Representing buyers in short sales can be tough.
One 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 Mortgage.com