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If you are a buyer looking to purchase a short sale property, I’m sure you have had some frustration on why a short sale property you fell in love with didn’t close. Rest assured after reading this blog, you should be able to determine which short sale properties you should walk away from and which ones you should stick it out.
On average a short sale negotiated property takes 60-90 days. However, there are unconventional short sale procedures that listing agents are conducting. These methods not only prolong the short sale transaction but often cause the transaction to fail.
Below are real examples of how some listing agents have it all wrong. Although there are many examples, I have listed the most common mishaps my buyers and I encounter with a listing agent.
Multiple Contracts Signed (Executed Contracts)
I often call on short sale transactions where the listing agent states the home has multiple offers and has submitted all signed contracts to the lender. What? All buyer contracts are signed by the seller? How can you sell the home multiple times on the same transaction? I don’t think I have to continue on this subject.
Banks do not want multiple offers on their desks. One contract signed and submitted to the lender and maybe 2 backup offers held by the listing agent. That’s it.
Multiple offers to the bank but still active in MLS(MetroList)
I am now in the habit of calling a short sale listing BEFORE showing the property. Originally, I would set up 5 – 10 properties for showings and after viewing the properties, calling the listing agent on the ones my buyers would want to put an offer on. After calling, we were only actually eligible for 1 to 2 properties. Listing agents are too lazy to pull their listing off of the market even when they are under contract. I recently called on a short sale property that had 32 offers…yes-32 Offers!! It was still active in MLS (MetroList).
Another example, my buyers wanted to put an offer on a short sale that had multiple offers. I called the listing agent and asked the status of the offers. Again, as usual, she had submitted all offers to the lender without a signed contract from the seller. I asked why it wasn’t placed in MLS and “under contract”. The listing agent’s response was that since she didn’t have a signed contract from the seller, she didn’t have to place it under contract in MLS. What’s interesting about this is the lender will not accept an offer unless it is signed by a buyer. I don’t think that property will close.
Buyers, if you come across a short sale property that has multiple offers submitted to the bank, still accepting offers, and it is still not placed under contract, walk away.
Communication from the Listing Agent
Before submitting my buyers offer, I spoke with the listing agent regarding our offer. After submitting our offer, I called the listing agent several times and even emailed him regarding the status of our short sale transaction. I still hadn’t received a signed contract from the seller even though we were told we were the only contract submitted to the lender. The listing agent never called us back to tell us that we were in contract. A month later we finally received a message from the listing agent that they are ready to proceed with the short sale. Seriously….a month later?
Luckily, my buyers took my advice, moved on from the property and found a wonderful property that they are “under contract” at this time. You should always be in contact with the listing agent, at least once a week for an update, even if there isn’t one. It is just professional courtesy.
Earnest Money
In one of my recent transaction a listing agent did not want to accept my buyer’s earnest money. The excuse given was that if they accepted earnest money, she would not be able to accept other offers. Isn’t that the point? Sell the property before the seller is forced to foreclose.
If you decide to put an offer on a short sale property, you should be giving earnest money. In return, this lets the seller know that you are serious about the property and willing to wait the negotiating period. If a listing agent does not want to accept your earnest money, more than likely they will not pull the property off the market or place under contract in MLS. You should avoid an agent who does not want to accept earnest money. As a buyer, you should be more than willing to give earnest money if you truly like the property.
Professional Short Sale Transaction Company
If the listing agent is using a professional short sale transaction company, you should feel more at ease. These companies specialize in coordinating the short sale process. They are in constant contact with the bank, title, all agents involved, buyer, and seller on weekly, sometimes daily bases. They often have great relationships with the lender negotiators.
In fact, these companies rarely lose a short sale to foreclosure. They usually have a 97 percent success rate compared to less than 50 percent with an agent that is not certified or not using professional services. Short Sale Transaction Companies coordinate the short sale while the listing agent can be a listing agent.
Ask the next listing agent if they are using a professional short sale transaction company.
Signed Contract
After submitting an offer, if you do not receive a signed contract--you are not in contract, even if the listing agent has told you so. My buyers put an offer on a short sale property on a Friday. We gave a full price offer with no concessions. We were told by the listing agent he would get the seller to sign the offer over the weekend. The weekend passed. We didn’t have a signed offer. I called the listing agent and he reassured me that our offer would be signed that week and submitted to the bank. Again, we didn’t hear from the agent. Finally, after calling the listing agents broker manager, the listing agent called with news that our offer was submitted to the bank with 2 other offers. I still didn’t have an executed contract.
I understand that it is perfectly normal for the listing agent to present multiple offers to their seller. In fact, the property is probably a great bargain. In this case, I don’t believe the listing agent even presented our offer, especially after calling his broker manager for some answers.
Bottom line, a Short Sale Transaction should be treated as a “normal” sale.
*Present all offers to the seller (not the bank). The seller still owns the property.
*Seller accept the best offer (not the bank)
*Execute the offer
*Place the listing in MLS under contract
*Submit the signed contract by both parties to the bank
*Take back up offers
The only difference than a normal transaction is the seller is asking the bank to accept a lower offer than what is owed on the mortgage and the time frame it takes to negotiate. That’s it! I don’t understand why some listing agents are treating a short sale transaction differently.
There are many listing agents that can negotiate a short sale with great competence. Unfortunately there are agents that have no clue on the short sale process.
Please call The Denver Realty Company. We are Certified Distressed Property Experts. We can help both buyers and sellers negotiate a successful short sale!
Michael Mancha
Broker Owner
303-302-3686
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