Good morning Superstars.
So you have been working for 4 months to receive short sale approval only to have the buyer walk. As a short sale listing broker myself this is the most frustrating part of the short sale. All my hard work for naught. Plus it places the seller one step closer to being foreclosed on.
Here are some things you can do to help keep the buyer on board.
- Negotiate a justifiable price. It needs to be close to market value or the lender will reject it.
- Realistic expectations. The buyer needs to allow 120 days for short sale approval. If it happens sooner then you are a hero.
- Cash or very strong financing with no more than 3% in seller concessions. Get an updated approval letter every 30-45 days.
- Deposit at time of contract.
- Inspections within 10 days of contract.
- Put in the contract that the buyer will pay some of the seller's closing costs. I use $500. Just enough to cover those pesty estoppel fees and any other charges the short sale lender may not allow.
- Send out weekly updates to the buyer side. Specifically state how many days it has been since contract. "We are currently 54 days into t a 120 short sale contingency"
Give me a qualified, realistic and patient buyer and I will get the short sale approved and closed about 95% of the time. It's a safe bet.
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We have to be careful about some of these offerings of advice, though. In Phoenix, we are in situations where buyers are being completely stripped of the their contractual rights in many SS, and many SS are in worse condition than HUDs!! It's crazy!! Many agents do not have the knowledge, experience, or ability to make a short sale work. So before you ask my buyers to pay attorney fees because the LA is 3rd partying out, or ask my buyer to do an inspection 90-120 prior to close (and then have a seller that couldn't care less about the condition of the house), or pay non-refundable earnest and/or closing costs ... A) you'd better be an agent that knows what you're doing and don't nearly curse me out when I call to ask you about your processes, B) the seller had better care about the home and my buyer, and C) the seller needs to be educated about what a short sale is (a privilege of the release of thousands of dollars of debt) and be willing to work with my buyer in a respectful manner. Brian's list can be taken as an excuse to not do your job as the LA, and if I buyer's agent calls you to ask you how you handle short sales ... it's probably a good buyer with the good agent. As a buyer rep and SS listing agent with an extensive corporate finance and investment banking background, if you want a quality buyer, it's earned ... Can you tell that I'm sick and tired of walking into trashed out short sales and looking at the documents sections and literally getting angry because there is not way I can recommend those homes? If everyone would just do their jobs -- get educated, and then educate our clients -- we'd all be in a lot better shape.
I agree Marti! I am a prospective buyer of a SS that may or may not work out. A month ago, it looked goodm, UNTIL... (after I paid appraisal fees and condo docs, by law fees normally paid the by seller) that the seller's (who is deceased) her conservator children did not fill out the required paperwork giving the court permission to sell!!! After almost a yr, NOBODY picked up on this, not the bank, not their agent or atty. In addtion, even though we are approved for the amt to buy the place, now we are having to work harder at getting financing (its a condo) b,.c apprantely, one person owns more than one condo in the unit. All unknown to us all those months we waited, and waited again (when our second appr came in lower cause three months had gone by). My husband was just saying its like no one cares!
Great tips! I do most of them but #6
"Put in the contract that the buyer will pay some of the seller's closing costs. I use $500. Just enough to cover those pesty estoppel fees and any other charges the short sale lender may not allow."
What is the exact language you put in the contract? I usually just have the seller counter with the buyer paying for the seller courier, estoppel fees and the other fees the short sale lender typically disallow.
Much has to do with the Buyer's true intent. One consideration with regard to offers contingent on bank financing is that banks want a fast transaction, a guaranteed fast transaction. Buyers who make offers before having loan approval from their lender can really hamper a sale. I suggest requiring that a pre-approval letter be submitted with all offers.
Though we may be seeing a slow down in short sales if the Obama administration does not renew the Mortgage Debt Forgiveness Act. More about this can be found in my recent article "Looking for Real Estate Deals? Consider Short Sales" at http://www.bankforeclosuressale.com/wp/article-12124095.html.
I wish my agent and the seller had your list! We, as buyer/occupants would love the 7 steps to be implemented by our representatives! I forwarded the list and this site to my agent. He is such a clueless sweetheart!
See, thats the thing, we did all of those, CEPT never received weekly updates. Our second appr was to low, now back to waiting! I would love it if someone would just keep me updated.
Hi Joseph.
Here you are:
http://ttrealty.ning.com/profiles/blogs/transaction-brokerage
and....
http://activerain.com/blogsview/349831/agency-it-s-as-clear-as-mud-
I understand, Bryant, I'm just amazed. Florida law is beyond kooky and ultimately acts to the detriment of our industry and the sellers.
Here in Massachusetts, my agents use a short sale offer addendum which obligates the buyer to remain a party to the transaction during the short sale approval process. If the seller is making the commitment to take the property off of the market and submit the buyer's offer to the short sale lenders, I think it is only fair the buyer gives a similar type of commitment. Any good attorney can draft the language to suit your needs. My rider asks for a minimum of 60-90 days to get the short sale approved, depending on the lender and amount of lien holders. If the buyer walks before that time, they lose their deposit. The Rider also requires the buyer to do their inspection prior to submitting the offer to the short sale lenders.
Read more here:
http://closingtableblog.com/2011/05/how-to-keep-buyers-committed-to...
DISCLOSURE: I AM NOT A LICENSED ATTORNEY AND DO NOT PROVIDE LEGAL ADVICE. THIS INFORMATION IS NOT INTENDED AS A SUBSTITUTE FOR COMPETENT LEGAL ADVICE. PLEASE CONSULT AN INDEPENDENT LICENSED ATTORNEY BEFORE AGREEING TO A SHORT SALE.
Andrew N. Coppo
Greater Boston Short Sales, LLC
Tel (617) 264-0376
Fax (800) 641-1837
Email: andrew@gbshortsales.com
I do each and every one of these with the exception of the seller's closing cost and updated approvals. Thank for the recommendation Bryant on updated approvals! One other thing I do is make the EMD non-refundable for 90 days. It helps prevent buyers who put in offers on multiple deals at the same time and commits them to the purchase.
I think the problem with agents who feel uncomfortable with these steps is they are thinking like a buyer's agent. You have to think like a SS listing agent and make your deal air tight.
@Patricia, you don't "believe in a buyer," you make them prove to you they are a worthy buyer! Never take low ball offers either. Banks aren't going for that. They know the value, and the buyer's agents do too. These are the one who most likely walk when they don't get some ridiculous offer.
@Karen, whether it is now or later, they will have to pay for inspections. If something turns up that kills the deal for them, they can bow out now and move on, because whatever it is will show up now or in 60 days, so really it is just a matter of not wasting precious time - for the buyer and more importantly the seller. Would you rather they bail now based on inspection, or in 60 days when you have worked hard on the deal and/or lost other potential buyers and your seller is that much closer to FC? Sometimes, depending on when the seller reached out to you for help, you don't have time to find a replacement buyer and your seller is dead in the water. Done. If the inspection is done upfront, you can avoid that.
These are not traditional sales and there is some amount of risk. If they can't handle paying for a $300 inspection up front to let them know if they even want to be in this for the long haul, then maybe purchasing a short sale is not for them and they can move on.
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