Central Florida Short Sales: Taking Control of the Short Sale Transaction.

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Hun...

I am continually impressed. But please, don't tell Broker Bryant I said that :)

TLW...ROAR!

Bryant,

How about we bill every one that doesn't understand short sales 10 times what they saved by not taking your class?

Bill

Bryant - That's right - lay it on the line!

Bryant,

I agree with what you have to say.  There are entirely too many agent running around with buyers putting in offers on anything and everything.  It's about educating buyers and setting proper expectations.  Too bad most agents are still playing catch up on the process as well.

It's the ready, fire, aim approach.  They could all use your class.

Unfortunately our own association here gave us a little form to use  that allows buyer or seller to walk at any time.

I think that your correct in your opinion that most agents don't get whats going on and most buyers (because of their agent) don't know how long it can take.  In most cases, great prices can be had for a little patience. Buyers in my area won't loose their EM though no matter what. 

You & Wendy are double-teaming on this one!

I would never allow a buyer to put down earnest money on a short until after we have lender acceptance.  I agree with everything else in that note to the buyer agent, except the earnest money.  I would have to slap my buyers upside the head if they agreed to that.

Bryant, so true in regards to the price you'll accept to submit to the Seller's Lender.  It won't do anybody any good or result in an approved sales contract if we cannot justify or support the purchase price.  If I can support the purchase price that I present to the Lender I know that I'll have an approved Short Sale.

Buyers walking from Short Sales and thinking that they can take their deposits with them is on the rise along with their increased insanity.

Bryant, good post, I love this response and will use this on my next short sale.   As far as Melina's post, since when do we give buyers permission to do something. The contract is between the buyer and the seller and the agent can not disallow a buyer from depositing EMD if the buyer agrees to do it!

Okay, but Jeff, how many short sales are NEVER agreed to with the bank and get foreclosed on anyway to get the AIG money?  This ties up my buyer's EM along with their time and emotions for up to six, yes that's right six (in CA) months and then get let down.  This not only wastes their time and energy, but discourages them from putting in any other offers in the future.  That's realtor suicide in CA!

BB - interesting how things are done differently. Here the deposit is handed over with an accepted contract from the lender and when escrow opens (unless someone agrees to do it differently - haven't seen that). I agree with what Melina said.  A big problem here, and I suspect elsewhere, is how agents handle the whole issue of offers to begin with - some submit one (sometimes without the seller's signature), others submit multiple offers, or so they say.And properties remain active until there is an accepted offer - offers received after one is submitted for approval is in back-up.

Jeff

Bryant,

I enjoyed your post.  Solid and steady approach to a challenging line of work.    We handle many of these and process in a very similar fashion.   EMD's are being offered much more often by buyers, particuarly if they found a home they really like, have offered fair pricing and want the opportunity to NOT be one of many.  If the buyer and seller negotiated and agreed - so be it!  

Yay. We be gettin some smarts up in heeerrr. <:oP  Some aspects of the short sale process is such a pain in the butt, while others are just the way the process works.... Bah. It's all stil a pain >=/

Jeff is is absolutely a buyer's choice about whether or not they want to place non-refundable earnest money down.  I would just have to strongly encourage them to not do it. 

It is not in the buyer's best interest to have non-refundable earnest money.  If they wanted to take the risk, so be it, but they would get an incredulous look from me.

Bryant, that's an excellent statement and I agree, at least partially.  When the wait gets long and prices decline more, many buyers get very antsy.  Not all, but many!

Hi folks. Interesting comments. Just for clarity..the commission is not non refundable. It is however non refundable if the buyer just walks away.

A purchase contract is a binding contract. The seller has agreed to sell and the buyer has agreed to buy. Of course just like any other real estate contract there are contingencies. The buyer has contingencies related to financing, inspections, survey etc....and the seller has a 3rd party approval contingency.

If one of these contingencies cannot be removed during the time period allowed then either party can cancel the agreement and the buyer gets their deposit back or both parties can extend the time frame and continue on.

What they can't do is just change their mind and walk. Accepting a contract and taking a property off the market without getting some sort of security from the buyer is a waste of time.

In order to be successful, the short sale process, requires cooperation from all parties.....including the Buyer. As a listing broker my job is to weed out unqualified and unmotivated buyers.

Satar, This property is an investment property and my seller will have tax consequences. Why would I want to try and get it at $195,000? My job is to get as much money as possible and therefore limiting my sellers liabilities.

Our procedures are a little different but the fundamental key is insuring that the buyers are well aware that the process is going to take some time.

Hi Bryant:  I think it depends on the bank you are dealing with on a short sale as to how long the process may take.  I worked a deal through American Home Mortgage that closed in about 30 days; whereas, the deal I am currently working through Bank of America has been in their hands for 45 days now and I am still talking through their automated system and never the same person twice when I get a live body. 

This is a great post.  I am a Short Sale agent here in Arizona and have found that if the buyer is not willing to "hang in there" for 60 to 90 days while we get a response from the bank they aren't really interested.  It is the Buyer agent who is responsible for educating their buyer on the process.  Some don't.   So YES I agree educate the buyer and their agent.  Give NON-refundable earnest money up front to be held while the seller's agent completes negotiations with the bank.  I also agree that as a seller's agent you are aware of what the bank will take and what they won't.  Why waste everyones time taking an offer the bank won't accept and then the buyer won't come up in price because they want that "bargain price". 

You go Bryant!!

As someone that is new to AR, this is the first post that I have seen that really separated the buyer's agents from the seller's agents.  It is glaringly evident who works for who here. Seller's agents want the deposit up front, buyer's agents want the deposit out of escrow until an answer comes from the bank.

Arizona's Short Sale addendum agrees that escrow is not opened until the lender has agreed to the sale conditions.  Right or wrong, that is the policy that has been put out by our association.  Can someone go counter to that?  Sure.  However, I for one have no confidence in the decisions made by the lenders (more importantly their asset managers of these properties)  and would advise any buyer I happened to be working with to NOT let their EM be tied up by a lender that may (or may not) come to a decision in timely manner.  Lenders have taken control of everything else, I'm not letting them take control of my buyer(s) if I can help it.

I list short sale property (and actually have decent success in getting them closed) and have never asked for a non-refundable deposit.   I;m not saying my way is right or wrong; I just know it works for me.  Myself and my partner make it a point of keeping the "other side" posted of what is going on in the transaction at least weekly.  It seems to help keep the buyers around, if they know what is going on in their transaction.  How many times have you gotten a short sale contract accepted by the seller, the contract is forwarded to the bank, and the buyer's side doesn't hear a thing for months from the sellers agent?  It seems to be the norm here, rather than the exception.  Great post!

Hey Bryant, great post! I specialize in short sales as well and you seem to have the same concept on them as I do. I always make sure the expectations are set ahead of time. I also always have the buyer deposit the earnest money into escrow up front. This shows a buyer's commitment to the deal. If they are not willing to take a risk and commit to the deal, then I don't want them on the deal to begin with.

I completely agree with your ideas. I also make sure all of my stuff is in my counter as well.

Good article and points, but what buyer or buyers agent would agree to forfiet earnest money.  I had a deal w/ Country Wide sit for 6 months and they finally get back to us and say, they wont sell it short.  We had $75k in EM sitting in escrow.  I dont think any buyer would ever agree to the language you used, but if it works for you great.

sounds like you have a good control of the short sale situation! I wish buyers and sellers in my area were more serious about buying and selling short sales. I hate game players that don't want to put any risk into the pot

Bryant,

Excellent.... but that's what we've come to expect from you! 

Kathy Opatka

Bryant, I just closed a transaction where the sellers just signed the contract and didn't negotiate. The buyer and I were dumbfounded but it was in our interest to be mum. It went through, but could have sold for $20-40,000 more. If it had been my listing, we would have negotiated.

Sharon

The norm around here is no money for deposit until the bank gives the green light on the sale.  I would not let my client tie up assets while waiting on a bank.  Listing agents know this and often view the first offer as just a way to get thinks rolling with the bank.  Why should my client wait months on end when other properties may make themselves available and the bank may not come through?

So many buyers sumbit offers on short sales expecting a response in a week or two and if they don't receive one they move on.  Buyers agents need to educate their buyers about short sales, it saves time for everyone in the long run.  I could see many buyers not feeling comfortable with one part you highlighted in your post:  "Once under contract the Buyer cannot just walk away. If they do the deposit will be forfeited to the Seller."

This is a tough sell in a market like mine (West Valley Phoenix) where there is an abundant number of REOs. As a buyer's agent I would never recommend placing non-refundable funds in escrow to a client unless there were no other alternatives. Specifically, the only way this would make any sense for a buyer is if the short sale property was the most desirable in a community and/or priced well below the market. Otherwise, it makes no sense to tie up earnest money and be locked into a property for months on end waiting for an approval that may never happen. I can certainly see where the seller would want this but I can't fathom why a good buyer's agent would advise a client to do this unless they just couldn't find another desirable property.

I appreciated your article, but as a Buyer's Rep here in the La Jolla-UTC area of San Diego, where most of our Just say, "Home, James! ®" buyers are all-cash and where we have had short-sale-condos-galore typically taking 6-12 months to process through the banks, we counsel our investor clients NOT to expose any Initial Deposit funds until the BANK ACCEPTANCE.  We are happy to provide photocopies of bank statements showing Proof of Funds, or to submit a photocopy of a check made out to Prudential California Realty so the Listing Agent has something to submit with our offer, but we have found no reason from the Buyer's side to have any funds exposed until the bank commits to the deal.  Practices and purposes may differ in other areas?  I appreciate reading others' comments.

ON THE BUYING SIDE:

I wrote an offer in February on a short sale where the listing agent said we should get an approval in a "few months". She said the process had already started, and that the bank countered the previous buyer but the buyer walked away. So she listed it at the price at which the bank countered. We wrote an offer at thAT price and kept our fingers crossed. The "few days" turned into a few MONTHS.As of July, no acceptance.

Still, my buyers were hopeful, even though we specified an expiration date for our offer. We did specify in our short sale addendum, however,  that the initial deposit will be held uncashed until we receive a formal acceptance.

Tired of waiting and afraid to lose out on another opportunity, my buyers started looking again, and recently got accepted on an REO.Glad we didn't tie up their initial deposit check on the previous property.

ON THE LISTING SIDE:

On a property that I listed, we opened escrow on a short sale in December last year. By May, we still didn't get an acceptance. When we finally received the news that the second lien holder would not agree to the short sale, we cancelled the escrow. But that was 5 months of waiting and tying up the buyer's $$.

I have another listing, with one accepted (by the seller) offer, and a back-up offer since March. There are two loans with Bank of America. That is also taking a long time. And now, the HOA filed notices to foreclose on it. And still no approval.

What I'm seeing is that when there are two lenders, it's nearly an impossibility to get the short sale approved. I've advised another client that perhaps, rather than selling as a short sale and running into problems with getting apprvals from the lenders, that they pursue a lease-purchase option instead.

Here in california we have a "Short Sale Addendum" to the  purchase contract which also has a box to check that the EM deposit will be held uncashed until confirmation "in writing" from the bank.  The in writing never comes into play, but if you're the buyers agent, it is responsible to check that box. 

Also on this addendum it has a box to check that the time periods do not begin until acceptance from the bank as well.  I don't think this protects one agent over another, because if it wasn't in place there could be lawsuits which affect both agents.

What I do on my listings is open escrow and have the Buyer deposit EM making it non-refundable for 60-90 days (as long as I can get). That way we have some assurance that the Buyers aren't out putting multiple offers in and they're showing some committment. On the other hand the Buyer can bail after that 60-90 day non-refundable if they see no progress with the bank.

Why would I tie my Seller's up in a deal with a Buyer that wasn't willing to commit anything. I'm in the East Valley in AZ and get multiple offers on listings. I know 1/2 of them are tire kickers. I wait until I have a real Buyer that I can submit to the bank, whose agent knows I'll do my best to get the deal done, will keep them updated and keep their offer in 1st position. I don't blame Buyer's for not wanting to tie up EM for months on end but if they're serious about the purchase they better show me the money.

Great words...I'm all for setting the expectations up front - That way there's room for mis-understandings down the road.

Best,
Dan

I could not agree with you more.  In a current short sale I am involved with, I had to do something very similar.  The buyers wanted a 14 day window of acceptance.  Dream on.  We, sellers and myself, were not excited with the offer even though it was reasonable with these kind of terms. We let them know we would be glad to accept the offer if they would put realistic dates of acceptance. I think there are a lot of  buyers that simply believe they are going to get something for nothing.  When it comes to short sales, I would like to add to my sign: " Only the serious need apply".....Bryant, I love your verbage and look forward to taking one of your classes.  Thanks....

After consulting with a friend who works in the loss mitigation office for a local lender, I've realized that unless my buyer has some "skin in the game" via a non-refundable EMD of at least 1% of the purchase price, their offer will not even be considered.  According to my loss mitigation friend, any file coming in for their scrutiny/approval will promptly be placed on the floor if it doesn't have a "proof of escrow deposit" from a lawyer or a title company.

Just an FYI.

Connie Addison

Realtor/CDPE

RE/MAX Realty Group

Fort Myers, FL

Hi folks. Been a very busy day!! OK so if I were working with a buyer on a short sale I would not hesitate to have them place a deposit BUT I would certainly have time limitations in the contract and of course other contingencies to protect the deposit. As a listing agent I would expect the deposit to be protected however I still want one at time of contract.

My expectation is that every short sale I list will close. I have qualified the seller, qualified the listing and priced it where I know the lender will accept it. Why wouldn't it close? So now the only thing left is to qualify the buyer.

Other than the time involved a short sale transaction is the same as any other transaction. Negotiate the deal, place it pending and get it closed.

I think I feel another post coming on.

Bryant, this is one way to discourage buyers from making offers on a bunch of short sales hoping that one of them might work out. 

Having buyers commit is crucial. Money up front is a good way to do that.

Bryant, great post!  Just the idea of having a buyer disclosure to make sure the buyer (and buyer's agent) understand what to expect makes a lot of sense.

In my state, the buyer isn't required to deposit earnest money until the lender approves the short sale, and most buyer's agents advise their buyers not to deposit anythnig prior to approval.  Short sales here almost always go for below market value.  Buyers expect price concesions in exchange for the inconvenience of waiting an indefinite period of time for bank approval.  Also, the buyer pool for short sales is also much smaller.  As a listing agent, I specialize in short sales.  However, as a buyer's agent, I recommed that my buyers avoid short sales whenever possible.  The fact is, many buyers need a definite closing date.

If I had a short sale listing with a market value of $240-$250K, I would try to get as much as possible, but I also know that I could easily get $215K-$220K approved by most lenders.  A lot also depends on how far away the foreclosure sale is.  I'll be more flexible when three weeks away from the foreclosure sale than three months.

Bryant - Ahhhh, if it were only that easy.  I haven't heard of a short sale going through in less than at least 4 months.  I have heard other short sales, after 6 months, just getting cancelled due to no response from the sellers - and the buyers becoming impatient had found other homes.  Also, how about how many times the agents are forced asked to reduce their commissions.  Can you really ever have control over short sales?

Troy, One of my buyer's agents just wrote a deal for a buyer she was working with on a Short sale. She wrote the offer July 8th. It's closing next week!!!

The fastest approval I have had on one of my listings was 3 weeks. Most take several months. But it's all relative. I can get them under contract much quicker than a regular listing. So time from listing to closing is quicker than a regular listing. At least for me.

Bryant, who was the lender that approved so quickly?

David, It's Selene Financial. I had never heard of them before.

Before I post this i am going to take a stiff drink (coffee) and brace myself for the "boo's"

I believe that all short sales done by all REALTORS should have an addendum that shows the terms and conditions of their E&O insurancealong with information as to how a claim can be made.

Also the MLS should be held liable.

A short sale sholud only be allowed to be completed WITH AN ATTORNEY.

(Pause for the boo's)

You have in todays market, a real estate agent advertising a property for sale by someone

who is NOT the owner who can convey clear title.A real estate agent that will try to get a price that is lower than the amount owed,which is touted as a "bargain" for the buyer.

A real estate agent that will allow the alleged seller to sign and attast to a "loss deficiency"

that the lender could try to recover for years.

I am not an attorney,I am a broker owner.

Go back and read all the comments,read all the hidden agendae,read all the practicing of law involved in the short sale process;the disclosures not being presented!

Yes I list short sales But only upon the condition that the "seller" will retain legal counsel

to do the process after an offer is received PERIOD.

Perhaps a future ad ??

"Have you lost money using a real estate agent doing a short sale for you?"

call 1-800-for this legal group "You may be entitled to compensation"

The MLS needs to put proper disclosure on all "Short Sales" one of which should be

"You should consult with legal counsel as a short sale may have some financial dangers

that you need to be made aware of."

The real estate agent needs to disclose,"

I (We) are not an attorney and there are legal matters that have to be disclosed"

OR GO BACK TO THE SENTENCE-An adendum giving the E&O Insurance information.

For background info GOOGLE

"Short Sale Horror Stories"

"Should I stop paying my mtg"

Basilovecchio,

I appreciate your comment however it is loaded with incorrect information. Including this little diddy:

"You have in todays market, a real estate agent advertising a property for sale by someone

who is NOT the owner"

Last I checked my seller is the owner of the property. They have not been foreclosed on yet. Now I completely agree that we need to have disclosures out the ying yang and should definately check out E&O insurance to make sure we are covered.

A competant short agent can certainly know as much or more than an attorney when it comes to short sales. Although a smart agent will also suggest strongly their sellers speak with an attorney. 

Short Sales are not for everyone. They do require a certain skill set. If you are not comfortable doing them then don't. It's not worth the risk if they are not your area of expertise.

Thanks for stopping by.

Thank you for clarifying these aspects of a short sale! you have some great posts!

Bryant, I want to be you when I grow up.

Great post Brian.  We have to be willing to offer a discount to reward the Buyer's time. Otherwise...they may not be your Buyer anymore