I was shocked to see this headline today in Banker and Tradesman: Buyers’ Agents Caution: Stay Away From Short Sales, If You Can. Behind this sensationalist headline is the Massachusetts Association of Buyer’s Agents (MABA) which is “warning buyers to say away from short sales.” Say what?!
Sam Schneiderman, the President of MABA states in the article that:
“But even though short sales are taking up a greater share of the market, many buyers aren’t fully aware of the trials and tribulations involved in the transactions. Buyers are thinking short sales are great deals – but it hangs you up for two months, three months, six months,” he said. “Whatever your timetable is, it’s bound to not co-operate. . . Even though banks have made efforts to speed up shorts in recent months, Schneiderman says such problems are endemic to the short sale process, with the buyer almost always left hanging while the bank frets and bickers with the seller and any second or third lien holders. “
Perhaps the MABA’s press release got “lost in translation” and Banker & Tradesman ran with a provocative headline, as Mr. Schneiderman suggests in his comment below. The article certainly spawned a fair amount of negative commentary.
The one thing we can all agree on is that potential short sale buyers must be educated on all of the risks and possible delays inherent with a short sale. The same is true for buyers’ agents who are likewise inexperienced with short sales. Short sales are growing segment of the Massachusetts market, and are predicted to be even hotter in 2012 with lenders trying to unload a stagnant inventory of distressed real estate. Scaring potential buyers (and inexperienced agents) with short sale war stories isn’t going to help anyone.
In response to the article, Andrew Coppo of Greater Boston Short Sales LLC, says:
“As somebody who exclusively negotiates Massachusetts short sales, this article is precisely the reason why agents need to be educated further if they plan on taking short sale listings or showing a short sale listing to a potential buyer. If not, they are doing their client a disservice. Short sales require much more work than a traditional sale, but commissions are typically the same, and in some cases less, therefore not all agents are willing to invest the extra time and effort needed to obtain short sale approval. A majority of agents undertake these transactions before fully understanding the lenders’ specific requirements and procedures. The problem is not short sales, but rather the number of inexperienced agents attempting to handle these types of transactions.
As someone with an extremely high short sale success rate, I do my homework upfront to make certain that the seller first qualifies for the short sale. I also make certain to give both the buyer and seller a reasonable time frame in which to expect to receive short sale approval. That way, everyone is on the same page and you avoid having the buyer walk away prior to giving the lender a reasonable opportunity to receive all necessary approvals from underlying investors. My company has helped hundreds of real estate agents get their short sales closed. Depending on the lender, and the amount of lien holders, we can typically get a short sale approved in the first sixty (60) days. If the buyer is not willing to remain a party to the transaction for the requisite sixty days, they are not the “highest and best offer” and their offer should never be presented to the lender.”
Andrew is spot on. By definition, short sales are a unique type of transaction and riskier than normal transactions. That is why the purchase price is usually discounted. Sometimes, short sales are not approved. But most often they are. Agents have to educate buyers about the time process inherent with a short sale. You are not going to close a short sale in 30 days. There could be, and often are, some delays.
I recently authored a post on how to properly write up sales contracts for short sales which was re-published by Banker and Tradesman. The risks can be properly managed. I, and the experienced short sale agents with whom I work, have successfully closed hundreds of short sales, with minimal delay.
I hope the next press release issued by MABA on short sales is more positive.
Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.