Here are some of the many pitfalls of a
short-sale.
Time to close
Short-sales take a long time to close. Although lenders are getting better in short-sales, they are notorious for making slow decisions when negotiating. I had a client last year who agreed to pay cash and purchase a short-sale in 3 days. The seller accepted the offer, but the lender took 4 months to agree to the offer. When buying a short sale, you have to act quickly. After you act quickly, you often have to wait a long time.
Multiple offers
Short-sales often involve competitive buying. That is to say, there are multiple offers on the property. Despite what you may have heard about this being a buyers' market, there are ALWAYS buyers who are interested in something for nothing. In addition the Northern Virginia economy has not been affected the way places like Detroit have been by the recent economic news. In Alexandria, in Arlington and anywhere near the metro, there are many folks who want to buy homes. Homes that are nicely priced, in good condition and in good locations are selling quickly.
The property isn't available
Fully two-thirds (maybe more) of the short-sales listed for sale right now ... ARE NOT AVAILABLE. This is perhaps the most maddening part of short-sales as a considerable portion of my day is spent sorting through properties that are listed as ACTIVE in
the MLS but they are in fact not on the market. Why are these properties listed for sale when they are active?
The simple and sad answer is that many agents who are selling short-sale properties don't understand there aren't any special rules for short-sales. If a property is offered for sale, the agent has a duty to the public in addition to his/her duty to the client. His duty to the public and Fair Housing Laws requires that he promptly present any offers to purchase to his client. If the client agrees to the offer, but the caveat that the contract must be approved by the lender, that contract should be listed in the MLS as under contract with a
kick-out. Most agents these days leave the property as active, wasting
the time of buyers and agents everywhere.
Often, a selling agent continues to list the property as active because it is not uncommon for a short-sale buyer to back out after the purchaser finds out just how much hell he'll have to suffer to get a bargain. The selling agent might not be aware that listing this property as active in the MLS is unethical, but the selling agent certainly does not care if you waste your time trying to buy a property that has already been sold.
The unethical selling agent wants to continue to market the property even though the property is under contract. This way the selling agent can get a couple of back-up offers in case the first contract blows up.
The stick-up
The last and worst part of a short-sale is what I've come to call "the stick-up". The "hold-up" occurs when the seller changes the terms of the deal at the final hour. I'll call it a "stick-up" or "hold-up" because I find this selling tactic contemptible, unethical and a form of stealing. There are no guns involved, but the net effect of the change is not much different from a stick-up or a hold-up.
The stick-up occurs come after the buyer has invested a lot of time and effort negotiating the deal. The change is simple: when you get to the final hour, the buyer finds out that the property costs more than what agreed upon. These changes come after the buyer has invested money in inspections and appraisals. These changes come after the buyer has given notice that he/she is moving or after the buyer has sold his existing home.
Not long ago, I was only the phone with an agent who was clearly very experienced selling short sales. The terms of the deal changed at the final hour to require an additional sum of money from the buyer: a sum of the buyer simply did not have. When I asked her by what rights she thought the deal could be changed, she told me with a straight-face: "This is a short sale. Short sales are different."
She informed me that she had sent me an email saying the price had changed after the deal was done. I told her that she could send me all the emails she wanted, that doesn't give you the power to change a signed contract. She seemed truly baffled by my stance.
The contract stated that the contract had to be approved by the lender. And, the lender had approved the contract. But now, the lender had changed their approval. This agent, well-experience with selling short-sales, thought that was standard practice, and she thought the bank was acting in good faith.
We ended up with a happy ending for the buyer, but there was a lot of drama and tears and fighting before it closed. I still get a knot in my stomach when I think back at that one.
For more information or to set up an appointment call Nesbitt Realty at
(703)765-0300.
-150x150.jpg "Will Nesbitt principal broker")
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