Short Sale Series-Part Five

Part Five-Qualifying a Buyer

So far we have concentrated on the meaning of a short sale, the advantages, and how it relates to the seller. But a successful short sale needs a qualified buyer otherwise this is an academic exercise with real life consequences.

First a buyer needs a good Realtor. Okay I know this is a cliche, but what I mean is, a realtor who either has a knowledge of the short sale process, or a willingness to learn from an experienced short sale listing Realtor. Since most of the time I represent the owner, I find our team teaching the buyers Realtor. No matter what we put in the MLS comments like "as is", and no service contract to be paid by the seller or lender,  we get that in the offer. Even if the offer is acceptable, we need to make sure it jibes with the lender requirements. I never mind a realtor on the other side who truly collaborates. They play a valuable role in rescuing my seller from foreclosure.

Second, a buyer needs to be non-contingent preapproved. You can't buy a short sale if your house is not on the market, or on the market unsold. Even a home with a contract is a contingent contract. It is right on the line to accept a contract where a home is merely under contract for the prospective buyer. Where it gets really sticky is dealing with a company like the former Countrywide. If the buyer falls out, they start the clock all over agian,even if a price is agreed on. if you are working with a buyer, have them totally through underwriting, and with a contingency if you want a successful sale.

Third, patience is a virtue. let's say you are listing a property with a 1st mortgage one place, a 2nd mortgage elsewhere, and maybe a divorce in the works. This is not a rare scenario. Throw in a disputed broker price opinion, and you can have a six month closing time from contract. We have had situations where we have gotten approval in a week, but that is rare. keep reminding your client that they got a great deal that probably can't be duplicated. Despite that, we have gone through a 2nd or 3rd buyer in a short sale process.

Fourth, consider a backup. Please reread number three. patience can be in short supply. a backup does not obligate you to close if you find something else. if you locate a smoking short sale deal, put in a backup. You could be Miss America here if you are the first runner up and the winner can't perform there dities.

Fifth, remember that the price is subject to lender approval.  As hard as we try to hit the jackpot on pricing we are at the mercy of the lender. They are looking at net, so the price plus the cost of closing including what you ask for equals a scenario they like or don't. Evaluate the final price and make a decision. Don't go into a contract without realizing that it may adjust upward. Pricing a short sale certainly invloves a lower price because it is a distressed situation, and it has to be attractive enough for a buyer to consider waiting longer than a regular price. if they saving are $25K instead of $30K, dont be greedy or ego driven. Your ego could cost you a lot of money.

Footnote, you can go FHA or VA, just don't buy a basket case. All FHA and VA mandated repairs have to be previous to closing and these are your responsibily. If you buy a basket case, go to your local bank with an FHA preaprroval letter, do a loan involving the cost of repairs and convert it. We know banks who will do this simpler "203K" type loan.