I made a prediction in late April that we would have buyers bail out of short sale transactions as the tax credit neared its end, and that has certainly proven to be true. May has been a really interesting month for many real estate agents selling short sales. Our office alone has had seven approved short sales in which the buyers were either gone when the approval came through or couldn't close the deal. Several of those seven, last-minute defections were because of the tax credit.
If you've got buyers on your short sales who were under contract before April 30, I'm sure you've already positioned them to understand that if they needed the tax credit to close, they should not have put an offer in on a short sale property. At this late date, it's a dicey proposition at the very least. Agents can't guarantee anything when it comes to time frames for a short sale. Short sales are notorious for going longer than anyone expects them to. So, putting your buyer's eggs in that basket was not at all a sure thing.
So, I'm sure none of the buyers you have right now need or want that tax credit...right?
Well, let me let you in a little secret. They all want it! They absolutely do. Whether or not they have to have it--and I hope, at this point, that they actually don't need it to close-8,000 bucks is 8,000 bucks. Even to Bill Gates, that's not chump change. Well maybe to Bill Gates it is, but not to the majority of us.
The reality is that this is the last week of May. Most buyers are looking at the calendar and saying, "Hey, if I don't get an approval by the end of this week, I'm out $8,000!" They might not need that money to close, but no one wants to kiss that kind of money goodbye without, at least, exhausting all their options.
So your buyer wants that tax credit, and time is ticking, and your buyer is thinking of shopping around for another house, etc... Here's a tip: If the buyer is serious about getting the $8,000, have them (or you) call in a favor to their loan officer, and tell that bank guy or gal, "I know we don't have an approved short sale yet, but I really need you to start processing and underwriting this loan so all we have left to do is the appraisal." (This is assuming that your buyer does not want to pay for the appraisal prior to approval, but that might be a reasonable trade off in some situations.)
Here's the deal--30 days is what a buyer's bank usually needs to process the entire loan. That lender as you well know--especially those of you who listened to our conference call concerning lenders--realize that the lenders look at a short sale transaction and say, "Until we have an approval letter, this isn't really even a full contract, so I'm going to do nothing. I won't even collect documentation and verify that their information is what it says it is. I'll pre-qualify the buyer and that is about it. I'm not going to do anything else."
The truth is that a short sale approval might come through in mid-June. If the bank and the buyer have been moving the loan forward, you might be able to close the deal in two weeks, get it funded, and have the buyer still get their $8,000!
If you are the buyer's agent, seriously consider making that call on your buyer's behalf. Ask the lender to process and underwrite the loan and get back to you with the only remaining condition being a satisfactory appraisal. So that if the approval of the short sale comes through at the last minute, they've already looked at title; and they've already done all their underwriting and verification. If an appraisal is, then, the only condition, you can most likely get a quick appraisal, and get docs out in a week! You could slam that thing through and get it done-and get your buyer $8,000 she might otherwise not have gotten.
You're going to have to pull in a favor because loan officers don't want to work for free and that's the way they'll look at this. They'll say, "This short sale isn't even approved. I'll be working for free on this." True enough. But if you have good relationship with them, and you really appeal to their better nature, hopefully, they will be able to process the loan file and you can do a rush deal and get that thing closed by June 30, 2010 and save the day with a "Hail Mary" pass! Everyone wants to be a hero, even loan officers. Why not try to get a deserving buyer $8,000? The government is giving money away, we might as well see if we can help the buyers get it.
Alliance Short Sales
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P.S. - Here is a tip if the bank makes a counter offer on your short sale:
If a bank is countering your short sale on price by $5,000, and your buyer qualifies for that $8,000 tax credit, don't dink around with that counteroffer! Recommend that your buyer accept it! If you do dink around, the chances that your transaction will go beyond the government's tax-credit time limit skyrockets! Even though that buyer wouldn't come out of the deal with an extra $8,000, they would still be $3,000 ahead. So, make sure that buyer is really thinking about what the offer is from the bank.
If the counter is over $8,000, your buyer might want to forget it UNLESS the property is a great deal even with that higher counter-especially if they get $8,000 of that back from the government.
Countering the banks counter can add months to the short sale process so consider your options carefully. Countering the bank will likely eliminate any chance of closing by tax credit time.
Based in Spokane, Washington Alliance Short Sales offers short sale services in multiple states around the U.S. With a current network of agents located in Washington, California, Idaho, Nevada, Arizona, Florida, Tennessee, Georgia, Ohio, and Virginia, Alliance negotiates short sale real estate transactions with lenders on behalf of agents without charging a fee to the agent or the seller. Because their fees are paid at closing out of the net proceeds to the lender, Alliance creates a beneficial outcome for all parties involved. For additional information about how you can work with Alliance Short Sales, please visit our website at www.AllianceShortSales.com.