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Frustration For Those Trying To Buy A Short Sale

All too often, we see homebuyers who are "looking for the deal" get involved trying to buy a short sale in Tallahassee. A short sale is when the home owner and the lender(s) for the home owner agree to sell the home for less than what is owed on the home. But as this reader found out, it's not as easy as just making an offer and proceeding to closing.

This frustrated short sale buyer writes:

My wife and I are trying to buy a short sale. We made the highest offer (full price), we were the 1st offer in and have an escalation addendum to bring it up another 12k. The realtor convinced the selling family to choose another offer, for a lesser amount! We are going fha and they are conventional so they went with them (I bet it is a friend to friend deal). I NEED HELP...Does anybody have a number to the loss mitigation department at AMERICAN HOME MORTGAGE SERVICING INC? I can't get through to them to tell them I will pay more than the pending offer because the realtor won't give me any info.

If you have a mortgage with them or deal with them please get me a phone number, email, or fax. Please thank you

This homebuyer's "call for help" contains so many learning points, I figured it would make great fodder for today's Tallahassee Real Estate Blog.

You Need Great Help To Buy A Tallahassee Short Sale

This home buyer should have hired a great REALTOR to assist in preparing the offer. They came in too low and lost the house. This is perhaps the most common mistake of an amateur buyer. Thinking they can "come in low" and they come up. That's all fine and good in a buyer's market .... which most of Tallahassee is competing in.

But not short sales. Short sales are instantly a seller's market because they are going to attract people who think they are automatically a "great deal" because somebody else is getting hurt. Sadly, the scenario raised by this reader is all too common. Several people bidding on a house (even though there are thousands on the market). It's like a feeding frenzy.

Maybe it's human nature, but it seems some people are just drawn to make offers to buy a short sale. The key to winning the day is understanding what the seller and the seller's bank want. Apparently, this short sale buyer did not have the correct REALTOR guiding him to get the house.

Home Owners Often Don't Care In A Short Sale

This buyer doesn't understand why everybody is non-responsive in this. He's willing to pay more! He put an "escalation clause" in his contract!

Who cares? First of all, what the heck is an escalation clause? Is that where you offer low, but tell the seller you're willing to pay more if he really wants more? Come on, you have got to quit buying the 2:00 a.m. infomercials. Make an informed offer if you really want to buy a short sale in Tallahassee.

Secondly, the Seller does not get any money at closing on a short sale, so often times the seller isn't too concerned about what contract makes it to the lender. The lender (or servicing company) is way too busy to negotiate on the hundreds of thousands of deals on their desk. Often times, they will take a few months to get around to an offer, only to counter the offer at a price that is above market.

Loss Mitigation Departments Are Overwhelmed With Short Sales

The numbers are staggering. Even if loss mitigation departments grew their staff by 500%, they would be less equipped to deal with all of the short sales (and short sale offers) that they are receiving than they were just three years ago. The number of short sales have grown beyond the capability of the lenders to handle them. Think about it, these banks are losing money and trying to up-staff???

Short Sale buyers asking for the phone number of the loss mitigation department is silly. They will not take your call (not to mention, just go online and get the number yourself!). They are overwhelmed.

We deal with loss mitigators on a daily basis, and the one thing all of them have in common is that they really have no clue what is going on. You talk to Person A on Tuesday and they approve your deal, then you talk to Person B on Thursday and they tell you no deal has been approved. It takes more than a single REALTOR to work short sales, and nothing is stronger than experience.

FHA Buyers Not Favored By Short Sale Banks

It has been our experience that when a lender is involved in a Tallahassee short sale, the lender wants things as simple as possible. Unfortunately, the FHA loan requires documents and inspections that conventional loans do not, so a lender will often seek non-FHA touting short sale buyers in a transaction.

Remember, these banks are not really equipped to handle all of the distressed properties that they now have in their portfolios, so simplicity often trumps all else.

How To Buy A Tallahassee Short Sale

Buying a short sale is not for everybody. You have to have plenty of time and care a lot less about what house you get than the "deal" that you get. You will be told one thing just before another happens. And you will wait. And you will not know what is happening. And did I mention that you will wait?

  • So, if you are determined to buy a short sale, here is my recommended process for doing so:
  • Hire a real estate company with vast experience with short sales
  • Follow the guidance of the short sale expert
  • Make a compelling offer, you will have competition
  • Make sure your financing and terms are favorable to the specific lender (read follow the guidance of the short sale expert...)
  • Don't be surprised when your offer is accepted immediately by the seller (he doesn't really care)
  • Prepare to wait
  • Don't hate your REALTOR because they can't get an immediate answer from the lender

If you follow these steps, you will eventually find success in buying a short sale in Tallahassee. Good luck and be patient!  

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Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

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Discussion

#1 By Tony Arko at 7/11/2017 3:44 AM

Great Post. All your points are dead on. I have had the same discussions with many buyers here in Loudoun County Virginia. The main point is that buyers need to do their research up front and then pick the correct agent. In this case, an agent completely familiar with the short sale process. Now they are asking everyone else for help because they didn't pick the right agent.

#2 By Joe Manausa at 7/11/2017 3:44 AM

Thanks Tony. Seems like the same all around the country.

#3 By Doug at 7/11/2017 3:44 AM

Joe,
What happen to the list of Liz Pendens you use to keep on the site? Am I overlooking the location?

#4 By Joe Manausa at 7/11/2017 3:44 AM

Hey Doug, we have a site set-up for distressed properties at http://www.manausa.com/buyer-foreclosure.php.

#5 By Doug at 7/11/2017 3:44 AM

Joe,
Thanks

#6 By Jeff Franklin at 7/11/2017 3:44 AM

Good article and responses Joe. I closed an American Home Mortgage Servicing short sale today. It take them 30 to 60 days just to assign the negotiator after gettting all the documents faxed to them. Their work load and many of the major national lenders has increased from 200 files to 500 files per negotiator. Suntrust's Short Sale customer service reps recieved 3600 phone calls last Monday so they are definitely overwhelmed.

I have closed some short sales with buyers getting FHA loans but they are not easy. The FHA appraisers seem pickier than ever and if any repairs need to be done prior to closing the seller's lender and the seller are not going to do those repairs. The buyer would have to have the repiars done before they take close. Without realtors with short sale experience those transactions are likely to fall apart.

#7 By Joe Manausa at 7/11/2017 3:44 AM

Thanks Jeff, experience makes all the difference in the world.

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