Sunday, January 04, 2009
Short Sale Shenanigans
They're at it again. As short sales have increased in number in our market, so have the shenanigans. A short sale is a sale in which the lender agrees to take the loss in a sale at a price below the outstanding mortgage balance. The lender approves the final price and the homeowner walks away without having to cough up the deficit, although in some cases he may have signed some nebulous IOUish thingy (promissory note). There has been a spirited, although unresolved, discussion among the members of our local board of Realtors about the procedure for handling short sales. In the absence of strict guidelines, many listing agents are having to make up the rules as they go. The seller in a short sale is walking away with zero cash and often blames the lender for the mess he's in. The details of the sale mean less to him than getting out from under the debt. Even though the lender makes the final approval, the listing agent has no obligation to that lender. The seller is the actual client and can call all shots except final approval. As you might have guessed, in lieu of specific instructions from the seller, the way the listing agents choose to handle the sale is often determined by what benefits that agent.
A listing agent told me yesterday not to bother showing her client's short sale listing as she had just submitted an offer to the lender. Never mind that our offer may have been better. Of course, she may have had both sides of the transaction and is hoping for double commission or she may have just been lazy and not wanted to have to prepare and submit all the required paperwork with my offer.
How about the listing agent who lied about submitting another agent's offer to the lender because he was waiting for a buyer of his own so he could make more money on the deal. He admitted this to a buyer of one of his listings who relayed it to me.
Or, there's the short sale listing agent who marked "backup" on a second offer before submitting it to the lender. I don't know if she's hoping to influence the final decision on the lender's desk or, lacking specific guidelines, she's just treating a short sale as a regular sale.
What about the listing agent who, last month, only submitted one of three offers on his short sale listing to the lender, the lowest of the three. If his seller instructed him to submit only that one offer, did he do anything wrong? He is obligated to obey his client, the seller, not the lender.
And, how about the listing agents who are advertising properties as short sales but have not even talked to the lenders about the possibility of a short sale. They're wasting everyone's time and setting up both the sellers and the buyers for disappointment. Listing agents, I know you're reading this. Do your homework before initiating the wild goose chase. Your chances of getting paid are only increased when you do your job.
If you're a buyer who's out there looking for a deal among all the short sales, be aware that the process can be long and that you may never know exactly what is going on after you submit an offer. Be patient and keep looking after you make an offer. You may find something you like better before you get a response from the bank. Only a fraction of short sale offers result in a closed sale and a buyer can be left hanging for months waiting for an answer. Expect to be frustrated and take everything told to you with a grain of salt. The dishonesty index is creeping back up and, as always, it is prudent to be skeptical. If you'd like a tough, cynical buyer's agent to guide you through the process, I'd be happy to be your designated hitter.
Our unbelievable weather that dominated in December continues. Cocoa Beach forecast for Jan. 5, 2009 --- Sunny, light east winds with a high of 80 degrees, low of 60. See you on the beach.
"Relativity applies to physics, not ethics."