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.

  1. Negotiate a justifiable price. It needs to be close to market value or the lender will reject it.
  2. Realistic expectations. The buyer needs to allow 120 days for short sale approval. If it happens sooner then you are a hero.
  3. Cash or very strong financing with no more than 3% in seller concessions. Get an updated approval letter every 30-45 days.
  4. Deposit at time of contract.
  5. Inspections within 10 days of contract.
  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.
  7. 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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Hi Patricia. I would submit the offer to my seller and then counter at market value. The buyer's agent is not in charge of the transaction.  For the purchase of the property the negotiations are between the buyer and the seller. The negotiations for the short sale are between the seller and their lender. The buyer has nothing to do with the lender negotiations so the statement: "I will submit a lower offer and if bank counters buyer can raise but we want space for negotiations" really has nothing to do with anything.

If the buyer is not willing to commit to a market value price at time of contract hen let them go.

The goal is to always submit a short sale that will be accepted.

The higher the price the easier the short sale.

I disagree. I have been very successful getting the buyer to reveal their "all in" price, which is the highest total dollar amount that they will pay.  This includes contract price and any fees, costs, and contributions that they may be required to bring to the table on the sellers behalf.  Once they give me the high number, I then allow them to lower their offer, as long as it is within a certain range of current comps.  This accomplishes two things:

1-They are more apt to stick it out if they feel they are getting a potential discount.  Buyers rarely walk from my contracts.

2-This gives me negotiating room. This is negotiating 101. Go in low and work up.  If you go in at the high number, there is nowhere to go if the lender counters.

This is a successful strategy because your primary duty in a short sale is NOT to get the best price.  It's to GET THE SELLER OUT OF THE DEBT. If I have a seller that has 2 liens, and the second is with a shlock outfit like Greentree, I KNOW that they will want more than whatever the first is giving. By finding a flexible buyer and creating room, as well as setting the expectation that the buyer will bring extra cash, I am heading the issue off at the pass, rather than reacting to a contribution at the end. I will take a lower offer where the buyer is willing to buy out a sellers deficiency than take a higher, inflexible offer all day long.

Please refer to my article: "Getting buyers and sellers on the same page" for details on how I accomplish this.

http://josephalfe.com/2012/01/getting-buyer-and-seller-on-the-same-...

Joseph. Sorry but I don't agree with that tactic. Agents playing games with the purchase price is one of the reasons why the lenders are taking more control of the pricing and marketing with short sales. It's why companies such as auction.com can sell their services.

A short sale is not a complicated transaction. It's the games agents play that make the process more difficult than it needs to be.

Agents complain about high values coming back from FNMA and Freddie and then on the other hand they submit contracts that they know could be better.

While it is our job to get the seller out from under their debt it's also our responsibility to try and do the right thing for all parties involved in the transaction. If you are a Realtor then the CoE applies.

Plus what you are doing is in direct violation of most lender contract addendum that state:

  • This Parties agree that this Addendum together with the Sale Contract shall constitute the entire and sole agreement between the Parties with respect to the sale of the subject property and supersedes any prior agreements, negotiations, understandings, or other matters whether oral or written, with respect to the subject matter hereof. No alternations, modification, or waiver of any provision hereof shall be valid unless in writing and signed by the Parties hereto.

More and more lenders want these addenda signed and notarized before they will even look at a short sale.

Why not just add a clause to the contract that the buyer will contribute $xxxx to the seller's closing costs? Doesn't this achieve the same thing? And it's then fully disclosed to all parties.

****The position of the owners of Short Sale Superstars is to negotiate the best possible contract then submit to the lender with the full intent of the short sale being accepted with no changes.

Well Brian, we will agree to disagree on this one.  I personally think you are leaning your Fiduciary Duty dangerously towards the lender and not the seller. This is a negotiation, and it is in poor form to go in high, it's as simple as that. And your responsibility is to the right thing by the seller. Period.  You have no duty to the lender whatsoever.

So you are stating that we should go ahead and sign the above statement knowing it's not true? I will never agree to that.

Fortunately in Florida I do not have a fiduciary with any party to the transaction. I'm a transaction broker.

 

Not enforceable. If it were, there could be no real estate negotiation whatsoever.  What if you get an offer and learn that the buyer may be flexible?  Why is it that a buyer or seller cannot sign a contract if there is any indication that the number may move, but the lender can cast aside this at will and counter?

And...you are saying that you do not have Fiduciary Duty to the seller? I hope you are not using the term REALTOR then.

I don't sign false statements whether they are enforceable or not.

Being a REALTOR(R) has nothing to do with being a fiduciary. Not sure where you are getting that from. A REALTOR is a member of an organization. It has ZERO to do with licensing and agency laws.

In Florida we are transaction brokers by default. If I did have a fiduciary with my seller I would still advise them to handle the short sale in straight forward fashion. No games. Full disclosure. That helps to protect them against any future liability.

Florida Real Estate Law:

(b) Presumption of transaction brokerage.It shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer.
(2) TRANSACTION BROKER RELATIONSHIP.A transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent. The duties of the real estate licensee in this limited form of representation include the following:
(a) Dealing honestly and fairly;
(b) Accounting for all funds;
(c) Using skill, care, and diligence in the transaction;
(d) Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;
(e) Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
(f) Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
(g) Any additional duties that are mutually agreed to with a party.

First of all, if you read the disclosure and understand it, it says that the addendum SUPERSEDES any other agreements, etc.  This does not mean that you cannot negotiate price or have a buyer that is willing to pay more.  This means that whatever contract that you submit with this attached cancels out any other agreements. Like so much lender guidelines and rules, it makes no sense because the minute any counter offer takes place the addendum is put out of force.  It's just another subtle way to lead agents to shift their Fiduciary Duty away from the seller and towards the lender, which leads me...

Bryant, help me understand this here...are you saying that you have no agency to the seller and no Fiduciary Duty?  Who then, represents the seller, because if you don't what is even the point of an agent? Who protects the seller?  Who looks out for their best interest? Obviously not you. This is perhaps why our industry is slipping farther and farther out of relevance. This may be why flat fee brokers are gaining market share, because sellers think " agents are useless, so why pay them 6% when I can pay $500?" Maybe this is also why real estate agents have a consumer confidence rating that has fallen to just slightly above used car salesman.

I am in no way directing this at you personally, because I know that you are very skilled at what you do, but rather at your ridiculous state and the industry as a whole. I mean, isn't Florida the same braintrust that also mandated that every contract, regardless if there is an executed contract in force, be submitted to the lender?  This push away from Fiduciary Duty to our sellers is very troubling and will eventually lead to the demise of our professional standards as we know it.

I don't buy it- I've had them come up when they are buyer occupants and after the wait and are in the love with the home- and can not lose it BUT many are investors or those just looking for a deal.  I had one this year where agent said buyer would come up, about 10% less than what I thought it would go for.  We took it and after a long wait, bank countered at what I expected on for buyer to counterback 5% lower than their contract offer. What??? It all comes down to comps- if the price can not be justified by it at time of offer it is going to be a hard battle- especially with money going to 2nd loans, etc...there isn't that much of a discount. Ever since I followed Bryant in recommending seller taking offers for what I know they will go for- things have gotten a lot better. A bad offer just wastes time of the market and you can get way to close to a trustee sale for comfort.

I have a hard time asking someone to pay $500 to $1000 for inspection when we can't guarantee the short sale will even be approved and at what price. I don't know if I was the buyer's agent if I would want him to do inspections . . . but I guess you can always ask.  Thanks for some great ideas though! I loved #6 and 7.  

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.

I completely agree Stacey. My experience is that buyers have no issue doing inspections up front UNLESS their agent has persuaded them differently.

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