When Does A Short Sale Become Attractive?

When does a short sale become attractive?  Most of my clients (including me) prefer to make offers on homes that are not short sales.  REO's and traditional sales are so much more attractive . . . sometimes.

I have had to change my strategy in purchasing homes for clients buying under $400,000 in North County San Diego.  The reason?  Too much competition and multiple bids pushing prices way up!  After writing countless offers and having them rejected because the price went 25% over listed price, we had to start looking at other strategies. 

The fact is that short sales are much more unattractive because of the long waits, and possibility that the deal might not go through.  However, that very reason is why I think short sales are the way to go and that's when does a short sale become attractive.  There is less competition and my clients are better positioned to get a good deal.  When inventory comes back up, it would be a good idea to reconsider, but for now, short sales seem to be the answer. 

The wait of the short sale is inevitable.  We can't control the lenders.  However, the one thing a buyer agent can do a better job of, is qualifying the seller's agent.  We all know that all agents are not equal, so why do we just accept that an agent is qualified to manage a short sale? 

If you decide to use the short sale strategy, consider qualifying the agent that represents the seller.  Here are some questions to ask:

1. Are you handling the short sale or are you using a negotiator?  If so, what is their track record?  Why did you hire them?  If not, then ask them what their track record is for closing.  A good negotiator these days is advertising a 75% or greater close rate.
2. How many liens are on the property?  If multiple, ask them if they are with the same servicer or not.  If there are more than two, and they are different servicers, this may be a hard deal to close.
3. Find out if the seller is willing or able to make a contribution to the close of the sale?  Or if they have a second and the lender requests a promissory note, would you client sign one? 
4. What is your frequency of communication the listing agent will have with the lender and with me?  Ideally, you want to hear that they call the lender frequently and will provide you and your buyer with weekly updates.
5. What have you done to evaluate the success of this short sale?  (They should be able to give you a list of criteria they have used to qualify this seller.)

So, if you are having trouble with the competition and skyrocketing prices in REO's and traditional sales, help your client get a better deal through a short sale.  If they have the time and they can be patient, they may win in a long run. That when a short sale becomes attractive!