Short sales are becoming a big part of the Southern California real estate marketplace. Many real estate brokers, let alone buyers, lack an understanding of short sales and then tend to avoid them. The first big challenge in purchasing a short sale is finding a broker willing to put the extra effort needed. Most don't want to show these for quite a few reasons. The big three are short sales are much more work, buyers 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 negotiators. And in this situation the homeseller and two banks don't act the way a traditional homeseller 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 bit against the purchase occassionally by not showing the house in the best condition or even at all.
Meanwhile, the negotiators aren't attached to the house, adhere to certain bank rules and can be almost impossible to reach and negotiate with. They often use agressive type methods in their efforts to get the most money. In fact, the first and second loans negotiate between themselves because what one lender gets moneywise the other doesn't. And getting access to those closers require completed paperwork packages from the current owner and an offer from a potential buyer before the clock begins to tick. So at some point 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 shear amount.
Once you are past that issue, the second major aspect is buyer impatience and lack of understanding. The most difficult type of buyer for a short sale is many times an excited first time homebuyer unless they have a concrete communication level with their broker. Because once the broker has everything submitted to the banks, the banks will take 10-14 business days to even look it and forward the completed package to a negotiator.
Asking an pumped up couple to wait this out is rough. This is especially true in Temecula's real estate marketplace since there are so many properties available right now. Plus, housebuyers today have the people around them in their head advising them they should get better price or more service when they buy. Buyer lack of patience usually is the biggest issue and should be discussed prior to bank short sale properties are visited. If the clients have the ability to be patient, they can get a fantastic deal!
Here is an example. Last month I highlighted a Murrieta home possible short sale deal to a buyer 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 to hear from the banks, perhaps as long as 2-3 weeks. The home was perfect for the couple and was move in condition. Their response was in this market they would demand a response within 48 hours.
I chose to risk my client contact and said this deal isn't for you because the bank employees don't care about your needs. They are 8-5 employee's and have no personal interest in the property and if you want to miss a fantastic deal, that is a decision you have to make. But I am willing to put in the work if you can have the patience. And when we get approved, you will be moving in with significant equity and I will earn your business and referrals for the next time. After a little more detail, they put in an low priced offer contract, got approval, and will move into their new house this month. Strong lines of communication, honesty, and patience can get the job done!
The last major challenge is stress. Some of this has already been discussed when dealing with patience. However, the unknown of what the bank will do, what people are thinking around you, and how frustrating the process is can drive you nuts. For the broker, working with the other party and banks is not a lot of fun. For the buyer, not screaming out your frustration on your broker is key. Much of the potential tension is relieved by a thorough understanding about the transaction and a twice a week update. If the buyer finds out that the banks haven't moved, they shouldn't go ballistic.
With all that said, why do I recommend examing bank short sales? Because these situations can offer a great chance to get a ideal property at a significant discount. These homes are usually in great shape than REO listings and many time they are actively being maintained nicely. Also, they can be the best for price negotiation for lots of reasons.
Currently, banks are filled to the gills with in default properties and the last situation they want to deal with is another, especially when there is a qualified buyer ready to buy. Why on earth would they want to gain another when given the chance to sell one while more expenses add up or the real estate market turns further down? Their loss is your gain and your real estate agent's goal should always be to get you, the real estate client, the best situation possible for today and in doing so, earn your business tomorrow.
Stefan is a top performing real estate broker of
Temecula California and North San Diego County and expert in the nearby areas of Murrieta, Menifee and Wildomar. Please visit http://www.stefanwest.com for additional information.
