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What Hurdles Do YOU Have to Clear in a Short Sale

Short sale home for sale Short sales are all the buzz in the real estate world these days, for two reasons. One, there are lots of them, with more coming on the market every day. And two, buyers seem to have a keen interest in buying them as they perceive that they represent a good deal. Not necessarily so, but perception is so often heeded rather than reality.

Agents AND buyers - do you know what hurdles you have to clear in a short sale?

There are lots of hurdles to overcome in the short sale market, or hoops you will have to jump through – this article is about those hurdles so you will understand what you are up against, not to deter you from considering them.

But awareness and education in the real estate biz for consumers AND agents is critical in order to make the right decision. What I have to share with you may vary in your particular market, but there seem to be a fair number of similarities no matter when you go.

GAINING ACCESS – sometimes easy, sometimes not. Sometimes locks on doors get changed without notice; combo boxes are on doors but no codes are listed in the MLS; agents do not return calls, keys don’t work; keys are removed from the lockbox but no one is told; home may have tenants who will not cooperate with showings. Just because you are working with an agent does NOT mean it will be any easier – we have our own frustrations with these types of sales

PRICING – list prices suggest a great deal but in reality the bank will likely only accept much more based on an appraisal; the low price is to encourage interest and multiple offers. Are you REALLY getting a great deal? Unlikely. Your agent will be a valuable reource, but even the best information may not satisfy the bank.

COMPETITION – everyone wants a deal and many short sales because of their pricing get multiple offers – 5, 10 or more. What chance is there that YOUR offer will be the best, or even get reviewed by the bank? Some banks will only review offers one by one, rather than reviewing ALL offers. And they don’t always counter-offer other than at the full price they want. Your agent can inquire about the status of the listing, the progress so far, and any other details that may help you make the right decision.

LACK OF COMMUNICATION – buyer agents often can’t get in touch with the listing agent; the banks often are non-communicative for days or weeks and the listing agent can’t find out what is going on; buyers can’t find out from their agents the status of the offer because status is not known. As an agent dealing with this sort of deal you may need to be particularly persistent.

BUYING THE HOME "AS IS" – in many cases the short sale home is being sold as is – are you ready to do that? Some homes are in bad shape, have been trashed, are missing appliances and fixtures, and worse. A home inspection as part of your due diligence is essential, but the bank will likely NOT be willing to do any repairs.

What hoops do you have to jump through? EMOTIONAL STUFF – how patient ARE you? What is your frustration level? How long can you wait to get an answer about your offer? Are you ready to deal with the reality that you may NEVER get a response? Agent s - you will find your patiences tested as well.

TIMING – how quickly do you NEED or WANT to move? Can you really want for several months or do you need to move soon because of a transfer, your rental coming to an end, etc.

Read also: Buying a Short Sale

These are some of the major hurdles you may have to overcome to successfully navigate a short sale. It MAY be worth it. But be aware it will NOT be easy.

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If you need additional information or have questions about the housing market in general, please contact me by phone or text message at (760) 840-1360 or email me at JDowler@remax.net.

Posted by Jeff Dowler ~ Carlsbad Real Estate on 03/01/2008 10:22 PM

Comments (28)

buyers, sellers, short sale

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28 Comments on What Hurdles Do YOU Have to Clear in a Short Sale

Great Post. It is really going to get out of control as the number of these short sale properties increases.

03/01/2008 10:33 PM

by Hassan Hamri, P.A , e-Pro®, ABR® Orlando Florida Real Estate (Stirling Sotheby's International Realty)

Very good post Jeff. Having negotiated several short sales, it's not a negotiation that I ever look forward to. I always try to prepare the client by letting them know just how difficutl it can be and that we will need to be very patient. Even then...there's no guarantee.

03/01/2008 10:42 PM

by Lola Audu~ Audu Real Estate~ Grand Rapids, MI Broker

good stuff. I am working on my 1st short sale and I'm learning as I go. The property I have is scheduled to foreclose April 1 and the bank says I have time but need to get an offer. the other piece to the puzzle is that they have two mortgages! Any advise from anyone is greatly appreciated

03/01/2008 10:48 PM

by Lisa Williams (BridgeWell Realty)

I just got in contract and when we were looking at property we skipped all the short sales. (except one that they wanted to just see....and it WAS not in good shape at all!) I suppose it would depend on the buyer...but if buyers here are wanting to buy....they usually want to get into a home right away.....not wait...and hope ....and wish...

03/01/2008 11:16 PM

by Celeste "SALLY" Cheeseman (RA), HAWAII Real Estate & HAWAII Relocation (Century 21 Liberty Homes -Mililani, Hawaii)

Jeff, it's definitely the waiting game. And..then some. I really don't like to see clients emotions (and mine!) go up and down when there's no guarantee. I would think the banks would want to be rid of these properties and not make it so hard. Then, there's the negotiations and you never know WHO you'll be talking to. It's all so inconsistant. Excellent post!

03/02/2008 04:00 AM

by Linda Scanlan ~Selling All of North Texas (Hall Team Homes)

Great post Jeff - So many think this is THE thing right now (which it can sometimes be) to get a smokin' deal and are completely unprepared for the processes that lie ahead.

03/02/2008 07:51 AM

by Steve Scheer - Denver Real Estate - Highlands Ranch Real Estate (RE/MAX Masters, Inc.)

Hassan - well I think yo may be right. It does not seem to be improving much and banks do not seem to be getting more efficient or more communicative. Boggles the mind and fruatrating for buyers, sellers and agents.

Jeff

03/02/2008 10:10 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Lola - how true. No matter how prepared you try to be, or what you tell your clients, the reality seems to be much worse. And there isn't really anything you can do or say to change it. I am working on one now where the short sale was already approved (including the $) and we cannot get an answer. :(

Jeff

03/02/2008 10:12 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

LIsa - well, you gotta get your feet wet somehow. What is so difficult is that even when you get offers youoften cannot get the response needed to close the deal. I think establishing a good relationship with the right people at the bank will be critical. Good luck.

Jeff

03/02/2008 10:15 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Sally - well that IS the problem. A LOT of patience and the ability to wait is essential. And many buyers will not or cannot do that (understandably). And there is no guarantee it will end up in closing.

Jeff

03/02/2008 10:17 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Steve - they just seem to be a moving target. You never know what is going to happen, when or if you will here, how long it will take, etc. Thanks for your thoughts.

Jeff

03/02/2008 11:04 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Jeff - Good points almost all. I'm confused on the first one.

"Lenders change locks on doors without notice to agents"

Correct me if I'm wrong but on a short sale - the homeowner is still in control of the house - the bank has not yet foreclosed and they have no right to change locks. The signage, the lockbox, and the listing are all between the homeowner and the Listing Agent. The bank is a passive participant at this point.

When the property goes REO - then you point is right on. Am I confused?

03/02/2008 01:46 PM

by Mike Mueller (Patagonia Finance)

Mike - well it's a good question, and I have never run into this until yesterday. But the bank changed the locks on a house I was trying to preview (not the agent) they were in the foreclosure process but the home has NOT been foreclosed yet. This is not common as far as I know (will update the post) and I thought it very odd.

Jeff

03/02/2008 03:16 PM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Linda - Thanks! Those ARE the frustrations that we and the clients all experience. It just does not make sense sometimes. And the buyers and the sellers are the ones that really get left out in the cold.

Jeff

03/02/2008 04:34 PM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

This has to be one of the most frustrating part of my business...You have a buyer for a home and you can't sell it to them!!! UGGHH

03/02/2008 09:10 PM

by Betsy Byersmith Realtor, GRI, CRS Toledo, Ohio (ReMax Central Group)

Hi Jeff,

Well done. For most consumers it's patience (that you talked about) that's needed most when it comes to short sales. It's like the "wild wild west" in real estate, and at times it seems like anything goes when it comes to short sales.

03/02/2008 10:48 PM

by Orange Co. Real Estate~Lynda Eisenmann, Broker-Owner, Brea, CA (Preferred Home Brokers)

Jeff,

I have successfully represented a buyer in a short sale, but currently have a condo listed. There are 2 mortgages and the bank (Ocwen) transfers me to India everytime! If someone knows of a good contact #, I'd love to have it. What happens to the 2nd??

Thanks for the great info! Love that San Diego weather. We get a ton of visitors from your neck of the woods!

Holly Galligan, Realtor ~ Lake Arrowhead, CA

03/03/2008 12:36 AM

by Holly Galligan (Coldwell Banker Sky Ridge Realty)

Jeff, I have two homes on the market right now that are short sales and I'm frustrated that neither one is being shown. They are $10,000 under priced. I'm checking with the bank today to see if I can drop them more.

03/03/2008 07:24 AM

by Kay Van Kampen, Broker, Springfield Missouri Real Estate (RE/MAX Solutions)

short sale fun fun, buyers sometimes don't understand that sometimes lendors take awhile to respond to an offer. Some buyers think when they hear short sale bank is willing to take any price maybe 80,000 less than asking. Short sales are not fun, some close and some don't

03/03/2008 03:39 PM

by Shannon Whitley RE/MAX OAK CREST REALTY (RE/MAX OAK CREST REALTY)

Hi Jeff,

This is a great post for consumers in need to read and understand. So many times they think the short sale is going to be, well short.

It's many things, but short is not one of them! (time wise short)

03/04/2008 11:14 PM

by Kristal Kraft ~ Denver Real Estate (The Berkshire Group Realtors)

Betsy - well that is so true. I think they are frustrating for everyone involved. And it is not improving from my perspective.

Jeff

03/05/2008 01:22 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Lynda - the stories we keep hearing are pretty consistent regarding the timing, frustrations and limited success. Seems that there are more buyers who are starting to shy away given the problems. I keep hearing that many short sales are not even being shown.

Jeff

03/05/2008 01:24 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Holly - well, wish I could help. It's bad enough when there is just a 1st, but the 2nd can complicate it even more. Even when the SS has been approved it seems to take an inordinate amount of time. Wish I had some other thoughts for you - good luck.

Jeff

03/05/2008 01:26 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Kay - I wonder if more buyers are starting to shy away from these listings. I have been hearing that seems to be the case from other agents out here. NOt sure what is worse - having no showing, or buyers with offers but no response.

Jeff

03/05/2008 01:28 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Shannon - well all we can do is provide the best information and advice possible to buyers so they understand the risks, and can make the right decision. But even when you share these stories some think it won't be the same in their case (just human nature, I think). And of course it usually is.

Jeff

03/05/2008 01:30 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

KK - YOu are so right. I wrote a post a long time ago about "when is a short sale not a short sale." The answer seems to be always. But there are folks who are not informed and really do think it means a rapid closing. NOT.

Thanks for visiting. Have fun with your March 19 event.

Jeff

03/05/2008 01:32 AM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)

Jeff,

Since I have experienced the positive side of short sales I believe by telling the buyer up front and disclosing that they are not guaranteed to be accepted or close on time then they won't be so upset if it doesn't happen. The biggest issue is tying up escrow for 30-90 days and having to wait for the unknown answer.

03/05/2008 06:45 AM

by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)

Neal - well you are one of the few I know who have had sucess. Your advice is well taken. I always caution buyers about the prospect of a long time to get an answer, and perhaps none at all. It just took me 2 weeks to get an approval on a short sale that had previoulsy been approved at the same number.

Jeff

03/08/2008 10:46 PM

by Jeff Dowler ~ Carlsbad Real Estate (RE/MAX Associates)