Qualifying the Buyer in a Short Sale
This should not come as a surprise, but all buyers are not necessarily good candidates for a short sale. The buyer’s agent should qualify their buyer before attempting to take them down the 1 – 4 month path of a short sale. Your time and the listing agent’s time is valuable to be sure. The seller, though, may have the most at stake if there is a pending foreclosure. This may be their last chance to avoid foreclosure so please approach it accordingly.
Who would not be a good candidate for a short sale?
1) Buyer that needs the property date certain. There is nothing certain about a short sale. We usually get the approval letter in 45 – 90 days from when we submit the short sale package but we still don’t want to take a file that has to close in 120 days or less because that will invariably be the exception and take longer.
2) Buyer that needs closing costs. If you have a buyer that absolutely needs closing costs to close you are adding risk to an already risky sale. Some banks/lien holders will not pay any closing costs so you may be asking for something that is impossible. Other banks/lien holders will pay but, if the offer is low, they may cut the closing costs in order to approve the deal.
Along those lines, first-time homebuyers in the lower price points are also a nightmare in short sales. One of the reasons is that nobody in the deal has any funds to bridge even a small gap in what the bank needs and the offer price. Just know you are truly doing pro bono work with a much lower success rate for any property 100k or less.
3) Buyer that comes into the deal making demands. Some buyers think that because it is a buyer’s market they drive the bus in a short sale. I hate to burst their bubble but the 1st lienholder drives this bus and they are merely along for the ride. This demanding buyer who is already talking about walking if….. needs to stay away from short sales. They are just looking for a dramatic exit and will almost always take it. This also wastes everyone’s time. Show them an REO property.
4) Buyer that can’s close in 30 days. The approval letter will usually give the parties around 30 days to close…starting yesterday. We have often been able to get an extension when needed but you don’t want to go in having to have one because they are not always granted. With the release of many of the dormant foreclosures there may not be an opportunity for an extension. For example: don’t try to do a short sale with a USDA loan because you will not close in 30 days…or 60 for that matter.
The bottom line is that you need to be serious about your short sale offers and buyers. It is not low-ball offer time (and never will be) and your buyers need to be serious and qualified before taking on this arduous task called short sale.