A Tale of Two Short Sales

Short sales look attractive at first but they are fraught with anxiety and uncertainty. We thought we would compare two short sale transactions. The first was without a professional negotiator. The second used a highly reputable, professional negotiator. Both were hard but you may want to note the difference.

No Negotiator -The Near Impossible One!

Here’s short sale” transaction lasted eight months where the listing agent did not use a professional negotiator and had little experience with short sales. The entire eight months were packed with uncertainty, not knowing if we were going to close on the house that my purchaser client selected for his family. Though short sales may look inviting, in most cases a short sale is filled stress and angst for purchasers! Whether you are selling or purchasing a “short sale” property you need to know some of the pitfalls associated with these non-traditional home purchases.


How Hard Can it Be? Read On!

A “short sale” is used to describe a sale where the debt owing against a property along with the costs associated with the sale exceed the property’s market value. The sale of the property is subject to “creditor” approval. With a “short sale”, creditor’s approval may take several weeks or months. In my case it took 8 months! The sales contract is subject to the approval of all creditors who must agree to release their liens on the property in order for the sale to close. It may take up to 30-45 days for a creditor to review the “short sale package” and then an additional 30+ days before a negotiator gets through the package. Additionally, the asset manager and the investors have to thoroughly look at the package before any approval is given. Because of the length of time it takes to get lender approval there is always a chance that the property could be foreclosed upon prior to settlement which prevents the Seller from selling the property and leaves the buyer with nothing. Unfortunately, the foreclosure threat is something the purchaser should always keep in the back of his mind.

Normally a “short sale” transaction does not have a Home Inspection Contingency that you would find in a” traditional home sale. “The purchaser typically will need to concede having the seller repair or replace any items in the Home Inspection. With “short sales” the properties are sold “as is” which means that the seller / lending institution will not negotiate home inspection items. You’re lucky if you get the approval to do a home inspection for informational purposes! Anything can be found in a home inspection from broken appliances to leaking roofs and malfunctioning furnace and HVAC units. That’s when you start seeing dollar signs floating in your head!

But wait there’s more! In our case, the third party creditors decided to do there own appraisal, and it came in $30,000 over the contract price. This prompted them to decline the contract price and renegotiate for a substantially higher price. After months of waiting, the purchasers agreed with this higher price!

Can it get worse? You bet! Less than two weeks from settlement, our client was told there were $3,700 in unpaid HOA assessments and attorneys’ fees associated with this property. The creditors refused to pay and the seller had no funds to pay. The purchaser now had to decide whether to pay the $3700 or walk after 10 months of effort and stress. After the time and money invested to date, they elected to continue with the purchase and paid the fees.

To paraphrase that great philosopher, Yogi Berra, in a short sale, “It ain’t over till it’s over.” Furthermore, creditors know very well that purchasers have a ton of time and money invested in the purchasing effort. They also know they have the “clock on their side” and use this information to their advantage.

With a Negotiator – Hard but Got it Done!

Faced with a very difficult short sale transaction I knew I would need some serious help. After all, the key to a successful ending of a short sale is understanding the process of dozens of third party creditors, and having the time and patience for the hundreds of follow up phone calls. I knew I needed a professional troubled asset negotiator but wasn’t sure who to use. There are a number of less than honest folks who will promise the moon, take your money, and never get it done! Through a referral we discovered The Helping Hands Foundation, a non-profit organization owned by David Bryan.

For a very reasonable fee, payable ONLY after settlement, Dave took over the tough job of collecting all of the information and coordinating and negotiation the third party approval for both creditors which allowed us to focus on marketing our listing and negotiating the contract.

We were fortunate to receive a fair contract within days which allowed Dave to push the third party through the grinder for two third party approvals. This process took about 40 days for the first lien holder and an additional 14 days for the second lien holder. Behind the scenes there were tons of phone calls, emails, and continuing negotiations. Each lien holder / bank has different processes and contacts and a number of departments that the process flows through. Without the experience of a real pro in the processes working for you, you will get lost in the bureaucratic quagmire.

Immediately upon approval, our purchaser backed out (a real bummer!) and we were back on the market again. And again we received a good contract, this time with a very professional, motivated, purchaser’s agent working the other side. The short story on our short sale is that from start to finish was less than 90 days. The moral to this story is “choose your team wisely!”
And by the way, the negotiator’s fee was worth every penny of it! If this appears to be a plug for the Helping Hands Foundation and Dave Bryan, it most certainly is!