So often buyers say they don’t want to get involved in a short sale because they believe short sales always fall apart. However when one explores why short sales so often fall apart they are likely to find the buyer frequently plays a significant role. Sure, one can argue that there are difficult lenders who refuse to negotiate or make financial demands that the seller couldn’t possibly meet or that occasionally the seller isn’t cooperative. But the more common scenario is that the short sale seller is very motivated and sees the short sale as their last hope. Most short sale sellers feel very vulnerable and that they have no other choice but to trust a complete stranger, the buyer, to make a sensible offer and have the patience to wait for the outcome. Sadly more often than not, this doesn’t happen. Most short sales will go through multiple buyers before final approval and the actions of each buyer can greatly affect the short sale’s success.
The first error a buyer can make to negatively impact a short sale transaction is working with an agent who is not experienced in the short sales. Although the seller’s agent is the one working with the seller and lender to get a short sale approval, the buyer’s agent can complicate this simply by not understanding the process and expectations. The buyer relies on their agent to advise them and an inexperienced short sale agent will not be able to adequately keep their buyers informed.
A frequent error a buyer makes is to submit an offer on a property which is way higher than the list price to ensure that the bank will choose their offer. Then when the bank takes the usual multiple month process to approve the offer, the buyer then decides the offer was too high because the market has depreciated. The buyer then walks away from their offer leaving the seller holding the bag and the bank demanding the higher purchase price which no longer entices buyers since the offer was too high to begin with. In this situation, the seller and their agent must try to convince the lender that the property is actually valued too high creating a time consuming uphill battle. Meanwhile the lender will deactivate the file because there is no current offer. This leaves the seller with no ability to postpone their pending foreclosure.
Another common buyer mistake is to treat the short sale as a normal transaction. When making an offer on a short sale the buyer must remember that the seller is merely a conduit in this situation and they are actually dealing with the lender. Dealing with the lender means that all seller paid expenses are actually being paid by the lender and therefore the buyer can’t keep asking for things to be paid by the seller. Many buyers make an offer asking for a credit back at closing. Lenders won’t even consider a credit over 3% and frequently reject any credit whatsoever. Short sales are “as is” sales which means the buyer accepts the property in its current condition and the lender doesn’t have to pay for repairs. In addition, the buyer doesn’t control the escrow timeline, the lender does. Once an approval is reached, the lender will state the closing date. Extensions are not guaranteed and when granted may cause lender imposed per diem fees that the buyer will be required to pay.
Finally, the buyer must have patience; there is nothing short about a short sale. Even a “pre-approved” short sale can take some time to get “re-approved”. More often than not when buyers walk away from a short sale it is in the final weeks just prior to the approval. Unfortunately for the seller, even if there is another offer waiting to be submitted, the lender doesn’t exactly pick up where they left off which equates to a one step forward two steps back type scenario. In most cases it doesn’t help the buyer either. When they walk away and start over by making a new offer on a property, whether the new property is a short sale or not, they have wasted time. Whatever their reason, the buyer should take the decision to walk away from a short sale they have invested time in very seriously. If they change their mind and decide to resubmit an offer, it is not likely the seller or the lender will reconsider their offer the second time around.
Homes-in-Stockton has a buyer database of over 20,000 names and a proven short sale success record. Both sellers and buyers considering entering the short sale market can have the confidence that Homes-in-Stockton is the San Joaquin Central Valley’s short sale specialist! Call me at (209) 471-6516 or email me at [email protected] regarding any questions you may have regarding Stockton real estate, Lathrop real estate, Lodi real estate, Manteca real estate or Tracy real estate.