Do Your Homework
Lately, I’ve been plagued by issues with short sales that could have easily been resolved had the buyer’s agent done his (or her) homework. You see, while this may sound very negative, the truth of the matter is that some short sales are just not meant to close. When there are too many liens on a property or when it is very close to the foreclosure date, the short sale negotiations may be destined for failure. It seems like it would be a good idea for buyers’ agents to look into all of the potential pitfalls before writing a an offer on behalf of clients.
So, if you are a buyer’s agent and you want your buyers to feel really good and see a closing in the near future, there are a few questions that you can ask that will save yourself and your clients from a world of trouble. Here are my five favorite questions:
- How many offers are you (the listing agent) sending to the bank? If the listing agent says the s/he is sending all of the offers to the bank and that the seller will not be accepting and signing one offer, run like you are Forest Gump. The listing agent has a fiduciary duty to the seller and should submit the best (not always the highest) offer to the bank. Submitting all of the offers and expecting buyers to just hang out and wait will result in a lot of cranky customers.
- Has the foreclosure (auction) date been scheduled? The truth is that you may not even need to ask this because you (a savvy buyer’s agent) can probably check this out through your local MLS. If an auction date has already been scheduled (or if one has been postponed several times in order to entertain a short sale), then there may be a foreclosure (and not a short sale) in this property’s future. Set expectations with buyers that this may not be a win-win situation.
- How many liens are on this property? Are there any other liens aside from mortgage loans? Again, you may need to do your homework here. I’ve heard horror stories of agents obtaining short sale approval from a first trustee, only to learn later that (oops) there are actually two loans on the property. Additionally, there may other liens (such as federal taxes or child support) that may hamper the closing of this short sale. Seek this information out before getting your clients into a losing battle.
- How many short sales have you closed this year? You can use your local MLS in order to do a little recon work on the seller’s agent. Check out how many short sales s/he has closed and whether this individual generally represents buyers or sellers. If this is a new thing for the listing agent, suggest a mutual and experienced third party (c’est moi if you are in California) to get the job done.
- Does this property qualify for an FHA loan? Will condos in the complex qualify for financing? Now, this may not apply to your buyer, but there are many properties on the market these days that may not (due to condition or location—in an HOA) qualify for FHA financing. Why write an offer on one if you are not going to be able to close? Additionally, many condominium complexes are currently facing litigation. Such legal matters often impede a buyer’s ability to obtain a loan.
So, the next time that a buyer’s agent contacts me to ask for advice on their ‘woe is me’ short sale situation, I’m going to ask if they have asked the magic five short sale questions of the listing agent. If they haven’t completed the due diligence before writing an offer, there’s nothing I can do to fix the situation—short of waving my magic wand.
Photo: flickr creative commons by erjkprinczyk
October 25, 2011 at 4:27 pm