Carolina Living Real Estate
Recently, I have spoken to many buyers and sellers about the pros and cons of buying and/or selling a home in short sale. Based on some recent deals (of lack thereof), it is becoming increasingly difficult to give positive recommendations to pursue this direction.
While closing on a transaction of this type can result in a positive outcome, it can also be very frustrating for both buyer and seller.
Case #1
We recently (10 months ag0) listed for short sale an awesome home for a group of investors that the value had dropped so significantly due to market conditions. After one of the major banks accept an offer within about 3 months, the buyer then could not qualify for a loan. We then waited on the major bank to sell the loan and in the meantime secured a new offer. After another 4 months, the bank accepted the offer only to have to wait for the PMI insurance company to then make a decision. Upon finally getting everyone on board, this second buyer started to waiver until, magically, several things happen that preventing his continual pursuit of this home. As a part of the banks acceptance, we had a very stringent timeline to get the deal done before foreclosure.
So here is the dilemma:
Do we continue to advise our seller clients that a short sale is a valid alternative? The biggest challenge beyond just being patient deals with earnest monies and/or due diligence fees. You see the theory is that due diligence fees are not paid for these type of transactions. The question is ‘Why give the owner money when they are no longer making the mortgage payment’. Valid question. However, there are people that have really tried to do the right thing and do not want a foreclosure on their credit. Since the buyer has NO skin in the game they can just wait on the bank to make a decision and then just say ‘OOPS never-mind’. Granted they may have some funds spent for inspections but the cost to the buyer is far less than the cost to the owner.
Lastly and less important, these type of scenarios have driven Realtor’s out of the business. Many man hours are spent on these transactions and when a buyer walks no one gets paid.
Case #2:
We listed a home for sale with a short sale in mind in Spring of 2010. In the interim, we have had six buyers come and go as they have gotten tired of waiting. Now we are in late summer 2012 and we finally have a buyer that was patient and we have had mortgage company #1 (actually #2 since the loan was sold) finally accept the offer. Low in behold, we have then had to wait for the second lien holder give us an approval. When the approval came back, there was a $2500 difference in what the First was willing to give up and what the Second wanted. So after over 2 years we are $2500 apart. Amazingly the buyer has agreed to pay the difference. However, this could easily have fallen apart!
Why in the world has it taken over 2 years to get an answer. Who knows? No one knows and no one can predict. So, what do we tell our clients.
At Carolina Living Real Estate, we are committed to helping our clients with these decisions. As in any Real Estate transaction, disclosure is key. We disclose the pros and cons of what may or may not happen. However, giving advice either way is not something we have a growing confidence in doing.
