Short sales are now a large segment of the Southern California real estate marketplace. Many agents, let alone buyers, do not understand short sales and tend to avoid them. The first big issue in pursuing a short sale is finding a broker willing to put the time necessary for the job. Most don’t want to show these for several reasons. The big three are short sales are a lot more work, homebuyers get very impatient, and they can be stressful if done wrong.
Let me explain these three issues in order. First, short sales are more difficult because in the place of a two party negotiation with just a buyer and seller, you have a four party deal with the buyer, seller, and two banks. And in this situation the seller and two banks don’t act the way a traditional seller would act. The current owner is upside down financially and just wants the loans of their back. They don’t always care about getting the best price which is wonderful for you. But the homeowner can also work a little against the purchase at times by not letting people see the house in the best of shape or even at all.
Meanwhile, the banks aren’t owners, adhere to certain bank rules and can be difficult to reach and negotiate with. They often use agressive type strategies in their efforts to maximize the absolute most money. In fact, the first and second loans fight between themselves because what one bank gets moneywise the other doesn’t. And getting access to those people require completed paperwork packages from the seller and an purchase contract from a potential buyer before the clock can start. Eventually there has be an agreement between two banks, a seller, and a buyer. By the time you get this all set, a period of 2-3 weeks can easily pass. Plus with the significant amount of short sales flooding in many banks are understaffed to handle the increased workload.
Once you are over that hurdle, the second biggest one is buyer impatience and lack of understanding. The worst buyer for a short sale is usually an excited first time homebuyer unless they have a solid communication level with their real estate agent. Because after the broker has everything forwarded to the financial institutes, the banks will take 10-14 business days to even examine it and pass it to a closer.
Preparing an pumped up couple to wait this out is tough. This is doubly true in Menifee and neighboring real estate marketplace now that there are a large supply of properties to look at. Plus, housebuyers today have the people around them in their head whispering that they should get better price or more service when they buy. Buyer lack of patience can be the most important variable and should be discussed before any bank short sale properties are looked at. If the clients are able to handle their patience, they just may get a fantastic deal!
Here is an example. Last month I promoted a Temecula home possible short sale deal to a new client of mine where they could get a house for over 70k off the its real value. But they would to have to wait a bit for bank approval, perhaps up to 3 weeks. The home was perfect for the buyer and was turnkey condition. Their response was in this market they would demand a response within 48 hours.
I risked my client contact and told them this opportunity isn’t for you because the banks don’t remotely care about you. They are 8-5 employee’s and have no attachment to the property and if you want to miss a fantastic deal, that is up to you. But I am willing to put in the time and effort if you can have the patience. And when we get approved, you will be moving in with significant equity and I will secure your business for the next time. After breaking out the details, they put in an purchase offer, got approval, and will close at the end of this month. Clear channels of communications, integrity, and patience can get the job done!
The last big issue is stress. Part of this has already been discussed when dealing with patience. However, the stress of what the bank will do, what people are telling you, and how drawn out the process is can make you crazy. For the broker, dealing with the other party and banks is downright tough. For the buyer, not screaming out your frustration on your broker is vital. Much of the tension is reduced by a thorough understanding about the situation and a twice a week update. If the buyer hears that the banks have not returned calls, they shouldn’t get upset.
With all that said, why do I suggest looking into bank short sales? Because short sales can offer a huge opportunity to get a great new home at a significant price. These homes are usually in great shape than REO houses and often they are still being taken care of. Also, they can be great for price negotiation for many of reasons.
Right now, banks are filled to the gills with foreclosure properties and the last situation they desire is another, especially when there is a solid buyer ready to buy. Why would a bank want to gain another when given the chance to sell one while more expenses accrue or the market goes down further? Their deduction is your gain and an good agent’s goal should always be to get you, the buyer, the greatest investment possible for today and in doing so, earn your business tomorrow.