the buyer to cancel before the third party had approved the sale and the seller accepted it, they could walk. With out such a provision or an expired time for approval or closing you'd be breaking the contract. Barring law to the contrary, you can contract for any thing, on any terms.

"This is my stand. I shall not waiver!" Cavitt Robert.

Bill

Bill... late to the party on this one. I saw this last week when it was featured. In any case, you make some good points. But overall, the buyer needs to work with a realtor that knows what they are doing when it comes to short sales. They aren't always easy... and it certainly helps when you have a listing agent that is easy to work with. And yes, you need patience. good job.

jeff belonger

Jeff,

The way these are currently being handled the listing agent is the key man!

Bill

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