If you list and sell short sales in Las Vegas like I do, you already know it's common to spend 1-2 months negotiating a short sale approval and proudly proclaim to your seller, the buyer's agent, title, and the buyer's lender: "Short Sale Approved!" ...only to hear a few days later from the buyer's agent, "...uhm, well...the buyer decided to cancel".
What's really going on? I believe an average buyer is putting 3-4 homes in contract, but only buying 1.
How'd I come up with that? In short...We've consistently had about 11,000 homes in contract at any given time, but we're only closing about 3000 per month.
Of the 11,000 or so homes currently in contract, about 6800 (about 62%) are short sales. However, we're closing about 3000 homes per month, but only about 25% (about 750) of the closings are short sales.
Bailing buyers have become a huge problem here in the Vegas market for short sale sellers and agents and banks. (Although I don't have much sympathy for the banks, I do believe that what hurts the banks also hurts our market, but that's a topic for another discussion.)
Why are buyers bailing on deals?
I don't blame the buyers or their agents. They want a house and don't want to keep all their eggs in one basket waiting several months to find out the bank didn't approve the sale, or wouldn't release the deficiency so the seller decides to let it foreclose instead, or they decided to try a loan mod, or (I could go on forever with reasons a short sale can fall apart...)
What can be done about it?
The real solution lies with the banks. A pre-approved short sale would go a long way to fixing this problem. We had some hope with HAFA, but in my opinion this plan has not worked well at all. Yeah, I've done several successful HAFA short sales, but they've been a drop in the bucket when it comes to really fixing the short sale/foreclosure problems we face in Nevada. And even the HAFA so called "pre-approved" short sales require a whole mess of additional paperwork, time & red tape even after the "pre-approval".
The banks can fix this? Yeah, right...so what can we really do about it?
In my opinion, buyers and sellers need to require a little more commitment from each other in their contracts.
I see it so often, I'm not even surprised anymore when an offer come across my desk where the buyer doesn't want to even put earnest money in escrow until we have short sale approval. ...so you're asking the seller to take the property off the market for a month or two while I spend countless hours negotiating a short sale approval and you don't even have a single cent in the game? Really? Are some sellers accepting contracts like that?
Another common item is due diligence beginning upon short sale approval. I think it might be a mistake to wait until short sale approval to begin the due diligence period and/or order the hoa resale package. Both of these items are easy "outs" for buyers with no skin in the game. Why not get these other contingencies out of the way early on? The buyer doesn't want to spend the $300 or $400 bucks for an inspection and the seller doesn't want to shell out the $200 bucks for the resale package until we get the "Approval", but that might have to change if we are to see any improvement to the current pattern of canceling contracts and 4 escrows to sell 1 house.