I typically don’t reprint publish mass-distributed items, but the mass in this case is the Charlottesville real estate community, courtesy of Bill Tucker of Tucker, Griffin and Barnes. Short sales are becoming more common in the Charlottesville market. We’re not nearly as bad off as other markets, but a little bit of education never hurt anybody.
1 – If the Seller has a second mortgage and/or home equity loan, that means another lender needs to approve the short sale. Also, depending on the facts, the holder of the first mortgage may not agree to any discount, which means the second lender may have to take the full discount. This is still possible, because the alternative may mean that the first lender eventually forecloses resulting in the second lender getting zero.
2 – Short sale contracts may contain a clause making the transaction contingent upon the Seller’s lender’s approval of the short sale. This approval, however, is taking much longer than anyone estimates. One strategy to shorten the time for the approval is to include a clause in the Real Estate Contract giving the Buyer an option to terminate the contract if the short sale approval is not obtained by a certain drop-dead date. You may also want to include a clause allowing the Buyer to extend the termination date.
With this “drop-dead” date, the short sale negotiator may put your contract to the “top of the stack.”
On another note, whether a property is in a short sale situation is not a required disclosure, and is not easily searchable via the MLS (in this case, the Charlottesville MLS) – I cannot speak to other MLS’ policies.
Related Reading
10 Questions to ask before Showing Virginia Short Sales
Frankly MLS in Northern Virginia does scrub short sales
Short Sale Listings: Leaving Out Key Details is Like Telling a Lie – Rain City Guide – Read the comments!
Update 12 February 2009: More from Frank Llosa
“One strategy to shorten the time for the approval is to include a clause in the Real Estate Contract giving the Buyer an option to terminate the contract if the short sale approval is not obtained by a certain drop-dead date”
You know you can always tell when someone has little if any experience in short sales. Just read some of this stuff and it will make you shake your head. Did this guy Tucker really say this…and put it in writing? OMG…that’s absolutely insane!
Just goes to show you, just when you think you’ve heard or seen it all some inexperienced agent up and says something as asinine as that which was written above. Geez…….
Barry –
Thanks for stopping by. Please expand for the readers – what’s the problem with this? Bill Tucker is a very experienced attorney in town and I know you do a whole lot of short sales – what is the right way to address this?
Thanks!
Jim,
The Florida Association of Realtors has an addendum that puts a time limit for the seller’s lender to approve the short sale purchase price. The pre-printed time limit on the addendum is 45 days from effective date.
Sellers and their agents would not want to accept a “drop dead” date that has no realistic chance of being met.
Bill may be a very prominent attorney but he obviously doesn’t know a hoot about short sales.
Here’s the rub…we only do short sales to earn a profit. I assume any realtor doing a short sale is doing so to earn a profit. We’re in it to win it. We’re in it to MAKE MONEY. I am not sure that an attorney is in it for the same reason. They are in it to protect their client. Understandably so…but his interest is counter to that of those who are looking to MAKE money.
I know how to do a short sale. i don’t need the practice and I assume your readers who KNOW how to do short sales don’t need the practice either. Here’s some of the problems:
1. I don’t want my buyers to have such an out clause. I only want to deal with strong, financially capable buyers with firm mortgage commitments or cash proof of funds who are also in it to win it! I want them to feel and be comfortable that they have obtained the BEST deal that they can. My buyers NEVER walk becasue they know that it is worth the wait.
2. Why is it worth the wait…because we obtain approvals in under 3 weeks often in under one week. Why? Becasue we know how to submit full packages that the banks want. When you hear from people that banks take so long it is BS. It tells me that you did not know how to complete a proper package. If one knows how to prepare a fully documented and substantiated short sale package, that is how to move your deal to the top. Put yourself in the LM’s position. What are you going to spend time on. A package that has EVERYTHING and more that will allow for a quick decision or some lame package where you have to keep going back and forth requesting document after document.
Our short sale packages exceed 150 pages! That’s a full package. not a contract and a letter like some submit.
3. no Out clause is going to speed up the process on a poorly prepared package and may in fact hasten a quick denial. You asked for it now here’s your answer. Denied! Now go away.
The way to get short sales approved is VERY simple and EASY!!
1. Only pick to work on deals that make sense. This is first and foremost the problem that most realtors have. The round hole into the square peg approach doesn’t work on short sales. it’s not a one size fits all process. I laugh at some of the deals that I get pitched. A Selelr who has good credit and is upside down and has a 401K isn’t a deal we even look at. Knowing what deals to pursue is job 1.
2. Once you have a deal you want to get involved in, then there are specific processes that must go into place BEFORE the bank is even contacted. When I see deals that say “Bank Already Approved Short Sale” I roll on the floor laughing. The inexperpeienced realtor just hung a NEOn sign on himself that reads..All Hail King OF The Idiots! Nothing exposes short sale incompetence more than advertising a short sale deal already approved.
3. Find and have buyers ready who understand the process (becasue they trust you know what you are talking about) and they will NEVER walk away from a deal.
4. Properly prepare your package and you don’t need these types of BS clauses the attorney is promoting.
We have taken deals that were slated for auction on the next day, got the auction stopped, the new buyer contracted and the short sale approved in as listtle as 72 hours…BECAUSE it was packaged and prepared correctly.
One day soon…MAYBE..just MAYBE a greater percentage of real estate agents will actually get it and realize that this is a business and they need to educate themselves throroughly instead of trying to wing it and get cute with BS clauses by attorneys who have no reason to be involved in short sale transactions.
That is if they actually want to make MONEY in this niche of the industry.
Hopefully I answered your question. Feel free to email me at info@realestateradiousa.com if you have more. Glad to help and you’ll always get the straight scoop…even if it isn’t what you want to hear. But I’ll help you make money for sure…that is if that is your reason for being in business.
Lately I have come to wonder about some agent’s motivation.
1. His clause provides the Buyer with an
Hey greg..I own South Florida for Short Sales and I have NEVER used that addendum. It’s for losers to use who have no control of their deals.
I use that addendum to replace my Charmin!