I need some suggestions on requiring the buyers to have some "skin in the game" when purchasing my short sale listings. When a buyer agent presents a contract to my seller they are required to submit it along with my buyer agent guidelines which set expectations for purchasing short sale properties. The first line of the guideline specifically states "Short sales are a complex transaction and the buyer must be willing to wait at least 90-120 business days to close. If buyer is unable to wait this length of time we would suggest they not present an offer" With that being said, buyers are walking away within 30-45 days. Any suggestions on how to keep them in the game??
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I agree with all the suggestions here on documenting expectations for the short sale process.......however, I must add that listing agents/negotiators do themselves no favor by the limited communication that some give. I have had several short sale listings over the past 5 years and this year I have had alot of my former sellers back in the market to purchase......as a buyer's agent waiting for short sale approval............OMG.......it's unbelievably aggravating. A simple system of stating updates will come every ____ days even if nothing has progressed would work miracles in the minds of buyers who sit for what feels like eternity waiting for any word or update......make sure you have that system in place and I suspect you would lose less buyers during the process.......
And for those that just let the negotiator do the communicating back to the buyer's agent.......think again!! My experience shows me that is doesn't work........the listing agent should be able to answer all questions on the transaction......it is not a delegation process! I have had a couple of those experiences also......
From a BA perspective, all short sales are not guaranteed to be closed and communication is essential for confidence that the waiting is worth it........
A big part of the reason was the utter lack of communication. We had a dual agent who completely washed her hands of the process and left all in the hands of seller's attorney. He was so non-communicative that he just ignored any efforts we made through our lawyer to get updates. The first communication we got that wasn't prompted by a call from us was when the BPA was done 90+ days after offer and then about 45 days later when the counter finally came in.
Maybe if buyers felt like they were part of the team instead of the enemy, they'd be more bought into the process ... our skin in the game is the total lack of certainty
about whether a deal will go through. Spending 3 to 6 months in limbo about a major life decision is a part of the skin the buyer has in the game!
Here are my "Rules of the short sale" If buyers don;t agree, we pass and go to the next, no exceptions.
1. 90 contract time
2. EMD up front
3. Normal 10 day inspection (not at lender acc.)
4. Normal 5 day attorney review (Not at lender acc.)
5. Proof of funds (for cash buyers or downpayment)
6. DU/LP Accept (for financed buyers, mortgage broker pre approvals not accepted)
7. 100% tax proration
8. Short Sale Fee Agreement (if I am negotiating)
If all of these conditions are met, we will allow buyer to lower their offer (as long as comps dictate a reasonable range) This is a powerful incentive that keeps buyers in the game and gets them to play by my rules. The result: Buyers rarely walk away from my contracts, but you have to educate sellers as to why we do this and prepare them to say no to certain buyers that will waster our time.
read more about my strategy on my blog:
http://josephalfe.com/2011/11/hello-world/
The name of the game here is commitment.
www.ssprocessors.com
www.josephalfe.com
Joseph,
Tell me more about your short sale fee agreement. I negotiate all of our short sales.
Please visit www.josephalfe.com
Joseph Alfe: I could not possibly agree with you more. I've had numerouse buyer agents tell me "nobody does inspections, or deposit, just after contract". Welllllllll, if you want a contract on this short sale you will. The buyer needs to "want this property", and YES, have some skin in the game. Also, those inspection reports help you justify the lower price.
Stephanie,
this may be an issue that you want to have a better addendum written by an attorney. In our area, the short sale addendum states that the buyers must wait <fill in the blank> days for short sale approval, and then close within 45 days of the approval. If a buyer walks before that time, I don't believe the seller would have any requirement to return earnest money (unless there was another contingency that was triggered, like home inspection or inability to get a mortgage).
Jim
In that case, does the seller receive the earnest money? I have attached the guidelines that we use.
Buyer and Agent Guidelines.pdf
You might want to change "I have read and understand this document" to indicate that they somehow agree to what is in the document.
I can read and understand something without actually agreeing to it. Do it all the time!
Get a substantial deposit at time of contract and have the inspection contingency removed within 7-10 days of contract. Treat it just like you would a regular equity transaction.
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