Blog

Kevin Post, Business Editor for my local paper, the Atlantic City Press, wrote an article for today’s Sunday edition you can find it here. The article reported that people are LESS satisfied with the process of buying and selling a home.

That makes my head spin for several reasons.  First interest rates are at all time lows.  Borrowing for those who qualify (and I assume that almost every home buyer interviewed financed their purchase) is as good as it gets in this or maybe a few lifetimes to come.  Second there is a large inventory of homes on the market and generally sellers are aggressively wanting to close deals.  Real estate agents are going belly up and fleeing the profession every week leaving  fewer, more qualified agents with time to assist their clients.  I could go on but all signs point to more satisfied buyers, all but one important one.

The Short Sale process and the failure of agents to effectively handle and communicate the special circumstances of these types of deals.  It begins with many agents not knowing what to expect.

I have to admit I didn’t have much of a clue myself when I signed a contract to purchase our family home as a short-sale almost three years ago.  I studied real estate in law school, understood the foreclosure and tax sale process and knew how to evaluate the pros and cons of bankruptcy for a client.  I had not done a short sale but the deal on the house was too good to pass up so I dove in.

Every agent who is working with a short sale buyer needs to understand and communicate the following so their clients are satisfied by the experience, seek out the agent again and refer the agent to friends:

There is more paperwork in a Short Sale - A short sale packet is over 100 pages.  It takes time to build and it takes time to review.  Once I am retained I begin putting together the packet, most of it is financial information about the seller’s condition and the property condition and value.  Most sellers do not have this information readily available and take up to 30 days to put things together and turn them over which is one of the most frustrating choke points.  Some agents and negotiators wait until the contract is signed to start gathering this information which extends this process even longer.

There are more parties that need to approve the sale - In a conventional sale the buyer sends a contract to the seller, the seller signs, inspections are done, title is ordered, mortgage companies are satisfied and things move to closing with 30 days or so.  With a short sale the lender needs to approve.  They review the packet of information, may request additional information, wait until any bankruptcy proceedings are completed, order an independent appraisal of the property, review comparable sales and each lender follows different internal protocols… get the picture?

There is a different timing to things - In order to protect both the buyers and the sellers there needs to be a short sale addendum which details how things will proceed including when to do inspections, how long a buyer is willing to hold on, how and when the deposits are to be delivered.  Buyers need to know there is more to the dance of the short sale.

The homeowner is distressed and distressed people do strange things sometimes - I could tell you but you probably would not believe me.  Telling you would do you no good either.  You see people are original and create new and amazing ways to do stupid things, self-destructive things, especially people who are losing their home.  Real estate professionals need to do a better job talking sellers through the situation, counseling them and giving them realistic hope about re-entering the housing market in a 2-5 years.  In doing so they prepare for themselves a hot list of clients for the future.  Trust me and ask me if you are an agent reading this and are interested about how this can sustain your business while helping people and improving the communities you serve.

The process takes time, often up to six months from contract to approval - Most agents and repeat buyers are used to 30 days to close.  Because of the circumstances listed above, a more realistic plan is 120-180 days to close.

My house took 14 months but it was the most tangled mess anyone had ever seen and it was one of the early transactions.  However we hung in because we could and because the house was right for us.  However there were days when I wish I would have known what to expect.

There are agents in southern New Jersey who are promising 45-60 day turn around to hook people in, the truth is if everything went exactly right it might happen.  But in almost every case it is a pipe dream and the agent knows it.  Furthermore there are agents who are negotiating short sales for sellers who neither understand or care about the legal ramifications of the papers their sellers are signing.  “They will never buy another house anyway”, I have heard out there.

If not legally, then certainly professionally, the agent that takes these reckless steps and over-promises on what they can realistically deliver will pay a heavy price.  Sadly it is often the clients who pay most dearly in these scenarios (i.e. Bernie Madoff, Enron and any Ponzi scheme you can name).

Agents need to understand the realities and communicate truthfully with their clients.  It will cost a deal or two along the way but it is the right way to do business and in the end that matters more to a professional.  Buyers and sellers need to make sure they do their homework and resist falling for the false promises of unscrupulous transients.  Ten years from now when that person is your waiter or waitress or jitney driver you will be glad you invested the time to read this column all of the way through.