Short Sales: Dealing with Buyers Hanging Out on the Fence
Short sale negotiations are tough–even in the easiest of circumstances. It takes around two months to get a short sale approved. And, many times, it takes much longer when buyers back out, paperwork gets lost, dates are not met, etc.
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Perhaps the toughest thing for a short sale negotiator to deal with is a buyer who is on the fence. You know the kind– having trouble with qualification, having trouble meeting deadlines, changing terms and conditions once the bank has agreed to the short sale.
Negotiating a short sale where the buyer is "on the fence" can be extremely tough on the sellers, because the sellers have little security that the deal will close. It is also tough on the agent or individual doing the negotiating; this individual is working extremely hard to put this deal togetherâspending perhaps up to 50 hours of time over the course of the transaction negotiating with the banks, just to learn later that the deal might go south.
Believe it or not, this situation is also hard on the banks. Just like everyone else, the bank is expecting things to happen according to plan, and hoping that all parties will meet deadlines so that losses will not continue to grow (not to mention how annoyed they become when two or three extensions are requested on the short sale approval letter).
But, what can be done when a short sale buyer is on the fence?
First and foremost, I would say that it is only best to work with this buyer when you have no better option. Second, I would say that it would always be good to secure as many back-up offers as possible. Third, I would advise that you need to get not only the buyer and the buyer's agent in the game, but you also need the buyer's lender on board. Ask the buyer's lender to provide you with concrete dates for approval, documents and settlement on company letterhead and submit that to the bank. This way if those dates are not met, it is not you (the listing agent or negotiator) who has put your professional name on the line.
For investor buyers who have their own plans and designs with regard to the purchase of the property, banks are frequently not empathetic. Banks really do not seem interested in the fact that you want another price reduction, or need to sort out some issue before closing. Now that most of the major lending institutions have policies and procedures, lenders are actively proceeding to foreclosure when buyers are on the fence and all parties to the short sale are not performing as agreed. It’s a bummer, but it’s also a fact.
So, what’s the best way to avoid this situation? I’d say that all parties need to perform their due diligence up front. Listing agents should pre-qualify the buyers. Buyers’ agents should be sure that the buyer is serious and ready to perform. Last, buyers should pre-qualify the property, and make sure that it is something that they really want. Short sales are tough, and everyone wants them to close. A little due diligence by all parties can go a long way towards seeing an effective short sale closing.
Photo: flickr creative commons by Anthony Stanley