Up To 70 Percent Of Short Sales Fail
Part of being a good writer is being a good reader. That goes for being a blogger as well. A good blogger will also read other blog and publications. Recently, we read a story from the Los Angeles Times that focused on why short sales can easily fall apart.
The main crux of the story is correct. Many short sales DO fall apart. Recently we heard that as many as 70 of short sales transactions fail or simply do not complete.
Four Reasons Why Short Sales Fail (Don’t Let This Happen To You)
The story mentions several reasons (we list four below) why short sales fail to close. The reasons come from the Phoenix-based National Assn. of Exclusive Buyer Agents (NAEBA):
1- They state that Often the house is not advertised as a short sale.
Unless an agent (or owner) is being deceptive, we don’t see how that is possible. Here in Bay Area all of the short sale homes listed on the MLS have to be noted as short sales. Maybe that requirement doesn’t hold true for other MLS areas but agents can be warned or fined for not noting a short sale.
2- The negotiating process is far different.
The short sale process continues to be a more complex transaction than a normal equity sale with often two or more lenders, HOAs, etc involved. A good listing agent will structure the deal in advance to see where the numbers need to stack up. Any buyer (or buyer’s agent) who doesn’t speak to the listing agent about how they plan to structure the deal is making a huge mistake. If the listing agent does not have a solid plan to structure the deal then it may not be the best short sale to approach.
3- Many lenders will not even discuss a short sale with a seller until a purchase contract is in place.
This last reason has a few issues. Firstly, a listing agent may be able to initiate a HARP short sale which does not require an offer. By the time the HARP process moves forward the buyer will be in place for the other end of the transaction. We have also seen buyers submit LOI (Letter of Intent) to purchase a short sale home.
4- Once lenders approve the short sale, they often require the sale to close within a short period. Consequently, there is not enough time for the buyer to have the house examined by an independent home inspector.
Any listing agent or buyer’s agent who allows the above situation to occur should take note. Don’t wait for the short sale approval to arrive. Listing agents who know how to structure short sales will get the deal approved. Knowing that, the buyers should have their inspections done in advance for the approval. In other words be proactive and don’t be at the mercy of the banks tight closing times.
Anyone who would like our list of Top Things To Ask When Buying A Short Sale then please contact us.