The Buyer’s Short Sale Transaction

It was not more than  two or three years ago that I sat in a sales meeting where short sales quickly took over the conversation.  By that time, we had all lost countless hours put in on a number of short sale transactions that never closed.  We lost buyers, too. As well as our patience.  In the end, agents just decided to avoid them whenever possible. Things are a little different today, but to give you an idea of how these deals can turn out, here’s a brief accounting of my history with short sales, scanning the last three years.

My first experience with a short sale took place just before the market took a dive. We had received an offer that was $5,000 short of what was owed on this house I had listed for a client. Because they had already missed payments, someone suggested looking into short sale. We had less than two weeks to closing and the buyer did not have time for extensions. It wasn’t easy but the buyer and I were diligent in keeping up with the bank and they managed to pull it together and we closed on time. Can you believe that?If only…

My next transaction went on for three months with no reply from the bank. The listing agent finally said, “Oh my God I am so sorry, but the the asset manager told me your offer was thrown away because it was too low. They had no intention of countering or responding at all because they are too busy.”  That buyer bought a home the following weekend from a builder at an open house. Too bad for me.

My next 2 short sales took 5 weeks from purchase agreement to close – the same time as any other deal. Those buyers were very happy.So was Mama.

After that I had 4 short sale deals that died. Two of the buyers disappeared afterward and two went on to buy something else with me. In all four cases the bank FINALLY responded within a week of either the buyer walking away or closing on an alternate property.  Crazy, right?

Side note here: One of the deals above that died was a full price offer that went on for several months with no reply from the bank. The agent confirmed that it had been received and that the asset manager was aware of the offer, but we had to wait our turn.  The problem with all that waiting is that the paperwork on file is ticking and by the time it is finally your turn, that paperwork is expired, causing more delays as everything is refreshed and resubmitted. In the unfortunate case of this particular house, my homeless stressed out and confused (yet amazingly gracious and patient) newlywed buyers were not the biggest losers. While the bank took its sweet time, the house went into foreclosure, having missed out on our full price offer.

As much as we wanted to avoid short sales because of the risks and nonsense, and headaches, and wasted time with no commission, the core of our buyer’s agency is that we act in the best interest of the client, not our own or anybody else’s.  And sometimes you just had to face the fact that the best house for the client was one that happened to be a short sale.  We just sort of learned the hard way to prepare our potential short sale buyers for the very worst.

We learned that 3 to 6 months to close is too optimistic to predict. Better make it 6 months to a year.  Whether they choose a different house because they don’t have that kind of time to wait, or they decide to give a go because they are in no hurry, we know that we have set aside our own negative feelings about short sale negotiations and have helped the buyer make an informed decision and acted according to their best interests.

The market is now flooded with so many short sales, it would be hard to avoid them if you wanted to. Luckily over the years the negativity has worn off a little bit and all parties are learning to handle them more efficiently and maintain more realistic expectations. We are even finding that the process is more beneficial to sellers than we originally thought, whereas before there were concerns about future ramifications. Be sure and check out The Seller’s Short Sale Transaction to get a better idea from a seller’s view.