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5 Reasons Why The Program Is Doomed To Fail:

Like the federal loan modification program that was put into effect just over a year ago, the federally subsidized short sale program, set to take effect April 5^th, is now being touted as the next great hope for homeowners who either can’t afford to, or are choosing not to, pay their mortgages.

But, just like the Making Home Affordable program that released last year with the promise of saving millions of homes, the federal short sale program is drastically flawed, and if enacted, will more than likely end up with the same exact outcome… after many months and billions of wasted taxpayer dollars, the “experts” will be that it isn’t working for a variety of reasons.

In this Nostradamus like post, we’re going to examine why this new program is doomed to fail… do us a favor – bookmark it, and in a year come back and revisit it, and see how many of these predictions come true. Without further adieu, here are 5 reasons why a federal short sale program won’t work:

1. Second (and third) mortgage holders

Here’s a potential scenario: You owe $500,000 on your home, which was purchased in 2005 with an 80/20 loan, meaning your first loan was for $400,000 (80%) and the second loan is for $100,000 (20%). Due to the collapse of the housing market, the home is now worth $300,000. You put it on the market for $300,000 and get an offer for $250,000, which you take to your first lender. Even if you jump through all their hoops, have a valid hardship, and get your short sale approved, that still leaves the second lender out in the cold, holding the bag to the tune of $100,000. The logical, and typical response from the second lender, will be to block the short sale any way they can.

2. Lack of buyers

Even in a perfect world where every lender agreed to take a loss and accept a short sale, there’s still one major flaw – we’re still in a recession, unemployment is at a multi-decade high and still rising, and consumer confidence is at an all time low. Add to that the fact that due to lack of liquidity and tightening of lending standards, many would be homebuyers are now ineligible for a mortgage anyway. Not exactly a formula for people rushing out to buy all these short sale properties, or to secure the funding to do so even if there were.

3. Bureaucracy & red tape by the banks

Have you ever tried to contact your bank for anything? Loan modification, find about or try to reverse a credit card fee, anything?

If so, you certainly know that it’s not the easiest task in the world. One department sends you over to another, who makes you repeat your info and your story. They tell you to fax in documents, then claim to never receive them. They say you’ll get a call back and you never do.

The point is that if the lender needs an excuse to postpone or make it  difficult for you to do anything, they have it… even if they have the best of intentions, the sheer volume of the requests for modifications, short sales, etc, has most lenders scrambling to play catch up.

Then there’s the fact that has squashed the hopes of so many short sellers in the past – even if you can get all the lenders and investors to agree on the short sale, that usually takes 3-6 months! By that time most qualified buyers have either found another home and lost interest in the current deal.

4. Lack of incentive & penalties

Just like the Federal Loan Modification program, this plan is lacking a huge ingredient… namely the lack of incentive for banks to take less than what they’re owed, and the lack of penalties for delaying or not complying with the rules of the program.

According to a NY Times article on Sunday, the program will offer $1000 apiece for 1^st and 2^nd mortgage holders, and $1500 for the seller.

Sure, there’s a $1,000 incentive payout for a bank to accept a short sale, that’s almost more of a slap in the face than anything. Actually, I’m kind of laughing out loud right now at the absurdity of this.  If someone owed you $100,000, and they came to you and said… “well I can only pay you $25,000, but  don’t worry, because my buddy here has another $1,000 for you…cool?” Haha… Does that really make anything better – it’s still only $26,000!!!

Or it looks more like this…

Borrower:  I know I owe you $100,000, but I can pay you $25,000… Is that ok?

Lender: No

Borrower: Ok, ok… well what if my friend uncle sam gives you $1,000 will that help?

Lender: Sure

I mean come on! Where do these smart people come up with these programs?

You really don’t need to incentivize the seller to sell – the fact that they are out of an underwater mortgage is incentive enough in most cases. The problem is, how can it possibly seem like a good idea for banks to take a $1000 consolation prize to take a loss of 5 or 6 figures on a deal?

Without a real, valuable incentive to accept short sale offers, and without a real penalty to lenders who don’t try to make things happen, there will be no real reason for lenders to go the extra mile to accept the short sales.

5. Lack of clear cut, uniform guidelines

Again, there is another huge comparison to be drawn with the federal loan modification program… the final decision is to be made at the sole discretion of the lender. One of the main reasons that the modification program failed is because you could submit the same application to 2 different lenders, or in some cases to 2 different people at the same lender, and receive 2 completely different answers.

Unless there is a uniform set of guidelines for acceptance, there is no way this will work.

Conclusion:

As with the loan modification program of a year ago, this program is destined for failure unless drastic changes are made to it by the government. By enacting these programs that are meant to be a show of the governments dedication to fixing the economy, but not including any real rules for banks to follow, they are delaying the inevitable, costing taxpayers billions more dollars, and making themselves look foolish and corrupt. Now is no time for token gestures, the economy is at the brink of collapse.

Either make changes that have some teeth and force the banks to start playing by some logical rules again, or do nothing, step back and let free market capitalism run its course. Let the market decide what the prices of homes should be, and who can qualify for them.

Sure there will be bank failures, foreclosures, and more pain, but most people who have an understanding of the economy, a few ounces of logic in their head, and don’t have a bank lobbyist at their doorstep daily, will tell you that this is bound to happen anyway. So isn’t it better to “rip the band aid off quickly”? Either let things take their course naturally, or to really take some action to change that course, instead of doing everything and anything, at all costs (literally) to keep playing by the bank’s rules, and stay on the same crash course that we’re currently on?

And then there’s the issue of the millions of people who are facing foreclosure. If they have tried everything possible to get a short sale done – jumped through all their banks hoops, found a buyer, did all the proper negotiation with all involved parties, and the banks still said no… then shouldn’t those people have the right to give the bank their home back with the same ramifications as if they did a short sale? It just seems very illogical to penalize a seller for circumstances that are far beyond their control, and very unproductive… why not penalize the banks who drag their feet and lose deals instead? You’d at least get some more short sales closed.

New York Times Reported on March 7, 2010:

But at the end of the day, the banks would rather make things difficult. According to J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

Please comment below and let us know why you think this new program either will or won’t work. Thanks!

Originally posted at the Irvine Housing Blog.

Today we look at one family in San Diego hoping for debt forgiveness that isn’t going to happen.

Love is like oxygen
You get too much you get too high
Not enough and you’re gonna die
Love gets you high

Time on my side
I got it all
I’ve heard that pride
Always comes before a fall

Sweet — Love Is Like Oxygen

Appreciation is like oxygen, you get too much prices get too high, not enough and your gonna die — or at least be forced to pay down debts – a fate antithetical to a borrowing dependant lifestyle.

Recently, I wrote about The Coming Tax Nightmare Over Forgiven Mortgage Debt in California, and recently another story was written about the Hefty tax bill may hit those who lost home.

San Diegans who have lost their homes through foreclosure or short-sales thought they had emerged from the dark times and could start rebuilding their lives.

Then the state tax man came calling.

With less than six weeks before taxes are due, an estimated 16,000 former homeowners statewide will owe $15 million in extra income taxes this year and $29 million through 2012.

Today we look at one family lamenting the $20,000 tax bill they must pay for their failed speculation.

[March 2, 2010 | Photo by Charlie Neuman. Bonnie and Clyde are facing a California tax bill of up to $20,000 because, they have found, the state treats short-sales differently than the IRS.]

Phyllis Roth, 63, a tax preparer, said she did not realize until recently that the state would treat the short-sale differently than the Internal Revenue Service would. She estimates her state taxes at $15,000 to $20,000.

“I didn’t call anybody,” she said. “I was looking online and didn’t see anything. That’s what happens when you rely on yourself.”

Brilliant marketing for her tax preparation business, “Let me help you miss a $20,000 tax obligation. I did.”

For the Roths, who continue to own a previous home and have other assets, their nearly $200,000 in losses does not cancel out their other holdings. The couple said they normally operate conservatively and only bought the home, which they lived in while their son continued to live in their first house, so they could sell it at a profit and pad their retirement accounts.

“If we have to pay it, we’ll pay it,” Phyllis Roth said of the taxes. “It’s less money to retire on, but it’s not the end of the world.”

If we have to pay it? Sure, let’s take our broken State budget and carve out a tax break for HELOC abusers and everyone else who lost money speculating in the housing market. That should provide a great incentive for frugality and curb speculation. Not.

Congress exempted most homeowners from the extra federal tax through 2012, and the state followed suit for 2007 and 2008 but did not extend the provision last year. The state Assembly may vote tomorrow on a bill to repeal the tax, but Gov. Arnold Schwarzenegger vetoed such a bill last year over unrelated provisions.

“The state of California is seriously upside down financially, and I think the governor will probably veto it again,” Nemeth said.

H.D. Palmer, a spokesman for the Department of Finance, said Schwarzenegger remains opposed to the bill in its present form but has not announced whether he will veto it again. Other versions of the tax repeal are in the hopper and could be passed next month, legislators’ analysts said.

Failure to halt the tax could cost Jack and Phyllis Roth of Fletcher Hills as much as $20,000 in state income taxes this year — they paid $781 last year — because of the home they sold short in Flinn Springs in November. They bought it in 2004 for $545,000, invested $50,000 in improvements, and then saw its value fall by one-third before they sold it for $410,000. The result was about $190,000 in net loss that was forgiven by the Roths’ lender.

Notice the words the reporter selected, “They bought … invested.” They did neither of those things; they borrowed. These people put no money down, borrowed another $50,000, sold for a $190,000 loss, and they are complaining because they might lose $20,000 of their money in taxes. We are not saving an already injured party from further pain, we are removing the only real pain these people will feel.

[schadenfreude alert] The state Franchise Tax Board has received an increasing number of calls from former homeowners who are discovering the giant tax bills they face, said spokeswoman Denise Azimi. Azimi said the former homeowners can work out a payment schedule, though the state charges 4 percent interest on such stretched-out payments.

If the tax is repealed eventually, the taxpayers could seek a refund, but for now, they have to pay what is due by April 15 or face a penalty.

Sen. Lois Wolk, D-Davis … who chairs the Senate Revenue and Taxation Committee, said it was appropriate to group all tax conformance measures into one bill. But if her bill is vetoed again, she indicated she would act to get the cancellation of debt tax repealed.

“We’re certainly not going to allow homeowners to have to pay significantly more tax when they’ve had to relinquish their homes through short-sales (and foreclosures),” Wolk said.

Why not? People who have non-recourse purchase money mortgages are not getting a tax bill. It is only investors, speculators, multiple-property owners, HELOC abusers and others with recourse loans who are getting a break. They are not a group who needs subsidies.

Insolvency

Every borrower will try to establish insolvency as defined by the Internal Revenue Service:

Do not include a canceled debt in income to the extent that you were insolvent immediately before the cancellation. You were insolvent immediately before the cancellation to the extent that the total of all of your liabilities exceeded the FMV of all of your assets immediately before the cancellation. For purposes of determining insolvency, assets include the value of everything you own (including assets that serve as collateral for debt and exempt assets which are beyond the reach of your creditors under the law, such as your interest in a pension plan and the value of your retirement account). Liabilities include:

• The entire amount of recourse debts, and
• The amount of nonrecourse debt that is not in excess of the FMV of the property that is security for the debt.

As defined by the IRS, insolvency is a condition of negative net worth; in other words, if you have no assets for the IRS to take, they will leave you alone. True or not, the incentive to feign and declare insolvency is huge.

How many people are filling false tax returns claiming insolvency when in reality, they just don’t want to pay, and they hope they can cheat and get away with it?

Those short sale flipper investors are really getting active now. As a Sacramento short sale agent, I have been receiving a lot of calls lately from investors and their agents asking if they can lowball some of my short sale listings. It’s not that I have anything against a guy trying to make a buck. Buy low, sell high is the name of the game in real estate. But I do object when those offers affect my sellers’ chances of closing escrow.

My sellers don’t hire me to make money for investors. They hire me to protect their interests, get them the highest price possible and to close the short sale in a timely manner.

A new twist that seems to be developing among short sale flippers is to submit an offer at list price with the buyer paying all of the closing costs. It is customary for the seller / short sale bank to pay those fees.  One might, at first glance, wonder what’s wrong with that; full-price offer and the short sale bank pays no closing costs except commission. I’ll tell you. When the buyer pays title and escrow fees, the buyer chooses the title and escrow company. Generally, the escrow officer is a person the buyer knows, and this person may or may not share certain information about the transaction with the listing agent. It means the buyer controls the transaction.

Why would a buyer need to control a transaction? Because there might be something going on that the buyer doesn’t want the listing agent to know. It could be anything. It could be the buyer is planning to do a double escrow, that is, turn around and resell the property to an end buyer, and close both escrows concurrently without disclosing this plan to the seller. Many short sale banks prohibit resale within a certain number of days, and they try to hold the parties accountable. If a buyer agrees not to sell the property within a particular time period and instead immediately sells it, that action might be considered mortgage fraud.

It could also mean the buyer has signed an all-cash offer but is actually borrowing the funds from a private source, which may or may not be qualified to make such a loan. If the loan doesn’t fund, the escrow doesn’t close. Or, the buyer may be counting on transferring funds from escrow #2 to close escrow #1. So, if escrow #2 falls out, so does escrow #1. The seller has a right to know if the purchase is contingent upon resale, but often those intentions are not disclosed.

The title companies I work with in Sacramento typically will not open a short sale escrow on behalf of strangers. The liability is too great. The potential for fraud is too high. They work with me because they trust that I am ethical and are assured that I won’t any allow hanky-panky to go on in my transactions if I can help it. I advise my sellers to just say no to those short sale flippers.

Photo: Big Stock Photo

Buying a home these days is a little bit like buying a pair of shoes at Macy’s. After listing a Sacramento short sale in Del Paso Manor last week, I stopped at Macy’s in the Country Club shopping center on El Camino. Macy’s was having a shoe sale, and I needed a few pairs of flat, brown shoes. Figured I’d grab them before the spring colors arrived.

The store was mobbed with buyers. There was one sales clerk to serve them, and he had one arm. OK, his arm was in a sling, but still. I picked up eight pairs of shoes to try on; however, Macy’s had only one pair in a size 6. It had no inventory, just like our Sacramento real estate market. This was madness.

Its sale rack also had very few size 6 shoes. Most shoe stores put size 6 shoes on display, yet even the display shoes were size sevens or eights. I suppose Macy’s needs to continue paying the rent on the store even if it’s not producing any income.

This new Lincoln Crossing listing isn’t producing any income either because the tenant is moving out today. It’s available as a short sale, and there’s only one lender. It’s possible this home could get short sale approval in April and close escrow in May.

If you’re looking for a 2-story with more than 2,400 square feet and a big lot, this home is for you. The kitchen is open to the family room and overlooks the back yard. It has an island with tile and a breakfast nook. There is a formal dining area in the living room as well.

This KB home built in 2005 features 4 bedrooms, which include an enormous master suite, and 2 1/2 baths. The master bath has a sunken tub plus double sinks in the vanity. I measured the master suite, and it’s approximately 20 feet by 20 feet. You’ll find the other 3 bedrooms upstairs and laundry. Hurry, there’s not much like this home for sale in Lincoln Crossing.

838 Devonshire Lane, Lincoln, CA 95648, offered exclusively by Lyon Real Estate as a short sale at $219,000.

For more information, please call your Sacramento short sale agent, Elizabeth Weintraub, at 916 233 6759.

Photos: Elizabeth Weintraub

—

Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.

The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.

Today Citibank announced its “Foreclosure Alternatives Program,” which has a goal (according to Citi) “to help homeowners make a smooth transition into the next chapter of their lives.”

That’s a nice way to describe a program that’s designed to trap homeowners into paying for utilities, HOA dues, and ongoing maintenance expenses.  This can easily cost homeowners thousands of dollars throughout the lengthy foreclosure process. Their reward? $1,000 of relocation money that they were going to get anyway.

From MarketWatch:

In exchange for the deed on their property, CitiMortgage will allow borrowers to stay in their homes for a period of up to six months. At the end of the six months, the borrower will turn over the property deed to CitiMortgage, and CitiMortgage will provide a minimum of $1,000 in relocation assistance to the borrowers. Citi will also provide relocation counseling by trained professionals and will cover certain monthly property expenses if Citi determines that the borrower can no longer afford them. Payment of utilities costs will be the responsibility of the borrower. Other costs incurred by the borrower, such as homeowner’s association and escrow fees, will be determined on a case-by-case basis considering the borrower’s specific financial circumstances. As part of the agreement, borrowers must maintain the property in its current condition and agree to bi-monthly meetings during which trained relocation professionals will help the borrower prepare for the next chapter of their lives.

Before a borrower enters the Foreclosure Alternatives Program, they must first be evaluated for a permanent mortgage modification. For those who do not qualify for a modification or another solution, CitiMortgage will explore the possibility of a short sale in which the company might accept a buyer’s offer for less than the outstanding amount of the mortgage. If a short sale is not feasible, then the borrower may be considered for the deed-in-lieu program. In addition, in order to be eligible, homeowners must hold first mortgages with a clear title owned by CitiMortgage, occupy the property, and be at least 90 days delinquent on their mortgage payments.

This program does nothing to help homeowners. The modify-short-sale-foreclose process is basically the same that homeowners go through anyway.

Here, Citi is asking homeowners to sign a contract that they will continue to pay for utilities, HOA dues, and all property maintenance all the way through the process. Considering that trial modifications and failed short sales could easily cover six months each, the homeowner could easily be on the hook for 1-2 years worth of costs that they could have simply walked away from.

Plus possibly six months more? When exactly does the six months start?

And what happens if the homeowner can’t keep up the property or misses an HOA payment? Can the bank then come after them for that money? It’s a pretty safe bet that the fine print in this Program contract could only open the homeowner up to more future liabilities.

Why would any homeowner agree to something like this? For the $1,000? They’d get that anyway as cash-for-keys. For the Deed-In-Lieu instead of a foreclosure?  Many banks will allow that option without any additional contract.

This is nothing more than a way for Citi to trap homeowners into paying for upkeep, utilities, and HOA dues that the bank would otherwise have to pay.

The Real Estate Agent ONLYTM TEAM @ Mason McDuffie Mortgage recognizes how much time a short sale can take from contract to close.  So instead of waiting to underwrite a file until we receive the bank’s short sale approval, we have decided to change our internal process to serve you better.

Mason McDuffie will now underwrite short sale purchases that are 100% complete credit files, prior to receiving the pending short sale approval back from the bank/lending institution. Once the bank approval is received, we will then order the property appraisal, do a quick final review and we’re headed to docs.  By making this change alone, we expect to shave approximately 2 weeks off the process to meet your COE dates on time, or before!

The Real Estate Agent ONLYTM TEAM @ Mason McDuffie wants to be your Short Sale Solution by staying one step ahead of the competition!  Please call or email us today to find out more about our process and how we can help you close your short sales faster!

Real Estate Agent ONLYTM TEAM – Experience the Difference!

www.realestateagentonly.com

Michael Ciglar                                                    Eilo Baboneh

Office: 925-701-3192                                       Office: 925-701-3191

Cell 925-998-5478                                            Cell 510-701-4000

Fax: 866-804-4095                                           Fax: 866-741-0662

mciglar@mmcdcorp.com ebaboneh@mmcdcorp.com

4301 Hacienda Drive, Suite 100

Pleasanton, CA  94588

Click here if you are thinking about doing a short sale of your home. Click here if you are thinking about buying a short sale home.

I may be the most stubborn man alive, my wife and daughters think so anyway. I saw a sign the other day that read “behind every man is a woman rolling her eyes.” I have further proof of my obstinence, a Bank of America short sale. This particular short sale has been my cross to bare for about 18 months now. We are on our third contract, and have actually received an approval for one of the offers about three months too late. The latest offer has been in the works since August, and you will not believe where it has been. I’ll skip the usual details about how many times I had to fax the package to them before they would acknowledge receipt, or the typical issues I had with getting them to acknowledge that the seller’s had authorized me to negotiate for them.

I will pick this one up two months into the short sale, when the file was moved to HRD. That is the Home Retention Department. This is where loan modifications are negotiated. I did not request the move and neither did the owners since they moved out of the area more than a year earlier. A loan modification package was reportedly mailed to the owners, which they never received because it was sent to the property. That did not deter HRD from continuing to work the file, while I was still working with the short sale department. In December, four months into this contract, I was told by the short sale department that the loan modification had been approved and the file had been taken out of short sale. This was actually the first time I had heard of the loan modification process going on behind the scenes. I requested the file be taken out of HRD and put back in short sale, and was told that would be taken care of when they discovered that the package had never been returned. (Keep in mind they approved the loan modification without receiving the request or the loan modification package?)

Late last month (January 2010), I was told the file was in HRD, and that I would have to have them release it back to short sale. I explained that I was already told that had been done. Apparently HRD has trouble letting go of these files. After being transferred to HRD, I was told they could not release the file because I could not verify the last four digits of the seller’s social security numbers. I was reading them directly from their tax statments, but HRD had something different. I had the sellers call, and they told me that they were successful in having the file closed in HRD. I called short sale yesterday to follow up on the file being moved back, and was told that it was still in HRD. They transferred me to HRD, and they promptly transferred me back to short sale since that is where the file was headed. When I got back to short sale they kicked it up a notch to a “supervisor.” The supervisor said the problem is that the seller’s and I had not registered in the new “equator” system. This system will make the whole process much shorter he said. I asked myself if they realized that the equator is the longest line of lattitude around the globe?

FYI another agent in my office is also working a Bank of America short sale, and she had to upload her file to REO Trans. She was told that was the new system they were using to track short sales. REO Trans is typically used for bank owned properties. After loading her file to this system, she received nothing. No confirmations, no updates, nothing. When she called to check on the status, the short sale department said that since she had loaded her file into the system they could no longer help her. I have not spoken with her recently, but I can only suspect that she is having similar success.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV’s House Hunters

A term that is becoming more popular in the real estate world is “Short Sales”.

Short sales usually apply to homes where the owner owes more money than the home can be sold for. Short sales usually apply to homes that are behind on their mortgage payments. These homes are often referred to as pre-foreclosures.

Banks don’t want homes to foreclose, so will accept less money than is owed for the property to keep it from foreclosing. Banks usually won’t approve a short sale unless the owner of the property is behind on their payments.

We are seeing so many more “Short Sales”. Why is that?  The main reason is because home prices went too high. A large portion of home buyers purchased these homes with little or no money down. When home prices started to decline, the homeowners had no equity.

When you want to make an offer on property that is for short sale, you need the approval from the Bank, sometimes multiple banks. Because the homeowner won’t be getting anything out of the sale, they may be, and often are, unmotivated and uncooperative.

Banks can be very slow to respond sometimes taking months before they will even look at a file. They are overwhelmed by the number of short sale requests they now have. Most banks usually won’t even look at a short sale file until someone makes an offer.

Often the homes for short sale will be listed at a very low price i order to get a offer quickly. It is also common for the listed price to not be enough to be approved by the bank.

Trying to buy a short sale home can be a very long process. Just because it is called a “short sale” doesn’t mean it will be a short process

In Cache Valley they have much less short sales than in the rest of Utah. The prices of homes for sale in Cache Valley never rose too high, so its the decline of home prices hasn’t been as dramatic as most places. In Cache Valley only less than 7% of homes sold are short sales  .

This link will show you all the current Cache Valley Short Sales for Sale

As a listing agent for dozens of short sales the past couple of years I can tell you a few ways to increase the buyers odds of an approval:

• Educate your buyer in terms of how long a short sale takes. Do not think because they are an all cash buyer a decision will be made immediately or that an obnoxiously low offer will automatically be accepted. A minimum of 60 days is needed in most cases to get an approval with the additional 30-45 days to close escrow.
• Investors have a formula as to how much of a loss they can take and they will get a couple of BPO’s and appraisal before substantiating their bottom net.
• Understand the sellers have no money. The lenders will only allow for  what is customary and usual for the market you are in but typically will not pay for inspections, most have not allowed for home warranties and most will not allow for repairs.
• Most will allow for up to 3% back in closing costs. (NOT repair costs)
• If you are making a bid on a short sale with issues, take pictures, notate the problems provide comps and provide a written estimate from a licensed contractor as to what it will cost to repair or replace items. As a listing agent we will turn in to the sellers lender for review. Make your purchase offer reasonable upon the factors above with  data to make your case.
• Offer to place at least half of your earnest  money up front as a sign of commitment with a stipulation that after x amount of time there is no movement or communication towards a successful short sale that would allow for buyer to have earnest money returned and/or allow them to extend their wait with rest of the earnest money to be deposited after short sale approval in writing has been given.
• If a buyer has to close within 30-45 days, a short sale is NOT the best choice for that buyer.

We have successfully closed dozens of short sales over the past years because we clean up the contracts before they go into the lender. We set expectations up front. Some lenders want us to pick the best offer. Some want to see all of the offers. We always give an agent who has turned in  an offer that is being processed the first choice to up their ante and/or make offer better if another offer comes in that would significantly reduce our clients deficit. We let competing agents know that up front.

Depending on the lender will depend on whether they want ensuing contracts submitted or just held for backup.

We have found most lenders will stay with the first offer if the buyer is still in the game UNLESS there is a substantially higher offer that will pass appraisal. If the offer is too low most will come back and ask for more or kill the offer and tell us to find another buyer at higher price.

Don’t allow relatives of sellers to present an offer on the home. Most banks have a non arms length policy. If we find out buyer is a relative then we have to notify the lender and most will kill the offer. It is fraud for a buyer to sign a non arms length disclosure when they are in fact related to the seller. Banks are really cracking down on that.

There are no guarantees in short sales. But agents who work together ethically and legally and educate their clients will be very successful in short sales.