There is one major draw to Short Sales in today's market. Price. If you look at the current inventory of homes that are available, the Short Sales typically stand out as the best value to be had! When a buyer sees this disparity in price, it can sometimes be very hard to correct their "tunnel vision" regarding these seemingly amazing buys. The following is a list of challenges that I have seen that the Buyer typically wasn't bargaining for:
•· Pricing strategy: Agents will use a variety of pricing and marketing strategies in order to get an offer from the "collection desk" to the "negotiator's desk". The more successful agents will attempt to create a history that will show the bank that they have attempted to get the highest price possible, which will typically move the transaction along much smoother when an offer is finally submitted on the property. Other agents will simply go from "market value" straight to "fire sale" without trying any prices in between - some have even been known to start with the Fire Sale approach. This can make the negotiation process very tedious if even at all successful. Have your Buyer's Representative check the history of the home to see what kind of price reduction history there is on the property. If you submit an offer on a "Fire Sale" priced home, chances are you'll be in for an incredibly long wait fraught with aggressive negotiations!
•· Agent communication: Nothing is more key throughout the short sale process than communications, however there needs to be an understanding of how often these communications really need to take place. On the Listing Agent's end, it would appear to be an endless game of phone tag and being placed on hold with the Collections Department and the Negotiations Department, in an attempt to get that answer we're all just dying to hear - "Your offer has been accepted" (or more realistically, countered)! This is not the case with the Buyer and their agent. Even though the Listing Agent may be on the phone daily, they're not getting new information that often. Realistically, a weekly update is typically all that is going to be available to the Buyer's Agent and even then it will frequently be "nothing new to report". For the Buyer that has been involved or at least heard of what's involved in a normal real estate transaction, this can be quite disheartening and upsetting. Unfortunately, if there is any one reality of Short Sales it is lack of communication from the one source that can make all of the difference in the world - the negotiator. Patience needs to be stressed from the beginning. This process is going to be painfully slow and agonizing for the Buyer that expects things to move along "as normal".
•· Bad or Inaccurate Communication: Lack of communication is one thing - bad communication is enough to drive some folks over the edge! Bad or inaccurate communication can result in the Buyer paying for inspections and appraisals before it is appropriate to do so. Buyers then often lose all that is invested only to find out that the negotiations that they were lead to believe (verbally) were unsuccessful and their home just sold or went back to the bank in a foreclosure. There are a few listing agents out there that have taken the approach of trying to negotiate "verbally" with the negotiators. While there is nothing necessarily wrong with this approach, it does need to be understood, particularly to the Buyer, that none of these verbal negotiations are binding in any way, shape or form. Unfortunately I've heard that a few of these listing agents have represented these communications as being more than what they really were and Buyers have lost the money spent on inspections and appraisals that they have been encouraged to pay for in order to expedite the process. The thing to remember when in negotiations on a short sale transaction is that you have NOTHING, unless you have it in writing! These agents can be quite convincing and tell you things like "I do it this way all the time!" Your contract should state that all contingency timeframes begin upon receiving "written verification" from the seller's lender. We encourage our buyers not to spend ANY MONEY towards this process until we have something in writing!
•· Inexperienced Agents, both New and Old can not only be problematic, but very frustrating for all involved with the process. Any licensed real estate agent can legally list a short sale property and facilitate the negotiations, however many agents have virtually no training or experience in this specific part of the market. This is probably the number one cause of frustration that we deal with on a regular basis. In my opinion, negotiating short sales is a specialty that should require a designation that can only be acquired through proper training. Unfortunately, even though the training is available, the designation and requirement to achieve as much is not. As previously mentioned above, any agent, whether licensed for 20 minutes or 20 years can legally list and sell short sale properties. However, even those that have been licensed for 20 years can pose challenges to the process if they haven't had the proper training. Seasoned agents are often victims of their ego and may not obtain or even admit that they may need the specialized training that these complicated transactions require (on the listing side), so don't be fooled into thinking that this is a problem that is limited to "rookie" agents. Many of our less experienced, but well trained agents have endured a considerable amount of frustration when dealing with a seasoned agent that is preoccupied with making sure that their "status" is known throughout the transaction - meanwhile making a total mess of the negotiations necessary to get the transaction approved. What's worse is that there is absolutely no way for a buyer's representative to tell whether or not an agent truly does posses the experience and/or training necessary to negotiate one of these transactions. It can be quite a gamble and all parties involved stand to lose a considerable amount of time, effort and possibly even money!
•· AS IS: If your financing is something other than conventional, these two words can be the kiss of death to your transaction. FHA and VA transactions have certain requirements of the subject property and if the home doesn't qualify and the seller cannot make the necessary repairs themselves, then it could be "game over!" Try your best to make sure that the property, at least from a visual standpoint, appears to be compatible with the financing. FHA or VA are not unusually restrictive, but are not the kind of programs that "fixer upper" properties should be purchased with. In fact, even minimum-down conventional programs are becoming increasingly more strict. It's can be very costly to the Buyer to pay for both an inspection and an appraisal only to find out that the home is not able to be financed with the type of loan that the Buyer is qualified for. It is recommended that your lender approve of your viewing an "as is" home before you go look at it with your agent.
•· Nature of the Beast: Even with the best of intentions, training and efforts, short sales can and do fail to come together much of the time. What's worse is that you likely won't find this out until you've waited for some 2 - 5 months. It's hard to tell what kinds changes may have taken place with mortgage rates or the real estate market in that amount of time. An increase in rates by even .5% can make a HUGE difference in the Buyer's payment, depending on the price point. So please, enter these transactions educated.
•· Illegal Practices: It is an unfortunate reality of the world we live in that whenever there are people falling on hard times, there are also people ready to take unfair, unethical and sometimes illegal advantage. They look upon these circumstances as opportunities for profit with their only focus being on their own bottom line. When dealing with short sales, there are certain key features to look for when the negotiations begin. Probably the most significant is that all portions of the purchase agreement should be allowed to run through the escrow officer. When an agent begins to draft instructions that are specifically noted to happen "outside of escrow or closing", this is what we refer to as a "Red Flag". Another potential issue can arise if the listing agent is trying to make arrangements for the seller to receive funds in connection with the Purchase and Sales Agreement. This is completely illegal as the seller will be asked to sign documentation stating that they will be receiving no monetary consideration in connection with the Purchase Agreement. "Double escrows" or more than one Seller involved in the purchase of a single property with a simultaneous closing may or may not be considered actual fraud and should also be avoided. Be particularly cautious if the other agent offers that they have "already cleared everything through their attorney". Typically, when we keep within the scope of our normal duties there is no reason to "clear things with an attorney". If the other agent feels the need to do so, there's usually a reason for this.
As buyer's agents, it is our job to insure that you have the best home buying experience possible. Therefore, if entering into a short sale transaction makes your purchase an even greater deal, all the better. But, it is important to understand that even under ideal circumstances, short sales require an incredible amount of patience and may not close - even with the best efforts from everyone involved.
The S&B Real Estate Team assists people in buying and selling real estate throughout Southwest Washington. We are proud members of Keller Williams Realty - Premier Partners in downtown Vancouver. Our local expertise covers: Vancouver, Battle Ground, Camas, Washougal, Brush Prairie, Hockinson, Ridgefield, Woodland and La Center. If you or someone you know is considering living or investing in Clark County, please contact us. Jamie Carroll can be reached at 360-609-6775 or via the "Contact Us" page at www.MyRealtorIsJamie.com. Steve Borwieck can be reached at 360-241-7305 or via the "Contact Us" page at www.SteveBSellsHomes.net. We are here to help!
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