Intrigued by feedback from a Sacramento Bee employee that purchased a short sale with our help, Jim Wasserman , senior real estate columnist, called to learn more about our “Short Sale Speech”. see article here

Short sales are such a significant part of the market and have so many challenges, we spend a lot of time helping buyers understand the problems and opportunities in short sales. This explanation has become such a frequent conversation when working with our home buying clients that I now simply refer to it as the “Short Sale Speech”. Almost every client will need to hear it, and most will likely need to hear ‘The Speech’ several times before appreciating the frustrations they will face. We are happy to help home buyers attempt to buy short sales…but only after they really understand what is in store for them.

Most buyers expect a short sale to be like any normal purchase transaction that just takes longer. But it is a completely different animal. The parties involved in decisions, the motivations of the parties, the process (or lack thereof) are completely unlike other traditional property sales.

So “The Speech” is really more a series of small discussions over a period of visits while out scouting properties with clients.

It is critical that a buyer know what they are getting into when they attempt to purchase a short sale and what they can expect. If expectations are not in line with the reality…it will be a miserable buying experience…or more likely, a miserable experience…and an unsuccessful purchase attempt.

Short Sale Issues…

The seller isn’t the seller. The banks and investors are the parties in charge.

A short sale is a negotiation between borrower and lender (or lenders) and the buyer plays a minor and expendable role. A short sale is about mitigating the loss of a non performing asset (the loan). The sale of the home is one piece of the puzzle. Customer satisfaction and keeping the buyer happy are not priorities in loss mitigation. In fact, I’m not even sure they are considerations.

The buyer & buyer’s agent are isolated from the true authority (Banks/investors) to negotiate, or problem solve. As a result, the buyer is essentially along for the ride and success is based on the seller’s circumstances, skills of the seller’s agent and the willingness of the banks and investors. All out of the buyers control.

The failure rate is high… the odds are, after many months, a home will not be sold as a short sale. While the success rate has been upgraded from horrible to bad, the odds are still against a buyer having a successful short sale purchase.

There is not a great process in place with banks. Call centers are overwhelmed with high call volumes.  There are typically multiple banks and investors each with their own and often changing objectives.  Combined with an apparent low motivation to complete any particular short sale, you can expect documents to be lost, files get closed without notice and what will feel like an unlimited variety of absurd hurdles.  Muddling through best describes the typical short sale.

The seller is in a bad place financially and emotionally. The seller would probably jump at the chance to get the price the buyer is getting and stay in their home. Don’t expect the seller to behave like a typical seller profiting from the sale of their home. Don’t expect gratitude from the seller.

There are things a buyer can do…

Avoid Contingent Short Sales labeled “Active Short Cont.” in the MLS as they already have offers submitted to the bank…your chances for success with these ranges from highly unlike to remote

Interview seller’s agent on a property you are interested in

Be prepared for a bumpy ride

Keep your options and schedule flexible

Don’t fall in love with a short sale

Be careful what you wish for…you might just get it.

Don’t expect much effort or expense from the seller to make the buyer’s move easier or better (like repairs, or leaving the house particularly clean)

All that said, there are good buys to be had. What’s more, considering short sales increases available inventory and choice for a home buyer. Just don’t expect a short sale to be fun, exciting or easy…because it won’t be.