Agents are familiar with banks requesting the purchaser of an REO property or the buyer of a short sale to furnish proof that the buyer is pre-qualified before the bank accepts the offer. However, turnaround is fair play. If you have a qualified buyer why commit them to a property for the next 60 to 180 days only to discover the short sale will most likely be rejected?
Unfortunately, many realtors take short sale listings and have no clue what they are doing. Even worse there are title companies or law offices that have little experience processing them. First before submitting an offer, ask the listing agent these questions:
1. Is this a realistic price which can be supported by recent comps? Quite frequently agents list the property well under market value or alternatively foolishly fail to negotiate a short sale contract and submit the low ball offer to the bank. Wrong approach! The number one reason most short sales are not approved is because of the price. Don’t let a listing agent lure your buyer into being married to a contract that will never be approved.
2. How many mortgages and how many liens are on the property? If you know up front there are three separate mortgages on the property you might want to think twice before submitting an offer as it may be a real challenge to get the cooperation of all three lenders. Similarly, judgment liens present additional issues.
3. Is the loan in default? Regrettably, banks are more motivated to accept a short sale to get a non-performing loan off their books. I cannot encourage sellers to stop making payments, but experience has taught me that banks are more receptive to short sales once the loan has gone into default. If the borrower is current, the bank does not have as much of an incentive to take less than the full payoff amount of the loan.
4. Is the property presently in foreclosure? If so, at what stage? More times than I would like to think, short sale contracts have been presented to our office days before a foreclosure sale. Unfortunately, this is typically a recipe for failure if previous negotiations had not already been commenced and a prior dialogue established with a negotiator who has the power to stop the sale.
5. Who will be processing the short sale for the Seller? The Realtor or the Closing Agent? What experience do they have? I have painfully represented buyers to watch their reasonable short sale offer rejected by the lender simply because the seller’s realtor and closing agent did not fully understand the process. Without representing the seller I had no authority to communicate with the lender. If there is not constant contact with the lender and if financial information is not updated every 30 days, the file will be closed.
6. Beware: There is no such thing as an approved short sale! What the banked accepted with one buyer does not mean they will accept the same deal again. Investor guidelines frequently change. Even if the price was approved, each closing has a different set of closing expenses. Commissions are constantly being altered by lenders as well as many other factors. If an agent represents the short sale has been pre-approved, force them to show you the unconditional letter of approval as a condition of submitting an offer.
At the end of the day, do yourself and your buyer a favor and use due diligence before you submit a short sale offer. Turn the beat around and be the one who determines if the seller, realtor and closing agent are worthy of your time and energy. A little investigation now can avoid a lot of frustration later and will provide you with a greater sense of whether your short sale will be approved.
Law Offices of Ronald S. Webster
239-394-8999 Phone
239-394-3511 Fax
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