I’ve thought for months about writing a post about short sales and why they are such a huge waste of time. Well, just yesterday another of the many short sales I’ve worked on went in the toilet. I decided it was time to write something to warn potential victims that they are likely wasting their time trying to buy a short sale.
This time I thought it might be different. It was a short sale approved by the bank at the asking price. My client made a full price offer and I was told it was just a matter of the bank approving our specific offer. Then the trouble started.
The selling agent called and said that there wasn’t enough money at the asking price to cover all the liens and expenses and that she was going to send me a counter offer. The bank had already approved the deal and it’s basic math to figure out how much you need to close so I was suspect of this agent’s competence.
A few days later she called to tell me that everything was worked out and that we could go into escrow at the agreed upon price. Escrow opened the next day.
Escrow instructions came out two days later and the deal was changed again. My commission had been cut by one half point (Before you say who cares, I give back all commissions over one point and that half point would come out of my client’s pocket), they were not going to pay for a home warranty policy for my client, there was no money for a termite inspection and they were short by $2,000 for funds to cover liens and expenses.
I told my client that this wouldn’t be the end of the problems and that he was going to end up getting screwed. He agreed and I got the pleasure of telling the listings agent to stuff the deal where the sun rarely shines.
EVERY short sale I have ever worked on has been a waste of time. The listing agents are lazy or incompetent and they’re just going for volume listings hoping that a few will go through. The bank owned deals are priced just as well and you’ll have far fewer headaches.
I’ll publish my primer on short sales shortly.
Brad Davidson
We Help-U-Buy Realty
Thanks for the article, Brad. I’ll probably exclude short sales from my radar. I’m always glad to see honest realtors/brokers out there doing the right thing for their clients. Jim the realtor in San Diego is another one who gives me this impression from his blog.
BTW do REO’s pose the same problem or is it just short sales?
Hey Kaz,
REO’s are pretty easy.
The escrows can be a little slow because the banks load up their escrow companies with so much work it can take two weeks to get escrow paperwork started. You don’t get any disclosures or information on the property that an owner would typically give you (since they have never been in possession).
You buy the property “As Is”. You get an inspection period but you can’t go back and ask for minor repairs. If something major comes up that would take several thousand dollar to repair you can get a concession.
Biggest issue is that there are multiple offers on the good ones. Most clients have a hard time paying the asking price even though it’s already priced very well.
Hi Brad, I see that you have been trying to do short sales but can’t get them completed. We partner with Realtors to do all their short sales at no cost to the Realtor or the client in default. You make your full listing commission. If interested, email me and we can talk.
Thank You
Brad,
Thank you for the article. I currently am the lessee, 6 mos. into a 12 mos. lease in Coto. The owner called last week and wanted showing times…he is going to short sell. My issue is that I questioned the realtors up and down to avoid this situation. They acted like I was crazy to assume a possible default. I also added specific language to my lease to forbid the posting of a sign (at the end of the lease term), and a 30 written notice of his intent to re-list at the end of our lease if he chose not to renew with us. Is all of that out the window since he decides to short sell? I feel totally backed in a corner. We are excellent tenants with excellent credit. If the house short sells will the buyer assume the balance of our lease agreement? Any feedback would be appreciated.
Hi Leigh,
A lease would typically survive the sale of a property and the new owner would be bond by it’s terms. Not the case in a foreclosure where all junior liens are wiped out.
You probably don’t have too much to worry about because short sales usually take several months to get done.
There are very specific laws concerning access to tenant owned property and you could make showing VERY inconvenient unless they agreed to put in the listing that the property is under a lease contract until a specific date. I find it’s always best to try to work things out. I believe you never have to give access on weekends and only 9 to 5 Monday through Friday. You’re always entitled to 24 hour notice.
A short call to an attorney would be a good idea.
Thanks Brad, I have calls out to 2 attorneys. I used to be a property manager for a VERY high profile company out here in OC. I was only familiar with multi-family stuff, didn’t know if there were different standard for SFR’s. Thanks for taking the time to respond. You provided a point of reference to begin dialogue with the attorneys.
brad,
i enjoyed your post. im new to market, as i’ve only recently accumulated enough savings to start thinking about buying.
from what little i know, i understand your advice against short sales. i do not however, know how to go about finding bank-owned properties. a google search of bank-owned properties gives me results which don’t see to be legitimate.
just curious if you could advise how i can go about finding bank-owned properties for sale. are they listed like regular or short sales, or am i best suited to go into a bank and ask?
thanks
Jon,
Banks hire real estate agents to sell their foreclosed properties and you can find them on the MLS. They don’t sell them direct and there is no secret place to find special deals.
If you would like me to set up a search that will email you properties as they hit the market, get in touch and I’ll do it for you.
Click the link (my name above) and you’ll get my website and contact information.
Thanks, Brad. I sent you my info via the Contact Us link on your website.
I appreciate your setting me up with the info.
Jon
Would like feedback on this: A person owns a home whos market value is less than amount owed on loan. He decides to buy a smaller home with a lower payment, then plans to sell the other home on a short sale. What would the lender of the first home say about this? Can it be done or is the first lender going to say no to the short sale because other property was bought?
A lot of people are considering, or are currently, doing this. The larger difficulty is getting the loan on the new property. The new lender is going to see that first loan and know you are upside down. That can make it hard to quailify for the new loan.
If you can get it done and buy that second home it will probably make you less of a priority in the short sale of the first home. Part of the short sale process is submitting a hardship package to the lender. It will be a tough sell on the hardship after you’ve just bought another home.
Most short sales don’t get done anyways, so give it a shot. Check out the possibility of a “Deed in Lieu of Foreclosure”. It can be clean and fast and will help save your credit.
Brad,
My husband and I just started looking for homes and were discouraged to find that almost all of the mls listings in our price bracket were short-sales which our agent won’t even show. That leaves a very small inventory to choose from and we’re getting out bid on the bank-owned listings. I understand what you are saying about short-sales being a waste of time, but what eventually happens to those listings. What are the banks waiting for? Do they just want higher offers or are they so backed up they are just sitting on paperwork? Do most of those properties eventually foreclose or do the banks get to sit on them untill they feel like selling them? I guess we are just trying to figure out if we are ever going to have a chance at those properties or should we continue with the bidding wars for the forclosures? Or pray for regular sales!
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Real Property Solutions in Sherman Oaks work hand in hand with real estate agents. We provide services to homeowners going into foreclosure and to real estate agents that hate short sales. We provide full training to agents on how to maximize profits on every short sale deal. Our services are free to the agent.
If you absolutely hate short sales but do not want to turn away clients that want to short sale their property, refer the property to us and we will pay you full commission each property you bring to us. Our services are free to the realtor. We get paid by the investor.
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Short Sale Specialist
shortsalecrystal@live.com
Real Property Solutions
13636 Ventura Blvd Suite 324
Sherman Oaks CA 91423
818-571-4655 direct cell
888-571-7854 fax
http://www.go.managemyshortsale.com
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I palced several offer in short sale proprty, I put highrer 10 to 20% higher than asking, via my boker,
I did not get any luck for those?
do you know what was the bubble?
I think listing agent not present other agent offer
because of commition.
do you think is that right?
Jag