The 3rd and final type of buying scenario or situation I will go over in the 3 part series is Short Sales or Pre-foreclosure Properties.  These properties can equal a good buy but you had better be ready to wait…and wait….and wait…and – you get the point.   Please read on to learn more below.  Of course you can read the original long post on all 3 buying situations here – Property Buyers – 3 Types of Buying Situations.  You can read the post on Seller Owned Properties here – Buying Scenario 1 of 3 – Seller Owned Properties and the post on Bank Owned Properties by clicking here – Buying Scenario 2 of 3 – Bank Owned (REO)Properties .
Short Sales – Also known as Pre-Foreclosure Sales.  These, in my opinion, are the last option to consider. 

While this can present a great opportunity to purchase a home at a discounted price, the time, patience and frustration are often more than most people are willing to deal with. 

I know and say this as an agent who has worked both sides of a short sale – representing both sellers and buyers.  I would say, in my experience, a short sale can not only take upwards of 4 – 6 months or more to come to a conclusion but at the end of that time frame, the outcome may be that you do not get the house at all.  There is no guarantee. 

In its basics, a Short Sale is when a owner has come into some hardship (divorce, illness, job loss, etc…) or for a certain reason cannot afford to pay their mortgage.  They have missed some payments already and have significant debt outside of their mortgage.  They may owe $200,000 on a house that is currently only worth $125,000 and are trying to sell the house, have the lender forgive the debt and get out of there without the foreclosure on their record.  They cannot make any money off of the sale but will get hit less with credit scores and so forth then they would on a foreclosure.

At this point a seller will try to sell the house – generally with the help of a real estate agent.  The agent will or should have the sellers supply many things to build their case with the lender to show that a short sale should be allowed.  This will require documentation such as a handwritten hardship letter explaining their situation, tax records, recent pay stubs, copies of all outstanding debt (credit cards, car loans, other outstanding bills, etc…) and other things such as an authorization to release information form allowing the agent to speak directly to the loss mitigation department and anyone else at the lenders office who will handle the account. 

Once all of this is submitted, the property is placed on the market at a reduced price and the owners try to get a contract – usually at any price.  Once this contract / offer is received, the listing agent presents it to the lender.  It can take weeks or months to get a response back from a lender as they are overwhelmed with short sales right now and it is difficult for most agents to even get the lender contact on the phone. 

Most agents are not aggressive enough to try to reach out to the bank contact daily which is what needs to be done to expedite the process.  

If and when they finally do speak with the lenders rep, the negotiating and so forth can take another few weeks to months and at the very end, the bank may decide that they want more money which may often kill the deal. 

I know I had one fall through over $4,000.  That’s right, $4,000.  That is not a lot of money when you are talking a $250,000 home.  I was the listing agent .  The buyers had told their respective places of work they were moving, gotten the kids ready to get out of school, etc… and then the deal fell through over $4,000.  This was after almost 2 months of negotiating, trying to get the bank on the phone, etc… I felt so bad for both parties. 

Then the bank called me back after 2 weeks and said, “Hey, are those buyers still around?  We will now accept the offer.”  Of course they were not still around.  With the amount of options in the market, they simply brought their money and their offer to another property – probably a seller owner property - and closed. 

This, for me, was the deal the broke the Realtors back, so to speak. 

After that situation I vowed to help my buyers find homes that can close for a good deal and in a decent amount of time.  I don’t want to have my people going through those headaches and heartaches.  And getting angry with me in the process! 

Yet, some still want to go for short sales.  Some demand to see short sales and, after explaining the process in detail and giving them examples both positive and negative, that is what I will show them. Usually after we make an offer on a place or two and they don’t hear anything back in a few weeks, they are ready to move on and we do.  But, some people need to experience it for themselves before they choose the better routes to home ownership. 

Recently I closed with some folks on a home. They placed 2 offers on short sales, after I had explained everything to them.  After 3 weeks of me contacting the listing agents and getting no new news back, they were convinced that a seller owned property was the way to go.  So, we made an offer that was accepted (a great deal for the buyers) and we closed.  They are now happily in their new place and I have yet to hear back from the other listing agents on anything.  By the way, those offers were placed over 2 months ago and in that time they have closed and moved into their new place.  Just goes to show you what can happen!! 

Now I know I will hear people and other agents say “We are doing short sales and we are closing them left and right.”  To that I say either “Congratulations” or “Your full of it!”.  Hopefully it is a “congrats” but in reality, most are not closing that many. It is the reality of the situation and the times.  Closing 1 or 2 out of 20 or 50 offers is not “closing left and right”.  The proof is on the MLS.

So there you have it Mr. and Mrs. Potential Buyer.  Of course there are other buying options – seller financing, lease to own, etc… But in general, these are the 3 types of options a buyer will see during their search.  It pays to have a Full Time, Experienced and Professional Realtor working on your behalf.  The sellers will most likely have someone representing them – and so should you. 

This will help you in not only finding the right type of property but in explaining and understanding contracts, negotiations, addendums, documentation, getting things in line for closing and keeping in contact with the selling party, the title company, inspectors, etc…  And the buying agents commissions are paid out of the sellers accepted price!

If you are thinking of buying in Florida, please contact me.  I would love the opportunity to discuss your situation and what is out there for you. 

Thanks and I look forward to your comments.  Fire away…