Buyer Reps: Helping Everyone Win in a Short Sale
By Robert Freedman, Senior Editor, REALTOR® Magazine
There’s a temptation among buyers hoping to land a good deal with a short sale to avoid committing themselves with money and effort until the seller’s lender gives its OK, but that’s a sure-fire way to ensure the deal won’t close, short-sales trainer Lynn Madison said Sunday at the 2009 REALTORS® Conference & Expo.
Lenders are too backlogged and have too much to lose to consider offers whose buyers haven’t provided earnest money, had an inspection conducted, or applied for financing, said Madison, who help devise and also teaches classes for NAR’s new Short Sales and Foreclosures Certification Program (SFR).
Doing all of these things—along with submitting a reasonable offer—can improve your client’s chances greatly. This is not the time to low-ball on a property whose value has already deeply plunged, she said.
FHA pre-foreclosure guidelines, which provide a widely used model even in the conventional market, directs servicers to consider offers starting at 88 percent of value and then to work down from there. Coming in with an offer at 50 percent of value just won’t fly, she said.
Also, when you’re helping buyers, make sure everything is OK on the seller side. It’s appropriate to verify with the listing agent if the seller really has a hardship and the agent has appropriately submitted a short sale package with the lender. If either of these isn’t true, you’re wasting your buyer’s time because the chance of getting the deal to closing is nil.
On hardship, it’s not enough for sellers to say the value of their property has plunged. That alone does not constitute a hardship. There has to be other issues at play: the sellers lost a job or took a pay cut, they have to move, they face big medical bills, and so on.
If your buyer client agrees to make a reasonable offer and shows a commitment with earnest money, a home inspection, and so on, then it’s reasonable to ask the seller to agree, as part of the purchase contract, to hold off considering additional offers for a period of time. Lenders have shown a willingness to accept this type of restriction if they see that the buyer offer is indeed reasonable and the buyer’s committed, she said.
The advantage of including such a restriction is that it helps attract good buyers. Without any promise from the seller to take the property off the market while the lender considers the deal, another buyer can come in with a higher offer at the last minute and run away with the deal. No buyer wants to make an investment of time and money only to become “road kill” at the eleventh hour, she says.
Buyers with good offers deserve reasonable protection from that happening—and lenders are recognizing that such protection leads to better offers over the long-term, she said.
