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Don't Write an Offer Without Checking Whether the Seller Can Afford to Sell

By Elizabeth Weintraub Sacramento Broker

Real Estate Agent with Elizabeth Anne Weintraub, Broker DRE #00697006

July 23, 2008 05:30 AM

Because the number of short sale homes are rising, and so many sellers are upside down, it's always a good idea to figure out the seller's net proceeds before writing an offer.

For example, there are two homes for sale down the street from me in Land Park that are both short sales. The listing agents just don't know it yet. Both homes are grossly overpriced. Both sellers owe more than the home is worth. One is headed for foreclosure shortly. But they are not advertised as short sales, yet I suspect they are.

If I were to write an offer on either of those, it would certainly wake up the listing agent. There is no sense ever writing an offer if you don't check out the mortgage balances, run the comparable sales and figure out the seller's net proceeds. That's real estate 101. But many buyer's agents don't do it, and I don't know why -- because it's their job to protect their buyers' interests.

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Fred Chamberlin

Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA

Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Elizabeth, it also helps the mortgage person going into it if they know it is a short sale. Short sales just naturally take longer. If you are expecting to close (normally) in 2-3 weeks and have a short sale that may take 2 months, it is better to be prepared and lock the loan accordingly.

Jul 23, 2008 05:33 AM

Gary Woltal

Keller Williams Realty - Flower Mound, TX

Assoc. Broker Realtor SFR Dallas Ft. Worth

Elizabeth, you are brilliant as always, because the Seller Net Proceeds gives the "clear" answer if the Seller can sell. It is one of the big reasons I see with FSBOs who refuse to list with Realtors. They can't afford to pay any commission, because either they are upside down or they still falsely think their house is worth far more than the true market value.

Jul 23, 2008 05:34 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

That's true, Fred. Not to mention the part where the short sale approval letter expires because the buyer couldn't close within that time period, and then it's back to the negotiation table to get a new short sale approval letter.

Jul 23, 2008 05:35 AM

William Collins

ERA Queen City Realty - Scotch Plains, NJ

Property and Asset Management

Elizabeth,

Thanks for the post. The listings agents who fail to do their due diligence and disclose the nature of the sale are subject to liability for failure to disclose. Their lack of competence does not exonerate them from responsibility, unless they can prove that the seller withheld information.

Jul 23, 2008 05:42 AM

Kate Elim

Dockside Realty - Spotsylvania, VA

Realtor 540-226-1964, Selling Homes & Land a

Hi Elizabeth...They may be owing back taxes also as well as Proprty Owners Association fees. If it is new construction that's a whole other poblem as there could be liens.

The more we know the more we are able to help our clients whether it is the seller or the buyer.

Good post.

Kate

Jul 23, 2008 05:43 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Gary: Some FSBOs underprice. Years ago, I bought a Cape Cod in Minneapolis that was priced about 10% below the comparable sales from a FSBO. It almost made my loan non-conforming due to the high appraisal. But I purchased that home FHA, and the seller had no representation. Which meant it was a shock to them at the closing table that they had to pay for a street improvement assessment in full. At least they had enough equity to pick up those extra costs.

Jul 23, 2008 05:43 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi William: It's not that the agents are purposely withholding information about a short sale. It's that they never pulled the tax records nor asked to see a copy of the seller's mortgage bill, so they are clueless. They have no idea whether the seller can afford to sell because they never figured the seller's net proceeds. That's why buyer's agents should use caution when writing offers for buyers in this marketplace today and always check first with their own sources for this information. Only the inexperienced rely solely on what the listing agent tells them.

Hi Kathleen: There could be judgments, too. If you have time, and the seller's name is uncommon, you can always ask a title company to run through the public records for you.

Jul 23, 2008 05:48 AM

Douglas Cartwright

Bankers Life/Colonial Penn - Somerset, NJ

Great advice... In the hurry of getting a listing some agents wind up with a property that ultimately can't be sold due to this problem. Stop, look both ways, then cross.

Jul 23, 2008 05:53 AM

Barbara S. Duncan

RE/MAX Advantage - Searcy, AR

GRI, e-PRO, Executive Broker, Searcy AR

Well, shucks, Elizabeth. I thought I'd see another kitchen photo today. Good post anyway.

Jul 23, 2008 08:11 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Thanks, Douglas.

Barbara: Tomorrow. I promise. I have a 6 AM home inspection (Yikes, what WAS I thinking?), and then I'll post. We're making good progress today.

Jul 23, 2008 08:15 AM

Robert Machado

HomePointe Property Management, CRMC - Sacramento, CA

CPM MPM - Property Manager and Property Management

Elizabeth, I could see where an owner has overpriced their home in hopes of catching a buyer that really wants that home. There is no rule I know of that a person cannot ask any price they want. The buyers and their agent have responsibility to offer what they are willing to pay. If there is a meeting great, otherwise no deal will ever be made.

Jul 23, 2008 04:35 PM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Robert: I think you are responding to some other post. :)

Jul 24, 2008 06:54 AM

Jim Quinn

Century 21 - Anaheim, CA

North Orange County Real Estate

Elizabeth, great advice and definitely something to keep in mind when writing up offers. As you've stated, I believe some listing agents may not notate that it may be a shortsale due to the avoidance by buyer's agents to show their listings.

When you run the MLS search and see a shortsale listing, do you show it to your clients or do you bypass it knowing that it may discourage the buyers due to the lengthy waiting period? With so many banks closing their loan programs, a loan that may be available today will disappear in the coming near future.

Jul 25, 2008 07:35 PM