5 Reasons Why the Short Sale Seller Still Cares About the Price


There is something about a short sale that makes some buyers think that the short sale seller is somewhat of a non-entity, a mere speed bump in front of their negotiations with the bank.  But, that is not truly the case, the short sale seller is still the record owner and has their own concerns when considering the amount offered for their home.  A short sale is not simply a foreclosure with a twist.  

Nonetheless, I’ve heard the following statements time and time again from potential short sale buyers:
  • “This is where we want to start with the bank”  
  • “We want the bank to counter us, not the seller”
  • “They should just be happy to avoid foreclosure!”
  • “Why does the seller even care, it’s a short sale!”

Here are 5 reasons why the short sale seller may still care about the price:

1) Potential tax liability.  The goal of the short sale is to obtain debt 

forgiveness from the bank; however, short sale buyers should consider that debt forgiveness may have negative tax consequences for the short sale seller.  As a result a short sale seller may still care about the price, because often the higher the price, the less tax liability they face.  Many short sale sellers will be able to avoid tax liability, but certainly not all will -- this is especially the case where the property was an investment and the seller is still solvent.

2)  They have an opinion.  Most people have an opinion about the value of their home.  It is usually their largest investment and will probably be yours.  Many short sale sellers could afford to keep their home if they purchased it at today’s prices and they have watched the market descend.  They aren’t always thrilled that their home is selling for what they view as “peanuts.”  Sellers who have maintained and improved their home tend to have a strong opinion about its value -- even if it is a short sale.

3)  Neighbors.  Yes, people care about their neighbor’s property values.  Especially short sale sellers.  These are not the folks who back a U-haul up to their home in the middle of the night and leave their former neighbors with a foreclosure to contend with.  They tend to care.  Many times short sale sellers are thinking about their neighbors who are trying to sell or refinance and they don’t want their financial distress to negatively affect their neighbors.  

4) The Bank.  Short sale sellers know that even if they don’t have an

opinion about the value of their home, the bank will. Submitting a low offer that is not likely to be accepted by the bank does little to improve their situation.  Banks use Broker Price Opinions and appraisals to value short sale properties.  If the comparative sales are 20% higher than your offer -- negotiations with the bank could be long, drawn out, and ultimately unsuccessful.

5) An Experienced Short Sale Agent.  Hopefully,the seller has done

their homework.  And, that includes hiring an experienced short sale agent to handle their short sale.  If their agent has advised them well, a short sale seller has listed their home at a price that will likely attract a potential buyer AND lead to short sale approval from their bank.  An experienced short sale agent already has an idea of what the bank will take and knows that accepting an unrealistic offer will often elongate the short sale process for the seller.

If you want to have your offer accepted and presented to the bank, it must be accepted by the short sale seller first.  And, there are still many reasons why the seller may care about the price.

Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She is a Certified Distressed Property Expert (CDPE) and Certified HAFA Specialist (CHS) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.

* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement.

Copyright© 2011 Tni LeBlanc *5 Reasons Why the Short Sale Seller Still Cares About the Price*
 
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76 Comments on 5 Reasons Why the Short Sale Seller Still Cares About the Price

20 Most Recent Comments Displayed Show All

DEC
11
2011
584,438 Points 1 Featured Post Outside Blog Attended Rain Camp Called Shot Master

An experienced short sale agent knows the bank wants to approximate the price that the property would sell for if not a short - and will be hard to deal with if the is not happenng.
2:34am • #57
115,664 Points Localism Sponsor

Tri, you spelled it out in terms that any buyer or seller could understand, so well written I had to reblog it for my readers to enjoy too, thanks!
8:00am • #58
Outside Blog Attended Rain Camp Called Shot Master

Good morning Tni, good advice as always and timely, had this conversation with a client just yesterday and told her I would do a little research for her.

Will reblog this along for my Heights clients to utilize

Greetings from Innerloop Houston Texas

Linda Jamail Marshall,Broker,ABR,QSC,RECS,ACRE

713-523-4600 info@LindaMarshallRealtors.com
11:32am • #59
191,780 Points Attended Rain Camp

Tni congratulation! This is a great post! all of us working with distressed buyers and sellers in today's market have had the same conversation with buyers who are trying to bargain a short sale. What buyers don't know is that the banks when evaluating their offersare expecting the short to sell at market value. Thanks for sharing!
1:55pm • #60
360,586 Points 76 Featured Posts Outside Blog Called Shot Master

Judi - It is easy.  But they are very much a part of the process.  If they don't sign your offer it will not be presented to the bank -- that simple.

Judy - You know if their is a tight time deadline that is one thing.  However, most of my short sale sellers are contacting me well in advance now.  In some situations, I am even able to close short sales without a missed payment.  Why waste time with a low offer when we could get a better one if we waited two more weeks?  Experience tells me to bring a reasonable offer and the process will be quicker for the seller.

Allen - Some short sale sellers do not care.  They are simply overwhelmed.  But many do.  Short sale buyers should not expect that they don't care, or that their agent doesn't fully understand the process.

Bill - It does.

Terry - Congrats on the approval -- glad it helped.

Robert - Nine times out of ten I know what the bank will accept.  I know that from experience.  You do occasionally get a home without any comps and then you have to use your best estimate.  In that case, your approach could be appropriate and I would explain that to the seller.  However, in most cases I know the comps and pretty much know what the bank will accept.  My job is to get an offer the bank will accept so that the seller's short sale does not turn into a marathon if that can be avoided.  That can make the difference between a 4 month short sale and a 10 month short sale.  Big difference.

Brad - Yes, they do feel that way for some reason.

Ric - Yes, that is the thing about low ball short sale buyers I've seen as well.  Many times they bail, because in a month they don't think it is a steal anymore anyway.  I can't fix that point of view and approach but I can try to protect my seller from it so that they can reach their goal of a quick and successful short sale. 

Linda - It does depend on the timing I'll give you that.  But a week or two more to get a decent offer up front is time well spent.  Especially since banks will often limit how many extensions they will give.  Why beg for an extension for an offer you know is not likely to fly?  You are wasting everyone's time with that.  

Wendy - How ridiculous.  I've had similar type reactions (although not that far) from buyer's agents that feel they have a "right" to submit their crappy offer directly to the bank on a short sale.  Right.  Go do some reading and get back to me please.  The seller still owns the property.  If it goes to foreclosure try submitting that offer when it is an REO and see how far you get.  LOL.
3:24pm • #61
360,586 Points 76 Featured Posts Outside Blog Called Shot Master

Debbie - Thanks for the re-blog!  I agree there is a definite short sale value that you have to give buyers because they do have to wait for the approval and the price has to stand the test of time.  When I price a short sale I consider comps, competition, and what I think prices will look like in 3 months.  But, I know the bank will only consider the comps.  So it is an art, but not very difficult.  When buyers low ball a short sale price, many times it just shows that they shouldn't be shopping for short sales.  Go bargain an REO.  Oh that's right... that's hard.  Ok now add a two month wait, an investor who has to sign off on a huge loss, a servicer that orders $20 BPOs, and a seller with a huge tax bill.  That's a short sale.

#51 - The seller does matter if you want to buy a short sale.

Kimo - When prices were falling rapidly and no one knew where they stood I would say that approach could be valid.  My market is pretty solid with multiple offers and plenty of comps.  There is a range for sure, but I don't need to submit an offer 40% below comps to figure out where the comps are at.  I can look them up.

Demarco & Marisa - If only buyers could!  The only thing you can do as a buyer is to not buy if you don't like the prices.  And, of course you could lose some opportunities doing that.  The banks are in total control of the real estate market right now, like it or not.

Hi Jeff - Absolutely.  Glad you enjoyed the post.

Evelyn - Great advice.  He needs to get the proper legal and tax advice before listing.

Woody - I don't know what it is.  If you have to promise someone an unrealistic deal to get them to write an offer it is probably your clue that you are dealing with an unrealistic buyer and need to move on.

Linda - Bingo.  Why go to the trouble of carefully packing a moving truck that has no engine?  What is the point?  And I find that after two months of waiting the low ball short sale buyer thinks that the bank is truly "considering" their offer when they are truly just processing the file and haven't even glanced at the offer yet.  As time goes on those buyers begin to overestimate their chance of success.  Even if they get a small counter at that point they often walk because they really started to believe the bank would take it just because of all that time.  I don't play that game if I can avoid it.

Jim - Exactly.  And our clients come to use for experience and expertise.

Hi Steve - Glad you liked it and could relate!  Thanks for the re-blog!
3:52pm • #62
360,586 Points 76 Featured Posts Outside Blog Called Shot Master

Linda - Glad you liked the post.  Thanks for the re-blog!

Hi Mayra - Thanks for the call.  I appreciate it.  We can keep telling them - hopefully somewhere down the line they believe it.
3:54pm • #63
118,017 Points Outside Blog Hit Router

Yes, and as a REALTOR®, I will respect my clients right to price his home. Even if it is a short sale.
5:39pm • #64
500,277 Points 13 Featured Posts Outside Blog Called Shot Master

Hi Tni,  Excellent post.  I get so many buyer agents thinking the seller should accept any lowball offer.  Your post does a great job addressing this issue.
6:56pm • #65
DEC
12
2011
293,252 Points 3 Featured Posts Outside Blog Attended Rain Camp

There is so much confusion surrounding short sales for the public. I love seeing posts like this that help clear that up. Thank you for your contribution!
8:44am • #66
1 Featured Post

Very nice.  Couldn't have said it better myself.  I'm going to tweet this because it is so informative for potential short sale buyers to have the right mindset.  Thank you!
11:33am • #67
Outside Blog

Great blog post, Tni. So nicely done. Please let me know if you get any sellers that need short sale help in the Los Angeles area. :)
6:25pm • #68
166,997 Points 1 Featured Post Attended Rain Camp

If we have a Buyer that insists on a low offer, we find out what their real bottom line is and we prepare them that the bank will very likely come back with a higher counter offer.

They often want to take the risk.  As long as they are not stuck on their low number, we'll let it ride.  Surprising is that every once in a while...the Buyer wins with the lower offer.  Joy
10:24pm • #69
DEC
16
2011
199,483 Points 5 Featured Posts

Great post addressing this topic when it comes to short sales, especially #1.
3:38pm • #70
JAN
11
2012
237,744 Points 9 Featured Posts Outside Blog Called Shot Master

Great post.  So often buyers and even agents unfortunately don't understand short sales and don't even realize that the seller is still the owner of record and has a say and has to accept the contract.  These are great and true reasons why the purchase price does matter. -Kasey
12:46am • #71
JAN
15
2012
519,192 Points Outside Blog Called Shot Master

If it is their home they probably will not have a tax forgiveness problem or tax liability through this year.
1:07am • #72
265,855 Points 1 Featured Post Outside Blog Called Shot Master

I suspect that most sellers just want to get an offer in to the bank.

I also KNOW that some agents themselves put "low-ball" list prices on their listings just to create activity and attract multiple bids. That sort of activity makes us all look bad with the public.
1:18am • #73
JUN
09
1,553,748 Points 277 Featured Posts Localism Sponsor Outside Blog Hit Router Attended Rain Camp Called Shot Master

Hi Tni,I couldn't agree with their comments.This is indeed a great post.I really enjoy reading all your post,their all helpful and their all important facts we should remember.Keep up the good work,your doing a great job as Santa Maria Short Sale Agent.
5:38am • #74
JUN
28
115,846 Points 3 Featured Posts Outside Blog

Tni, terrific post.  As a short sale listing agent as well, I receive those same ignorant responses all the time, and it just shows the buyer agent's lack of knowledge regarding the situation.  I would add to your list that in some states, deficiency judgments are still a concern, especially on investment properties.  Also, many local or regional banks with 2nd mortgages will require (non-negotiable with some credit unions) a promissory note for the FULL FORGIVEN AMOUNT, and so yes...the seller cares about the price.  Great job!
10:34am • #75
360,586 Points 76 Featured Posts Outside Blog Called Shot Master

Thanks for stopping by Lianne!

Bob Miller - Some agents just do not get it. 

Sylvie - There is a lot of misinformation out there.  Glad you liked the post.

Thanks for the tweet Diane.  I appreciate it.

Thanks Sara.

Joy - Well if you have no other offers it may be worth a try.  However, a "try" in a short sale is a major commitment -- it is usually worth it for the seller to bring in an offer they are confident the lender will accept.

Thanks Patricia.

Kasey - Very true.  Buyer sometimes act like the short sale seller is merely a speed bump on the way to the bank.  But, if the seller won't sign your offer -- you're not going to get it in front of the bank.

Elite Home - I leave those kind of calls to the tax pros!

Jon Quist - Why someone would want to list low for the fun of collecting offers I'll never figure out.  Sometimes it is necessary due to time constraints, but why do that otherwise?

Hi Katerina - Thank you - glad you liked the post!

Matt - I agree and you are so right.  Deficiencies are still a concern on some transactions and jurisdictions.  We worry less and less about it in California, but it is still out there for many states and property owners. 
2:49pm • #76

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Tni LeBlanc, JD, MA, REALTOR®, DRE #01871795

Santa Maria, CA

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Mint Properties, Tni LeBlanc (805) 878-9879

Address: 2880 Santa Maria Way, Suite D8, Santa Maria, CA, 93455

Office Phone: (805) 938-9950

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