Just read a great article in Inman news. The buyer was absolutely frustrated with the way her short sale was going, losing her bid to a LOWER offer after waiting all that time, which raises common questions I get when working with short sales.
People entering the market (those who haven’t kept up with the news and buzz about short sales and bank foreclosures), many think that short sales [often referred to as quick sales by those new to the experience], are quick and easy with the banks. To many of you reading this, it’s probably a review, but I still uncover many would-be buyers in my travels who are still unfamiliar with the process or even the definition of a short sale.
As a listing agent of over 20 short sales at the present, I find myself answering many questions again and again on the short sale process. The primary being, “what is the offer, I’d like to offer higher and beat the existing offer.”
In their minds, and even my own, this strategy makes perfect sense.
But why doesn’t it work?
I think Tara-Nicholle Nelson at Inman nailed it on the head (with several points), although I’m not in agreement on the point about the commissions. We have first hand experience working with banks, and we’ve actually tried substituting a higher offer to the bank… only to fail miserably.
A little background…
The 22SS form in Washington State has several VERY IMPORTANT clauses which can allow the seller to continue to accept and submit higher offers to the bank. The second important clause can allow the buyer to walk at any time and keep their earnest money – watch these carefully (or hire me and I’ll do it for you…). I’m more concerned about the first clause, if the seller can accept additional higher or better offers and submit them to the bank the buyer runs the risk of not getting the home they offered on and have been waiting a LONG TIME to receive a response. This was the case on our experiment, too.
Back to the experiment…
We had an offer, and for easy numbers lets say it was for $90,000 on a short sale. The offer and package was submitted to the bank and we were patiently waiting for the bank to respond. Several weeks had gone by and now we’ve received another offer from a “got to have it now buyer,” who generously offered $105,000. Having the ability to accept and submit higher offers, we contacted the bank, swapped the offer and then…
The bank started completely over.
“What the heck!” we thought. but what are you going to do, they started over, six weeks wasted and we burned an otherwise great buyer who offered at $90,000.. only to start over. Lesson learned.
In my opinion (and school-of-hard-knocks-experience), it’s best to hold onto the offer that is not necessarily the highest, but the one that is most likely to hang in there for the long term and buy the property despite hoops, tunnels and acrobatics required by the bank to get it done. Accept the most likely to succeed candidate and put ALL others in backup. Thinking back to my three simple rules of real estate “Location, Location, and TIMING,” it’s often one of the backup offers who gets snuck in at the last moment (but even then to switch a buyer out in a short sale, we have to re-approve a large portion of the file).
- Shorts sales are anything but short.
- The banks call the shots, you wait and jump
- You NEED a great agent to navigate you through (however I firmly agree that MOST aspects are beyond the agents control in the short sale negotiation process, having an agent familiar with the process is like having an experienced captain navigate treacherous waters – your chances of success are far greater).
- As a buyer, negotiate your ability to walk any time (on the WA 22SS) and keep looking. There’s no guarantee the bank will approve your short sale offer so keep it as your ace in the hole and keep looking.
Questions? Sound off in the comments or contact us! We’re passionate about this. 🙂