Good Sunday Evening from Chicago, folks!
No matter where you live, or where you work, Short Sale Properties are as much a fact of like for those working or buying Real Estate as the U.S. Economic Recession itself.
A couple of years ago, one of our former Team Members, frustrated with a bank disapproval after a lengthy wait, swore them off completely. Her Listing Client ended up in foreclosure, losing his house, after her seemingly-patient buyer, then another, each got tired of waiting - nearly five months after the original contract was signed by the distressed seller.
These days, ignoring the presence of Short Sale Properties is very shortsighted. In some of the Chicago Neighborhoods and Suburbs our Real Estate Team serves, over half of the available properties on the market are either selling short, or already bank owned.
On the Listing Side, many prospective clients are delaying going to market unless and until they really need to. And, when they need to, it is over matters of distress. Often, for these people, selling short is the only reasonable alternative.
If you study what exactly a Short Sale is - the seller turning over his house to a prospective buyer for less than what is owed on the mortgage, in order to stave off foreclosure, it seems like a successfully-completed short sale would be a win-win for everyone involved.
The seller removes an oppressive debt. The buyer gets a good-condition home at an attractive price. The lender avoids the high costs associated with foreclosure. And, finally, the community does not have to see a depreciating, deteriorating, boarded up home right down the street.
If it is a win-win, however, why do banks not yet seem to want to win their share?
The waiting game played by some of the largest banks - several months in most cases - seems specifically designed to increase the chances of alienating prospective buyers.
From the perspective of the frustrated seller, and his Realtor and Attorney, Customer Service is usually poor, with less than competent clerks spearheading the process. During one recent transaction we had with the Bank of America, the phrase "10 Business Days More" was an almost-scripted, boilerplate response to our every questions of how long it would take to get to the next step.
Two weeks ago, we finally got through to a Second Stage Loss Mitigation Professional at BOA. But, at this time, we have no written confirmation that the current buyer we have will stick with us for the couple of more weeks it will likely take to get final approval If we DO get approval at all!
On this one deal, which we have been working on since late June, the seller has not had the money to pay his mortgage. He was unable to procure a tenant to rent his property. It has remained vacant, without house payments made, since the time the temperature around here was in the 70's - at night!
A buyer walking away at this critical point - unless we can find a qualified replacement buyer right away - would almost certainly result in foreclosure procedures happening right away.
Now, some Real Estate Practitioners have found clever ways to "game" the system. They sometimes find a patient investor, right away, who writes a low offer. They might also have another buyer - perhaps less patient - waiting in the wings.
If the investor writes a low offer and it is accepted, he buys the property at a considerable discount. If the offer gets counter-offered, they buyer might counter back - but if the negotiation is not successful, the listing agent now has some idea of what bottom-line sales price would be acceptable to the bank. He quickly finds a replacement offer - and sometimes gets it through.
The strategy here - playing a game!
Another tactic - should the first buyer walk away, delay notifying the bank of the impatient buyer. Do so, and risk the insensitive lender shredding the entire file, and restarting the clock again - likely, another six-month wait.
Instead, should a buyer walk away, immediately lower the price to the level of the previously-successful offer, and do everything you can to find a new buyer right away. Then, try to replace the buyer with the new one, at this most critical juncture in the short sale process.
Again - another game! A game you, as well as the seller, the bank, and the buyer, could lose. And if you do?
All that hard work. All that patience. All for naught!
No matter which way you slice that - it makes NO SENSE!
You agree? Please share your thoughts, as well as your experiences!
DEAN & DEAN'S TEAM CHICAGO