How to coach your buyers through the short sale process

Real Estate Agent with Maui Life Homes / Metro Life Homes RS-78439 / BRE #01708344

How to coach your buyers through the short sale process

The process of obtaining an accepted offer and successfully closing on a short sale transaction on the buying side can be one of the most tedious and stressful things we do currently as real estate agents.

But it doesn't really have to be if you use a recipe for success for you and your buyers.

One of the most important issues in the beginning is knowing how to craft an offer that is conducive to a successful short sale closing.

Here is a task list that will help:

1. Obviously, you want to make sure there is a short sale addendum to the contract.  Why? Because you need to make sure there is a time period that is clearly stated that the buyer will wait for the written approval(s) so that contractually they can safely exit the deal if the listing agent and/or short sale facilitor cannot obtain the written approval in a reasonable amount of time.  If your buyer wants to continue to wait past that deadline, it is their choice of course, but it's good knowing there is a contractual date that allows them to exit from the transaction legally.  If you expect a quick approval, then write in a smaller waiting period.  If your buyers are completely married to the home, then write in a longer waiting period.  That decision will have a lot to do with how much preparation has been done to date by the listing agent and/or short sale facilitor to date.

2. When will your buyer be submitting their good faith deposit?  Upon the fully executed purchase agreement between buyer and seller?  Or upon receipt of the written approval(s) from the bank?  Well, that's for the parties at hand to decide, in writing.  My recommendation is to have the buyer submit their deposit upon full acceptance between buyer and seller, prior to obtaining the written approval(s).  Why?  Because this is a REAL contract.  It's not a "play" contract or "let's wait and see" contract.  There's no such thing.  Submitting your deposit within 3 days of signing off on the offer confirms that the transaction is REAL.  It makes it very much so a tangible contract, and does not create an environment of it being a "disposable" transaction where the buyer can walk at will should they find something better or merely change their mind.

3. AVOID having the contract include personal property!!  Why?  Because it can throw a wrench into the transaction on many levels.  First, in a short sale, the property is always subject to 2 appraisals - one from the bank that holds the lien, and one from the buyer's lender. (unless the buyer has waived the appraisal contingency).  You do not want the appraisals to become "muddied up" by concessions that the appraiser has to take into account.  Second - IT'S A SHORT SALE PEOPLE!! 9 times out of 10 it is a short sale due to financial distress, so don't create an environment of "rape and pilfrage" by kicking the sellers when they're down and wanting the refrigerator included, if you know what I mean.  The seller's personal property DOES NOT BELONG TO THE BANK!  So don't craft a deal where you make their personal property part of the bank's mathematical equation.  Your buyers want to be portrayed as acting in good faith, and fully understanding of the situation. If you want to work something out regarding the seller's personal property, then do so outside of the short sale transaction and negotiate those directly with the seller for the sale of those items.  And YES, it is legal to do so because part of the short sale approval process is the seller supplying a financial statement to the bank declaring their personal assets.

4. Make sure you provide weekly updates to the buyers on the status of the short sale approval.  If the listing agent and/or short sale facilitator are on the ball, they will provide you with periodic updates on the status of the short sale file with the bank(s).  BUT EVEN IF THEY ARE NOT (everyone gets a little overloaded now and then), then make it a point to make a friendly phone call to the listing agent or short sale facilitator for an update so that you have a regular update to relay over to your buyers.  Non-communication is a recipe for anxiety, and anxiety is a deal killer on ANY transaction, even a standard sale.  So mark your calendars to make a note to yourself to make sure you're able to provide periodic updates to your buyers.

5. Make sure that it is absolutely clear with your buyers that they should not expect ANY concessions from the bank.  Those of us who have been through many short sales know that the banks will almost never allow any credits or concessions for repairs, and often will not pay for those expenses that would normally be covered by the sellers in a standard sale such as home warranty, retrofitting, HOA docs, local city compliances, etc.  If you're buyers are fully prepared to pay for these additional expenses RIGHT FROM THE BEGINNING, then you've already passed one of the largest hurdles towards a successful transaction.  Does it hurt to ask?  Of course not, but do so with the expectations that the bank will almost always come back with a "NO", and consider yourself extremely lucky for whatever concessions you do receive.  Make the overall net to your buyers be REFLECTED IN THE PURCHASE PRICE and remind them of that.

6. Have your buyer's lender do as much work as possible prior to obtaining the written approval.  Why?  Because once you receive that written approval, you do not know what closing date deadline you are going to end up with.  You need to be ready to MOVE with the escrow quickly once you have that approval.  And getting extensions are not easy should your buyer need more time.  Have your buyer's lender do as much pre-approval work as possible so that you can hit the ground running once you do receive it.

- Make sure the buyers have looked into a homeowners insurance policy already. 
- Choose an inspector and have them at the ready. 
- Make sure they know who their utility providers will be to make arrangements for those. 
- Make sure they have made their decisions on how they will take title to the property.

7. Keep in mind that a short sale is a drama magnet! -  A distressed property is always subject to new liens, new judgements, HOA issues,  accumulating property taxes, etc.  SO MOVE QUICKLY once you have that approval so that there are no further surprises or increased closing cost requirements for your buyers.

MAKE USE OF THE TIME WHILE YOU'RE WAITING FOR THE APPROVAL. You do not want to have to extend the closing date if you can help it for these reasons.

So basically, all you need to do is KEEP EVERYTHING ON THE REAL, and you should do just fine. 

It's when there are either hidden agendas or unrealistic expectations that your short sales will fall flat.

There are many other factors to consider that will create a plan for success, but I try to keep my blogs to a comfortable reading span so that they're not too lengthy.

I'll have some more blogs similar to this in the near future.

All the Best,


Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Bob Miller 05/26/2012 01:47 AM
Real Estate Best Practices
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Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

"My recommendation is to have the buyer submit their deposit upon full acceptance between buyer and seller, prior to obtaining the written approval(s)."


May 26, 2012 01:43 AM #1
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (800) 591-6121

Len, that is good to know.  In California, the short sale addendum states that the deposit is not required until the seller provides written approval from the bank, HOWEVER, it contains checkboxes to override that which makes it easy to change.

May 26, 2012 01:48 AM #2
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Ralph, great post so I took the liberty of re-blogging it!

May 26, 2012 01:48 AM #3
Ute Ferdig
Ferdig Real Estate Solutions - Auburn, CA
Because Getting It Right Matters!

Well put Ralph.  What you mentioned are all points to discuss with the buyers. Most of the points you mentioned are also things that the listing agent will look for in a buyer, which means that a buyer needs to be aware of those items before even making an offer as the buyer might otherwise not even get an accepted offer.  A buyer who won't put money in escrow upon acceptance and can't perform without the closing cost credit is not nearly as attractive as one that puts the deposit in escrow and can close without closing cost credit if the lender does not approve it even if that buyer's offer is for a lower price.  I agree that it's important for the listing agent to provide regular updates.  Good communication is a key factor to success.  Nobody likes to be in the dark or feel ignored and short sale buyers are no exception.

May 26, 2012 04:32 AM #4
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

I like #7 because it's so true. A Short Sale is a drama magnet. It's like you press down on one side of the balloon and the other side pops up. There is always something. Lately, it's been: how fast can we close before some thug breaks in to swipe all the copper plumbing and rip out the AC units / electrical panels.

May 26, 2012 05:40 AM #5
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Nice post.  How do you handle protecting the commission  and when do you recommend inspections take place.  Depending on the property it can get a bit expensive if you have the home, well and septic...

May 26, 2012 06:49 AM #6
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I don't want to sound too cynical but for us the key is to sell the short sale to our own buyer. Most of the time this is one of our long term investors, but between the buyer and a real estate agent who doesn't like the length of time to get a commission I have become a bit cynical.

May 26, 2012 09:25 AM #7
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

Ralph, this is a great list to help couach just about any buyers throught the short sale process. Great job.

May 26, 2012 11:10 AM #8
Your #1 Choice for Southern California Real Estate

Great tips, Ralph! 

Have a nice weekend.

May 26, 2012 12:13 PM #9
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello Ralph,

Great tips, short sales are not for the unaware or faint of heart!

May 26, 2012 12:22 PM #10
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Although I do not agree with 1 and 2, it is a well written and thought out blog. Great job.

May 26, 2012 12:26 PM #11
John Juarez
The Medford Real Estate Team - Fremont, CA

Excellent post! Your laundry list highlights the fact that buying a short sale property is very different that buying a property from a seller who has equity. Buyers who are ill-equipped with adequate patience and financial resources are huge causes of short sale failure.

May 26, 2012 12:47 PM #12
Cheryl Thomson REALTOR Army Ret
United Real Estate (703.216.5635) - Prince William, VA
Associate Broker in Northern Virginia

Although some buyers may have issue with what this I recommend they also have all inspections done prior to bank approval.

May 26, 2012 01:47 PM #13
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Ralph I suggest lots of alcohol, patience and keep looking for other homes:)) Just kidding have a great holiday!

May 26, 2012 04:36 PM #14
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Ralph - Coaching the buyers is so important.  If this were done more often, we would go through fewer buyers in the short sale process.

May 26, 2012 04:43 PM #15
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent
Ralph, This is definitely a step by guide to short sales that I will be keeping.
May 26, 2012 10:05 PM #16
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

All great tips that apply to your market. .

in general, I tie the buyers in all my short sales as much as I can for the first 60 days . .

May 26, 2012 11:19 PM #17
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

Great post - I bookmarked it for future reference.  I agree even when you KNOW NOTHING - it's good to send an email  or call your buyer and let them know.

May 27, 2012 03:42 AM #18
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Ralph Gorgoglione

Hawaii and California Real Estate (800) 591-6121
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