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Short Sale Suicide...and How To Prevent It! (Part Two)

Short Sale Suicide...and How To Prevent It!

Also How To Determine If A Listing Agent Is Committing Short Sale Suicide...

A Two Part Series Presented by Sherman Smith

Part Two

The Buyers Agent and Short Sales

Now I have told you what to do if you are the listing agent, but what do you do if you have a buyer who is interested in a listed property that is a short sale? Well first off, I try not to show any short sale listings that I have not talked to the listing agent first. Here is what I want to know:

Do you have an approval from the bank?
Do you currently have any offers on the property? If yes, how many and did you send them all to the lender. If there are offers and they sent more than one to the bank, forget the property.
Is there a true hardship and what is the hardship? If there is no real hardship forget the property.
How many owners are on title? If more than one are they all in a true hardship? If not forget the property.
How many short sales have you closed? If very few offer to help or do the short sale for them. It is probably the only way it will close anyway.
How many lenders on the property? Is there any equity for the second or third? If not how will you get them off the property? If no answer, forget the property.
Have they been in contact with the banks? If so what has the bank said? If not why? Consider forgetting the property.
Does the seller have all of the banks required documentation? If not things will be delayed.
If you were to receive my offer and another offer at the same time would you send them both to the bank? If yes forget the property.
Last but not least ask "What do you think the chances of getting this through are"? If the listing agent says 50% or less, consider forgetting the property. They have no faith in what they are doing.

Now you can see why 50% of all short sales fail to close. It is the listing agents fault for not doing their homework.

Notes: I use bank and lender synonymous with all type of lending institutions. The information here is not carved in stone. It is in generalities as to how short sales are done and yes there are exceptions to every situation. This is a guideline as to how to not waste your time on deals that can't be done.

Sherman Smith

Sherman Smith & Associates

1173 Irvine Blvd Tustin, CA

(714) 544-5445

Sherman@shermansmith.com

www.shermansmith.com

READ PART ONE CLICK HERE

Posted by Sherman Smith on 12/27/2007 12:11 AM

Comments (9)

short sale, listing agent, loan loss, lenders, bank, trust deed sale, fiduciary relationship, approval

9 Comments on Short Sale Suicide...and How To Prevent It! (Part Two)

DEC

2007

awesome stuff Sherman!

Sherman,

Good info from the perspective of a Realtor working on behalf of a buyer. Sherman, no doubt you're the best when it comes to short-sales.

MAY

2008

SHERMAN- I think another HUGE mistake by the listing agent is to not be present diring the BPO. The lender is using that opinion to draw their line in the sand. It is just a huge advantage if you could talk to the person doing the BPO that they are seeing the market from your eyes and bring up your chances of getting a BPO cloer to your list price than not.

JUN

2008

Hi Sherman,

I am a buyer who wishes I read your article before I made an offer on a short sale... I have noticed that you mentioned NEVER send multiple offers to the bank.

In my case, the seller accepted my offer and signed it, the contract was submitted to the bank, and a day later a new offer came in, it was also accepted by the seller and send to the bank. Is this legal ? Although the second offer is a "backup", I believe that the bank will possible accept the better offer only. Is it legal to delay the response to any offers in order to get more offers like in a silence auction ?

JUN

2008

FRANK--First let me say that a back up offer does not mean it needs to be submitted to the lender. It means that is should be held until the present contract is either approved or denied. The contract is between the buyer and seller, those are the parties that need to sign it. The lender is a third party that is only there to approve the short sale and the terms of which the buyer and seller have already agreed to.

The lender is working on trying to get the best price they can and if the agent is submitting several offers then, in my opinion, the lender can sit and wait for other offers to come and hold a silent auction; as you stated. Is that right? No. But the agents complain about the long wait times for an approval and at the same time they keep submitting other offers making the waits even longer.

I advise my clients against submitting offers with agents that practice this technique of submitting several offers because it delays the process and the buyer doesn't know where he stands among the other offers. As the buyer waits interest rates can rise or other factors that can disqualify that particular buyer from their dream of a new home, all the while they might not of had a legitimate chance to purchase the home.

You should ask to be released from the contract, because they are in breach. Or you can have the contract amended to state that you want to be the only offer submitted to the lender. If another offer comes in you have the right to match and if not you may be released from your contract in order to pursue another purchase.

There might be another out. I will assume that the agent had you agree to standard contract which will give you an "out" after the closing date passes without an approval.

I hope that helps.

Hi Sidney,

First of all, I want to thank you for your answer. It seems that this does not have a simple YES/NO answer. I signed a contract, I have to wait up tp 45 days for the bank's respose, and I was hoping that there are some clear rules about submitting multiple contracts to the banks.

In my case, I am not sure if the backup offer was higher or lower, or if the backup was sent to the bank. Originally, the realtor said that it was sent to the bank, but later she said that the second contract was not sent to the bank. Is there a way to find out how many offers are submitted to the bank ?

Regards,

Frank

FRANK--Unfortunately, there is no way to find out if the other offer was submitted to the lender. You would have to rely on the answer you received from the agent.

You signed the offer but have you received a signed copy of the offer from the seller? Many times the agents will send an offer to the lender that is not signed by the seller. In that case, there is no contract.

You're right, there isn't a simple YES or NO answer.

JUN

2008

Yes, I have received the copy of the contract and it was signed by both the buyer (me) and the seller. I am surprised that there is no rules for submitting multiple contract to the bank. In this case what is the meaning of primary contract ? Are the banks supposed to give me the first right of refusal and give me an chance to match the backup offer if it is higher ?

FRANK--You're absolute right! There ahould be some regulation or standards for the procedures of doing short sales. My feeling is that the power that be are waiting for this to shake out on it's own. It seems to me that it will take a class action suit by someone that will have the courts establish the rules. In this matter the real estate industry shields itself from culpability in any given scenario.

Back to you. A primary contract is just that you're the first that submitted an offer. There really isn't a standard procedure, but I would guess that when the lender comes back with a counter offer they will give you the first opportunity to match it or they'll go to the next in line. What you should do if find out what the intentions of the listing Realtor is. I wouldn't suggest to leave that to chance or rely on anyone doing the right thing. They might have a different priority than yourself.

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