The Myth of Short Sale Sellers Vanishing into the Night

Another day, another lesson I find myself giving a Buyer's Agent in the Northern Virginia market on Short Sales.  By now, I would think that all of us in this business understand that a Short Sale is only different from a regular sale in that the Seller's must get bank approval on short payoff of mortgage balances.  That's it.  It's the same type of contingency that a buyer has with their financing.  If the bank doesn't say yes, it's no deal.

So as a buyer, how would you feel if you went to a seller and made a great offer on their home and the sellers said that they wouldn't sign it or take their home off the market until your financing contingency was removed?  You'd feel pretty upset.  After all, there is a leap of faith on both sides that the parties are going to do what they say they are going to do in the offer.  

Part of a seller trusting a buyer is that the buyer puts up an earnest money deposit.  It's money tied to the contract that assures the seller that the buyer is going to follow through on the loan process, etc.  In Short Sales, somehow buyers think they don't need to put up that earnest money until Short Sale Approval.  The excuse is always the same from the Buyer's Agents.  "We don't want to have money tied up in a transaction and if the banks don't approve it, your sellers vanish into thin air and won't sign a release."

I have represented a lot of Short Sale Sellers since 2007.  Not all the deals were approved.  And you know what?  None...not one of my Short Sale sellers vanished and was unable to sign a release of the deposit back to the buyers.  What that sentence, uttered by yet another Buyer's Agent today translates to in my head is this, "We're going to be looking at other homes while you are working on getting Short Sale Approval, so the buyers would like the money liquid.  That way they can bail on your seller with no drama."

If you expect one of my Short Sale sellers to accept your offer, you better start by understanding that most Short Sales fall through because buyers flake out.  And when you don't put your money where  you're mouth is as a buyer, you are announcing that you are a flake.  Sorry.  There's no other way to say it.

Buyers who can't stomach the idea of waiting for Short Sale Approval shouldn't be making offers on Short Sales.  Period.  

 

Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155.  To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com.  Or you can visit her website:  www.nvarealestate.net.

Header photos taken by Chris Ann Cleland.

The opinions expressed in this post are those of Chris Ann Cleland, not those of Long & Foster REALTORS®.

 
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9 Comments on The Myth of Short Sale Sellers Vanishing into the Night

JUL
17
1,003,295 Points 117 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

I agree.  Buyers can be in for a long haul.  But in our market the status can change to SSP (short sale pending) when the buyer's offer is accepted by the seller.  So, if buyers want to see the SSP change in the listing status, they really should have their financing in place.  DUH!!
5:20pm • #1
1,542,562 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Carla:  And have the EMD in escrow.  Can't expect a seller to take their home off the market in exchange for the PROMISE of putting the money in escrow later.
5:26pm • #2
313,763 Points 33 Featured Posts Outside Blog Called Shot Master

Hi Chris Ann, this is a new one to me. Perhaps only because I would never think of advising my buyers to not submit a copy of their earnest money with an offer! Your translation is right on - it would raise that same red flag with me. Now why would a seller get into an iffy situation like that?
6:30pm • #3
JUL
18
158,402 Points 2 Featured Posts Called Shot Master

I can see both sides of the argument, but I base my decision on who I am representing. If I am representing the seller, I am trying my best to hold onto the buyer. If I represent the buyer, I am trying my best to let them place many offers and go with the one that materializes first on their terms.

 
1:35pm • #4
1,542,562 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Andrea:  I don't know why a Seller would accept an offer from a buyer that isn't willing to financially commit. It's mind boggling.

Satar:  If I'm representing a buyer that can't deposit their EMD and wants to keep looking at homes, they aren't serious buyers. That's my view.  And our Buyer Representation Agreement states that once our buyers are under contract, it is no longer our obligation to show them property.  So again, either a buyer is serious or not.  I see it the same no matter who I am representing.
2:39pm • #5
158,402 Points 2 Featured Posts Called Shot Master

"I don't know why a Seller would accept an offer from a buyer that isn't willing to financially commit. It's mind boggling."

To stall a foreclosure with a short sale package and/or to see what the BPO results would be so you can properly market the property. Now a days, with some lenders, it is not needed. Also, my take is, if the buyer is going to jump ship, I rather know about it rather than they stick around until after approval and use a contingency to leave.

"If I'm representing a buyer that can't deposit their EMD and wants to keep looking at homes, they aren't serious buyers. That's my view.  And our Buyer Representation Agreement states that once our buyers are under contract, it is no longer our obligation to show them property.  So again, either a buyer is serious or not.  I see it the same no matter who I am representing."

Totally understand what you are saying. The counter argument would be that serious buyers would place offers on multiple short sale properties to increase their chances of purchasing a property rather than submitting one offer and waiting it out to discuss terms (assuming if the lender and/or seller will entertain the terms). If this was a retail transaction, then yes, your buyer should (and must) place an EMD and stop looking. If they still want to see other homes after placing an offer on a retail home, then I would question their seriousness.

2:57pm • #6
1,542,562 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Satar:  In our market, properties priced correctly get offers.  It's not necessary to do business with buyers who are playing the odds.  As for the scenario you describe, that's not something I will participate in.  Getting in multiple contracts to see which one gets approved first.  There are families attempting to avoid foreclosure.  Investors playing this game are minimizing the chances of those sellers getting short sale relief when the investor bails on four to do business with one.  So in essence, you have just proven why it is bad business to do get under contract with buyers who won't commit.  They are shopping around and likely to bail.  If someone needs an offer bad enough to avoid foreclosure for a month, that's a door stop maneuver, but not going to settlement.  
3:10pm • #7
158,402 Points 2 Featured Posts Called Shot Master

"So in essence, you have just proven why it is bad business to do get under contract with buyers who won't commit.  They are shopping around and likely to bail. "

Totally agree. That's why I stated as a listing agent, I would do everything in my power to retain the buyer. Which, in turn, begs the question, what can a listing agent do to retain a buyer and have them comit to the transaction.

"If someone needs an offer bad enough to avoid foreclosure for a month, that's a door stop maneuver, but not going to settlement. "

That is correct. In an ideal situation, a buyer places an offer on a short sale and the lenders approve ALL the terms of the purchase contract, and it closes. However, if that was the case, I would think our lives would be too boring. ;)

Great blog. Thanks.
4:24pm • #8
JUL
19
1,542,562 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Satar:  Thanks for the comments.
9:57am • #9


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Chris Ann Cleland, Associate Broker, Northern VA (Long & Foster REALTORS®, Gainesville, VA) Ambassador_large

Chris Ann Cleland, Associate Broker, Northern VA

Bristow, VA

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Long & Foster REALTORS®, Gainesville, VA

Address: 7526 Limestone Drive, Gainesville, VA, 20155

Office Phone: (703) 402-0037

Cell Phone: (703) 402-0037

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