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Top Secret Short Sale Tips for Buyer’s Agents



Representing buyers in short sales can be tough.

shortsalesignOne chronic criticism of my short sale blog posts is that they primarily address the perils of the short sale listing agent: troubles with mortgage lenders, issues on the preliminary title report, etc. But, truth be told, short sales can be a real headache for buyer’s agents as well. Actually . . . perhaps the word migraine might describe the feeling a little better.

There are many challenges that buyer’s agents may face when writing offers on short sale properties. Let’s discuss the most obvious one: the buyer’s agent has a fiduciary obligation to get his or her buyer into the home that they desire. How on earth will that ever be possible if the property that the buyer wants is a short sale? You see, with a short sale there are absolutely no guarantees that the bank is going to accept the buyer’s offer and generate a lien holder approval letter (required to close the transaction) with terms and conditions that are also agreeable to the seller. That right there is a risky endeavor—putting your buyer into “limbo” for multiple months while other properties on the market come and go. In the end, if the deal goes south, the buyer(s) will be frustrated and disappointed and may even hold the buyer’s agent partially responsible for putting them in that disagreeable situation.

Well . . . here are some TOP SECRET tips for buyer’s agents who are inclined (or required) to show short sales:

Pre-qualify the property and the individual doing the short sale negotiations prior to showing the property. Call the listing agent and ask a few questions in order to determine who will be doing the short sale negotiations and what the process will be. If you listen carefully, you will determine whether this agent is a crackerjack listing agent who can get the deal done or whether your buyers might like to consider other properties instead. (Your first clue may come when you leave your voice mail message for the listing agent. If you do not receive a return phone call in a reasonable period of time, this might describe some of your future concerns with regard to the transaction.)

Write an offer with an “out.” The California Association of Realtors now has a Short Sale Addendum where you can specify an exact date that you will require lien holder approval (or the purchase contract will be null and void). Of course, you can always extend the date. So, write into your purchase contract some sort of clause that states that lien holder approval from all lien holders must be received within a specific time frame. If you do this and your buyers are unhappy with the status of the transaction, it will be easier to move on.

If you live in an area or work at a price point where most of the listings are short sales, then here is my favorite way to get buyers into a short sale quickly. (SSSShhhh. Do not share this with your competitors. Can you hear me whispering?) Look up all the short sales that are “pending” or “contingent” on your local MLS—especially those that have been on the market for more than 100 days. Call all of those listing agents and ask whether their buyers are still on board. Since the average short sale listing agent has a close ratio near 30%, it is likely that about five to seven of every ten short sales may be in need of a replacement buyer. If you can write an offer on one of these properties that is about to get short sale approval (or has just received an approval in the last few days), your buyers should be able to see a successful closing in short order.

If you are a buyer’s agent working short sales and you try these techniques, your migraines may dissipate into dull headaches, and you may even have additional successful closings!

Photo: The Truth about

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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  1. Mike

    February 16, 2010 at 8:00 am

    Better yet, I look up the recent, (back one year or so) sold/expired-withdrawn record of the listing agent. If they have 5 solds in the last year and 35 exp/wthd, RUN away. Many agents in my area just don’t bother to return emails or voice mails.
    Another thing that I have done is write into the contract, a 48 hour time limit contingency for the property to be changed to under contract in the MLS, so they don’t continue to take offers.

    • Melissa Zavala

      February 17, 2010 at 2:31 pm

      Mike: That is a great way to pre-qualify a listing agent!

  2. Doug Francis

    February 16, 2010 at 8:38 am

    Excellent idea about following up with the “pending” transactions… that little nugget is going to make someone’s day today!

  3. Rob McCance

    February 16, 2010 at 6:06 pm

    There’s no reason buyers should ever be “in limbo” waiting for a bank approval.

    The sales contract is between the buyer and the seller, written as normal with all the normal contingencies and time limits, etc.

    Then, you add one contingency: The “Short Sale Contingency” that (most basically) states that if the mortgage lender(s) do not approve the sales price within x-days of closing, either the Buyer or Seller may terminate this agrrement without penalty.. upon notice…etc…bla bla.

    Make x-days to be just before the contingencies expire. Make the contingencies as long out as you wish to be “in limbo” for.

    Also, this way, you don’t order any costly items (appraisal, inspection) until the bank responds.

    Or in GA, with our Due Diligence period, there’s no limbo whatsoever, regardless, if you write it up correctly.

    • Melissa Zavala

      February 17, 2010 at 2:33 pm

      Rob: Each state has different documents as you point out here. The important thing (as you definitely state here) is to make sure to write an offer that protects your client.

      • Rob McCance

        February 17, 2010 at 2:56 pm

        I agree completely. And good article btw, didn’t want to sound disagreeable, just pointing out how we do it here in GA. (or should!)


  4. Bruce

    February 16, 2010 at 9:20 pm

    Interesting ideas. I’m seeing a rise in deals falling through on short sales in our market. This may be just what some of my buyer’s needed, a shred of hope.

  5. Barry Cunningham

    February 17, 2010 at 8:03 am

    “Your first clue may come when you leave your voice mail message for the listing agent. If you do not receive a return phone call in a reasonable period of time, this might describe some of your future concerns with regard to the transaction”

    That’s funny! Do that and you eliminate 90% of the agents doing business…at least in South Florida that is. They NEVER return phone calls. I received a reply to an email that I sent 6 months ago…last week! Amazing…the more things change the more they stay the same.

    What you’ve written here, we have been teaching for nearly 3 years…but your post underscores the main problem with short sales. That being that by this time there are still so many agents who don’t know how to execute them.

    That’s a really sad state of affairs. I applaud you for doing your best to bring agents kicking and screaming into a state of proficiency. Keep it up…PLEASE!

  6. Don Jacks

    February 20, 2010 at 10:21 am

    Great info.
    Mike, the 48 hrs to change to pend in MLS, priceless. Thanks
    Bottom line, do your homework on the property as well as the agent and you will begin chosing the “closeable” short sales to write offers on.

  7. Missy Caulk

    February 21, 2010 at 7:13 pm

    In my area, we always have to call the listing agent because agents don’t change the status until the bank signs.

    We have a form we are now using that says the buyer must be prepared to wait 90 days before moving on. We do this so they will understand it is long wait.

  8. Barry Cunningham

    February 21, 2010 at 7:53 pm

    Ummm…Missy..Until the bank signs what?

    Please tell me some nearly three years into this that agents STILL don’t understand that the deal is between the buyer and the homeowner? The homeowner MUST sign the contract with the Buyer and THEN approval is obtained…but where I come from as soon as the contract is signed, the deal is pending…regardless of how long it takes for the bank to come back with a SHORT PAYOFF” approval.

    Are you intimating that there are actually agents out there who STILL don’t understand that the Seller has to sign the contract and that the bank isn’t party to that contract?

    Hopefully I misread you but your response blew me away!

  9. Joan Lorberbaum Moore

    February 21, 2010 at 8:04 pm

    And in my area once the seller has signed the presented contract the listing agent has 48 hours to place the listing on contingent status with the contingency being 3rd party approval.

  10. Missy Caulk

    February 21, 2010 at 8:17 pm

    The agents in my area, do not change the status to CTS= Continue to Show but Active.

    They do not do this until the bank accepts the Short Sale, it shows Active in the MLS.

    Heck, Barry one big agency here just told their agents to NOT deposit the EMD until the bank approved. We had just had con-ed with our MAR Legal Counsel and he said the opposite.

    As you know…some agents have no clue.

    One of my team members wrote an offer on a short sale, very competitive offer a few months ago. The listing agent countered, they went back and forth and it never came together. The house is now bank-owned and listed for less than my team member offered. I don’t counter short sales, (only 1 time) I just send the offer and package to the bank, signed by the sellers. The one time, we did counter was when the offer was 100K under asking price and I knew the BPO would not justify this, but if they are in range I don’t have my sellers counter.

    So when I call, I have ask the listing agent, “do you have the package ready to go.” I can’t tell you how many times I have been asked, “what package?”

    • Melissa Zavala

      February 21, 2010 at 8:31 pm

      Missy: I do think that it is sometimes a good idea (as a listing agent) to counter some of the other terms and conditions of a short sale offer (but leave the price to the bank if it is within reason)–in order to assure that the buyer is serious. There seem to be so many ‘outs’ for both the buyer and the seller.

    • Barry Cunningham

      February 21, 2010 at 9:32 pm

      Wow Missy…that’s really a sad state of affairs. What’s wrong with so many agents not getting it…still? Something should be done about it….you know we get our shorts done in under a weekn when there’s no agent involved. They make the business seem so difficult when it really isn’t.

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Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!



magic eight ball

magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:



short sales standoff

short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.



short sales

short sale approval

Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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