With a huge number of short sales in the MLS, why are there buyer's agents dissuading clients not to pursue

Asked by Tina Farinas, Roseville, CA Sun Jun 29, 2008

short sale purchases? I had a consumer call me yesterday about my short sale listing because her agent told her it wouldn't be worth her time to view the property and/or submit an offer.

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23
Bill Mccord, Agent, San Jose, CA
Sun Jun 29, 2008
BEST ANSWER
Hello Tina,
There a many reasons for this apparently weird situation but the 2 most easy to explain are as follows:
1. Short Sales are a beaurocratic nightmare frequently made worse by a listing Agent with no experience of dealing with them. Often the contract price agreed to by the current owners is way below market and will be changed by the Bank if they actually agree to the short sale. If, as is often the case, there are 2 mortgages the delays will be multiplied 4 fold as the 2 Banks bargain over sharing the losses. This leaves the Buyers Agent in the situation where neither he nor the Buyer really knows whether they have a deal. Who do you think will be blamed if it does not go through.
2. On a Short Sale the Buyers Agent's Commision is going to reduced probably 90% of the time. The Bank will say "if we are losing money on this deal the agents are going to share the pain.
I have no problem buying later when the Banks have foreclosed and put the property back on the market as a regular listing. I will always explain to the potential Short Sale Buyer exactly how thing work. They will usually prefer to not spin their wheels, and will go for a property which can be put into contract with some certainty that it will actually close in a sensible time.
Bill
2 votes
Erin Stumpf…, Agent, Sacramento, CA
Wed Jul 2, 2008
I am a bit late to this thread since I have been on vacation (a much needed one at that)!

I should preface my response by saying that I have successfully closed several short sale transactions on behalf of sellers. I have presented offers for a handful of buyer clients on short sale listings...none have been successful.

I have a pretty consistent message to my buyer clients who are interested in short sale properties...Proceed with caution! If your buyer has a high tolerance for uncertainty, frustration, disappointment, and waiting, a short sale purchase might be great for him/her.

With short sales, the buyer has zero control over the flow of the transaction whatsoever. It is very difficult to determine in advance if conditions are right for a short sale to be approved by a lender...or lenders. They can take months to get approval. Sometimes, while the buyer waits for approval, at the 11th hour, a better offer might come in - and then your buyer is just out of luck. Sometimes, your buyer waits months for approval and then the lender says no. Sometimes, time runs out and the bank forecloses the home out from underneath your buyer. The risk for buyers compounds with the use of VA or FHA loans or grant programs - as there are restrictions on property condition, and short sales are generally sold 'as-is'. If the appraiser notes anything that needs attention in the appraisal, and the underwriter decides that the home must have _____ repair done prior to the close of escrow, there will be a problem, and yes this does happen.

My experience is that most buyers who are motivated to find a home get frustrated after submitting offers on multiple properties, and will eventually just stay away from short sales on their own. They generally make that call...not me.

My concern is not with getting paid...it is providing the buyer with a positive (and successful) home buying experience. ;-)
Web Reference:  http://www.erinattardi.com
3 votes
Jim Walker, Agent, Carmichael, CA
Mon Jun 30, 2008
Great answer, Cathryn. If I take your advice for putting my buyers in short sales I then turn my perfectly good buyers over to a short sale expert who will pay me 25% referral fee on a sale that has an 8% chance of occurring. Here is the math. A buyer who would have earned me a $9,000 on a normal sale (300K times 3% commission) is now worth $77.50 { 25% of 8% of 2.5% of $310K.)

In the extremely unlikely event that a deal is consummated,
The buyer client pays 10,000 more for a short sale than for a reo , the commission gets slashed by the bank. No thank you, Client acquisition is a time consuming and expensive activity. I don't throw my good clients under the short sale bus. If they step in front of that bus despite my safety warnings then I tend to their wounds, all while softly repeating " I told you so"
2 votes
Jim Walker, Agent, Carmichael, CA
Mon Jun 30, 2008
Why? Because I would rather be paid that not paid. I would rather that my clients find a home that they can buy rather than find a home than they can pretend to buy.

The one in 12 success rate for short sale listings has been researched and verified. Until you can think of a compensation plan for buyers agents to show your short sale listing. I, for one, will continue to steer my buying clients towards properties that are known to be salable over properties that are roll of the dice with bad odds. Don't blame me because I am reluctant to show a short sale.

I do not represent your seller. My duty is to my buyer (s). In the fulfillment of that duty, I do not want to waste their time looking at and offering on short sale properties, and opening escrows that have flimsy chances of being sold..
2 votes
Tina Farinas, Agent, Roseville, CA
Sun Jun 29, 2008
Thanks all for responding to my question. I understand how complex a short sale process is. I represent both sellers and buyers in a short sale. But if a buyer came to me and commit the time required to complete a short sale, I think it is my duty to show them properties that interests them.
Web Reference:  http://www.tinafarinas.com
2 votes
Paula Swayne, , Sacramento, CA
Thu Jul 3, 2008
I agree with most of the previous answers...having experienced short sales, to say they are no fun and an exercise in frustration is putting it mildly. There is no contral, no communication and most of the time, no escrow. Contrary to some information below, many lenders will not give any information ( and I mean ANY) until an offer is received. Then they will give you what requirements they have (which, if they had told you ahead of time, you could have been prepared for) which you scramble to get together. Then you wait...and wait....and wait...and wait....well, you get the idea. After a month or two, you will find out if the lender accepted your offer, or someone elses, or have decided to auction it off on the courthouse steps. Agents don't avoid short sales because of money....they avoid them out of the frustrating experience they know their clients are in for.
1 vote
Cathryn Blai…, Agent, Cape Coral, FL
Wed Jul 2, 2008
The mistake that most people make is making an offer on a short sale listed home where the price has not yet been approved by the bank. Some realtors out there are jumping the gun and putting an unauthorized price in the MLS. This is where all the trouble is stemming from!!
As Realtors, it is our "Due Dilligence" to get the price in writing approved by the bank representative. Start with this and you won't wait months haggling over the price to close the deal.
1 vote
Vicky Chrisn…, , 20176
Tue Jul 1, 2008
Buyers aren't interested because of the length of time it takes to get approval. How can they plan when to move? What to pay in a declining market? How can they know if they can afford the mortgage if they can't lock in an interest rate on a loan? It's not the agents - it's the buyers.
1 vote
Cathryn Blai…, Agent, Cape Coral, FL
Mon Jun 30, 2008
I know plenty of realtors who refuse to pursue short sales for their clients. It is a lengthy process here in Florida. However, there are plenty of realtors who have made it their "niche". Both my husband and I are realtors, but I am also a Lic. Mortgage Broker. He does not do short sales, instead, he takes his deals to another realtor who does and has experience working and negotiating with the banks. This short sale expert is very good at what he does, so now that he has found a source to get the job done, my husband refers the business to this man and in turn is paid for bringing the referral. Then I do the financing.
The borrowers today arn't just looking for a deal, they are looking for "steals". In their mind, these short sales are the "steal" they are looking for. I say, find a reliable resource to do the job for you if you don't wish to do the deal yourself. Every sale is important to our livelyhood, so let's make the most of it and accommodate the client at the same time.
1 vote
Christina Mo…, Agent, Saint Petersburg, FL
Mon Jun 30, 2008
Banks are not paying the Realtors and never get back to Realtor on timelines, we are at the banks' beckon call and mercy...

Waste of time for both client and Realtor.
1 vote
Sue Archer R…, Agent, Palm Harbor, FL
Mon Jun 30, 2008
I understand your frustration, having been on both sides of a short sale transaction myself. Bill explains it best, and with only 1 out of 12 short sale listings actually closing, the odds are that you're wasting both your buyer's (and your own) time. Therefore, with a buyer, I educate them on the situation, show them everything else first, and if I have to resort to short sale listings, I grill the listing agent pretty hard to make sure that they have some experience with short sales, and have a commitment from a bank.

When I have a short sale listing, I press pretty hard in the advertisements that I have the qualifications to close this, and the bank is committed as well.
Web Reference:  http://www.suearcher.com
1 vote
Dorene Slavi…, Agent, Torrance, CA
Sun Jun 29, 2008
I don't understand that...If the property is in the area my buyers are interested in and is a great price and in good condition..by all means..we will persue that property!
Web Reference:  http://www.doreneslavitz.com
1 vote
Tina Evans, Agent, Cookeville, TN
Sun Jun 29, 2008
Your answer is in your question. Many agents won't encourage their buyers to pursue a short sale because of the length of time it takes - 45-60 days (sometimes longer) from the time the offer is submitted to the time the investor approves and returns a go ahead answer. That's a long time to wait to get paid in many agent's eyes. The second answer is that the agent probably does not really understand fullly what is entailed in short sales.
Great question!!
Tina Evans, Principal Broker
Web Reference:  http://tinaevans.net
1 vote
Joanna Jensen, Other Pro, Livermore, CA
Fri Mar 19, 2010
sometime the problem arises when the listing agent doesn't know the process or stay in contact with the right department.
Most lenders servicers now have a straight forward approach to the process.
I have seen sellers list their home as a short sale with no intention of ever selling they use it as a tool to negotiate with the lender. When I'm taking my buyer thru and the home owner mistakingly tells me they are putting in an offer as well... I know there is no chance for my. Buyer.
Web Reference:  http://www.joannajensen.info
0 votes
Phyllis Lern…, Agent, Tarrytown, NY
Wed Jul 2, 2008
Here is a link to a great article about short sales and the troubles you may have to go through...

http://homebuying.about.com/od/buyingahome/bb/BuyingShortSale.htm

Phyllis Lerner
http://www.westchester-real-estate.us
0 votes
Jim Walker, Agent, Carmichael, CA
Wed Jul 2, 2008
You are correct, Erin, the primary reason to caution buyers against short sales, is that short sales, in the majority, are fruitless, frustrating and unrewarding to the client. I also acknowledge that, mostly, short sales are also fruitless and unrewarding for agents, too.

The part of the sentence that made me cringe was "My concern is not with getting paid"
I can understand that pay is not your primary concern, nor should it be. However my point remains that an agent getting compensated is in alignment with the clients goal of successfully buying a home.
0 votes
Erin Stumpf…, Agent, Sacramento, CA
Wed Jul 2, 2008
How do you figure? That last sentence is a reference to how many short sales do not close.
Web Reference:  http://www.erinattardi.com
0 votes
Jim Walker, Agent, Carmichael, CA
Wed Jul 2, 2008
I liked your reply Erin, til the last sentence. Please don't give the Realtor-haters that kind of ammunition.
Your commitment to providing the buyer with a positive (and successful) home buying experience is closely correlated and aligned with your getting paid.
0 votes
Sandy Partri…, Agent, Roswell, GA
Wed Jul 2, 2008
It's all according to the servicing company of/or the bank that holds the property, but it's taking a long time to close these properties, even up to 9 months. Some even go into foreclosure, while you've got a contract sitting there for property. They've become very iffy situations for the realtor....probably about 50% of them work out. I've had a good cash offer on one property for over 3 months already and the bank hasn't even assigned someone to handle it. On another deal it closed in a month.
0 votes
Dave Werth, , 58102
Tue Jul 1, 2008
Agent didn't want to spend time waiting for a response from the 3rd party bank. I have been on both sides and they are very hard work and very rewarding or you feel like that when your done. Let each agent know you have a good repore with the bank or 3rd party up front and the agent will come and play. Its a frustrating time for some agents who won't even deal with it, which is sad, but a good buy out of the sale of the home is always worth the patience. It shows you who wants to work and who wants to be a level above car dealers too! Keep pushing cuz its certainly rewarding to have your name on a sign for free advertising and an opportunity to do open houses at the place as well. Look at the bright side, you might even get buyers from it, so use it for your advantage and not another agents dilema!

Best of luck to you
0 votes
Vera Brodsky, Agent, Bellevue, WA
Mon Jun 30, 2008
I think it all depends on the area. In the King county where I live, Short sales are much more common then foreclosures. Although foreclosures increased over 50% in the last year, short sales are going quick. Banks are willing to negotiate since many buyers want to purchase short sales and banks get more money then at the auction. I have had multiple transactions (one in the works, knock on wood) and all closed if not on time but within reasonable time frame. So I think we should not generalize the short sales as being bad. I have had very good experience with them and have only represented the buyers.
0 votes
Vera Brodsky, Agent, Bellevue, WA
Sun Jun 29, 2008
In our state of Washington, the new law just came into affect that has to do with short sales called the Distressed property law. basically (i am not sure about your state) in our state if you are involved in a distressed purchase sale you might be sued down the road. If you are a listing agent and your property is owner occupied you pretty much become a distressed home consultant. for a buyer's agent, if the forclosure is within 20 days, it applies to the buyer and agent as well.
But, i think its only the state of washington that did not exclude the real estate professionals. you might want to check with your MLS
0 votes
Dot Chance, Agent, Burbank, CA
Sun Jun 29, 2008
It depends upon my client whether or not I show them short sales. If I have a buyer who is not patient enough to ride the roller coaster of a short sale I discourage them from it.
Web Reference:  http://www.DotChance.com
0 votes
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