How can you tell when a short sale buyer is serious about his offer?
Being both a listing and selling agent for short sales, I’ve had my share of buyers backing away from a short sale, and having to start all over again.
I’ve even had buyers who wanted to write multiple offers wanting to see which one will stick. Not only is doing that a lot of work, it also describes what kind of buyers they are. When writing an offer, one is expected to write in good faith.
Writing multiple offers is hardly that.
What is good faith?
Wikipedia describes it as
“In philosophy, the concept of Good faith—Latin bona fides “good faith”, bona fide “in good faith”—denotes sincere,honest intention or belief, regardless of the outcome of an action; the opposed concepts are bad faith, mala fides (duplicity) and perfidy (pretense).
In law, bona fides denotes the mental and moral states of honesty and conviction regarding either the truth or the falsity of a proposition, or of a body of opinion; likewise regarding either the rectitude or the depravity of a line of conduct.”
So how do we make sure a buyer is serious, i.e., submitting an offer in good faith on a short sale?
Buyer will open escrow upon acceptance by the seller,
before receipt of short sale approval from the short sale lender.
Buyer’s initial deposit is 1-3% of offer price
Buyer’s terms and conditions are acceptable to short sale lender (For example: offer is reasonable, i.e. no low-ball offer, AS IS, no credits, no request for repairs, no request for lender to pay Buyer's closing costs)
- From the listing agent’s and the seller’s point of view, such a buyer shows total commitment when the buyer is willing to have his initial deposit cashed into an escrow account. As long as the waiting period for approval is within the 45 days per our short sale addendum, this is do-able.
- From the buyer’s agent’s and buyer’s point of view, this strengthens the offer and thus has a very good chance of being approved. It also puts the onus on the listing agent to get the answer within a specific period of time, or the buyer walks.
If the buyer is unwilling to open escrow, then the buyer probably doesn’t want the property that much and may signal to the agent that Buyer has a lot more looking to do before he totally commits.
It all boils down to this: TRUST
Trust is defined as:
- reliance on the integrity, strength, ability, surety, etc., of a person or thing; confidence.
- confident expectation of something; hope.
- confidence in the certainty of future payment for property or goods received; credit: to sell merchandise on trust.
So in this case:
- The seller trusts that the agent will work towards getting the short sale approved
- The buyer trusts that his agent found him a property that has a high likelihood of getting approved
- The buyer’s agent trusts that the listing agent is experienced in short sales
- The listing agent trusts that the seller, the buyer and the buyer’s agent will all work together in getting him all the information and documents that he needs to negotiate from a position of strength with the the short sale negotiator