I'm starting to see an interesting phenomenon with the high volume of short sales in our area. I recently had a client who wanted to buy a property. I
met with him and his wife, and I had them get prequalified with their lender and they qualified for a nice property. Off we went in our search, and after a couple weeks we found a great house.
The only issue with this house was that it was an REO and required a certain lender to do the pre-qualification before the seller would consider a contract. So, I sent my buyers off to a friend who worked at that lender with the expectation that they would be back soon with another pre-qualification letter. It would be easy since they had already been pre-qualified, right? That's what I thought, anyway.
After the interview, the lender called and asked how much my clients had shared with me about their financial history. They had only discussed what their bank said in their original pre-qualification letter.
The lender couldn't share their personal information because of
confidentiality, but with their approval, she told me that they had a short sale last year. In the days that followed, I confirmed that my buyers had done a short sale the year before. When asked what led to the short sale they explained that they didn't like their neighborhood or the trend it was following, and they wanted to move out of it so their children wouldn't grow up there
Wow! That was information that needed to be shared up front in the beginning of our interview process. Later, I asked them to get the name and number of the lender that had pre-qualified them prior to our visit with the second lender. I'm still waiting. That experience has made me a little more cautious about taking someone at his/her word. I know it's necessary to trust, but I believe I will need to start a "trust, but verify" policy with new clients.
"Short sales for convenience" are going to catch a lot of people off guard when they start their next property search. There are ways to buy when you've had a short sale recently, but it will likely be through unconventional methods rather than through the conventional lending process.
People who are contemplating a short sale should be advised that short sales are not a "get out of jail free" card. When a seller is trying to balance the options and a short sale is considered, we need to be completely honest with them if it's not a true hardship situation. Choices have consequences. A short sale may be the only route some sellers can take, but it should never be used to blow off a mortgage commitment that is not a hardship situation. IMHO.
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