Short sales are the hottest word in real estate today.
What is a short sale?
By definition, a short sale is when a seller is dealing with a hardship and they are selling their home for less than what they would have expected to make. An example is if they owe $500,000 on a property but the property is worth $350,000.
In a short sale situation, the seller is the bank. A short sale usually takes an average of three to six months, from start to finish.
How can a qualified real estate agent help you with short sales?
Today’s buyers are savvier about short sales, and real estate agents do indicate which properties are for short sale. However, we still advise buyers who are making offers on short sales to make sure that their Realtor has thoroughly screened the listing agents. A lot of listing agents are not savvy about doing short sales (most just do it for a friend or acquaintance) and are oftentimes not qualified to take short sale listings, which have more requirements compared to a regular sale.
On my part, I talk to negotiators from banks to find out what the problems are. I ask them about any arrears. A lot of times, listing agents send incomplete, unsigned (by the parties), or illegible packages. These are not the full packages for short sales. To avoid this, make sure that the listing agent is certified to do short sales.
The SFR and the CDPE
There are two important definitions we often use in the National Association of Realtors: Short Sales & Foreclosure Resource or the SFR, and the Certified Distressed Property Expert or the CDPE.
A CDPE basically helps a distressed property owner avoid foreclosure. They also make sure everything is in order with a short sale, with all requirements submitted to the bank to make a full package.
Shady agents are just one of the frustrating issues a buyer can expect to deal with for a short sale. There is a lot of unethical practice among those who are not certified for short sales.
Recently, I made an offer for one of my clients. We made a strong offer for a listing, and I called the agent and sent multiple e-mails. My assistant kept following up with both calls and e-mail, as well. I got no reply for over a week. My buyer got frustrated. When I finally got a callback from the agent, he admitted to settling for another offer over the weekend.
How to protect yourself when making an offer on a short sale
Understand that short sales are listed under market, so they’re listed very aggressively. I just listed a short sale this weekend with a realistic price, and I’ve gotten ten offers this week already. I picked the best offer, took it to the bank, and we are now in the waiting process.
A lot of short sale listing prices are unrealistic for buyers. These homes are listed about 5-10% under market, and they sell for about 5-10% over list price. So don’t think that when it says $189,000 you are going to be able to make an offer at $180,000 and get it. If you’re working with a knowledgeable Realtor, they’re going to make an offer in the $200,000 range. An inexperienced Realtor is going to waste your time and everybody else’s time by making offers at $185,000, when the property is most likely going to sell at $200,000.
It is fine to make more offers on short sales, especially since you will wait for months at a time for the bank process. However, you need to make sure that there is a three week to one-month “drop-dead” date. If there are no answers within those time-frames, you will no longer be bound by your offer and can move on to make offers on other properties.