Short-sale frustrations...

Home buyers and Home owners frustrated by slow short-sale process - A recent article at the USA Today Real Estate site documented what many local buyers and sellers have already concluded - the short-sale process is badly broken. Read the article here. Almost everyone who has tried a short-sale in the last year will probably have horror stories to tell you about long waits and the frustration of just not being able to get any answers - from the bank or from the selling agent.

The problems seem to start with overwhelmed banks that just aren’t staffed to keep up with the tremendous workload that has resulted from recent economic events. It is compounded by some Realtors who are unfamiliar with the short-sale process and who haven’t properly advised their sellers or managed the process with the bank(s). The fact that there is more than one lender involved with many loans just works to make things worse.

The bottom line for buyers is that great patience is required when going in with a short-sale offer. They should not expect to get any answer for weeks, maybe months. They shouldn't do it, no matter how attractive the property and price may be, if they need to get into a house within the next few months. They need to ask, up front, if the short-sale has been approved by the bank. If the Selling agent can’t answer that question in a way that makes them feel comfortable, they should move on to another house. A reply of "they are aware of it’" is not sufficient. Make sure that the lender(s) have approved the sellers short-sale request.

If the buyers are satisfied that this is a short sale opportunity with a chance to get through the lender, then they shouldn't blow that chance by low-balling the short-sale price. Remember that the price being offered is already below what is owned on the place. Obviously, buyers and their Realtor need to do their own homework to determine what the market price should be, even if it works out to be lower than the listed price. The place still needs to appraise at or above what will be offered, in order to secure a mortgage.

For sellers, the critical factors are getting the communication with the lender established, completing the short-sale hardship documentation process and getting some form of pre-approval from the bank on a short-sale price. The lenders do not like surprises and they do not react to them well. Get it all out on the table and get the bank behind the effort to make the sale. They won’t be happy partners in this venture, but sellers can’t afford to have them as enemies while they are trying to sell their house for less than is owed on it. The majority of short sales that fall apart do so because the sellers haven't completed the short-sale paperwork process with the lender(s) before getting an offer in hand. A few real estate agents are still advising sellers to list at a low price and get an offer in hand before going to the lender with a short-sale proposal. That is an approach most likely to end in failure.

Short-sales can work for both sellers and buyers, if everybody who is a party to the deal is on board and ready. That includes the Realtors involved.