5 Short Sale Pitfalls…and how to avoid them Presented by: Scott Newman- Newman Realty
The Problem…1) Many buyer’s agents are uneducated on the short sale process2) Those same agents pass along that poor education to their clients3) Those clients become afraid of short sales4) The agent is all to happy to avoid them all together and plays into the buyer’s fear and advises them not to even bother looking at them5) Buyer and agent are left scratching their head when they have very little inventory to see together
The Facts…- In many neighborhoods short sales account for close to 50% of the inventory- in some areas that number is exponentially higher - If you’re not showing short sales you’re missing out on amazing opportunities for your buyers - You’re not maximizing your earnings potential - You’re missing out on a golden opportunity to demonstrate value to your client and earn their referrals and future business
The Solution…Get Educated- Earn a short sale focused designation- Take advantage of training opportunities- Team up with established distressed property experts to learn to do things the right way- Learn what tools and unique skills you need to be an effective short sale buyer’s agent for your clients
The Plan… Today’s presentation will be focusing on 5 key things you need to focus on to make short sale buyer representation a profitable part of your businessThe 5 key things are:1) Earnest Money2) Attorney Review/Inspection Contigency3) Financing Contingency4) Purchase Price5) Understanding the Nature of Your Relationship with the Listing Agent
Earnest Money- As a listing agent we have non-negotiable minimums for earnest money to protect our sellers - Benefit from submitting an offer despite insufficient EM is far outweighed by the consequences of buyer bailing on the deal because he/she has no skin in the game - If you want to take the property off the market for months and want to protect your buyer’s interest in the property it’s only fair that they show their seriousness with a quality amount of EM - Do not split the amount up- it significantly weakens your offer. If your client is putting down $5K in EM give it all up front
Attorney Review/Inspection Contingency- As a listing agent we require attorney review and inspection periods to begin upon seller execution - Your offer is essentially worthless if the attorney review and inspection period don’t begin until bank approval. - Why? - Your buyer can walk over a nail-pop - Your buyer’s EM is not at risk - Sellers want to see skin in the game. If your buyer is unwilling to spend the $300 on an inspection prior to bank approval how serious are they really?
Financing- As a listing agent we require any mortgage contingency to conclude no more than 30 days after seller acceptance and that all buyers be pre-approved through our preferred lender on the file - Just because it’s a short sale doesn’t mean you get to horse around with lining up financing - Appraisal to be done within that 30 day period too - File should be clear to close well in advance of the bank approving the short sale so the closing should be able to happen in a matter of days not weeks - Buyer’s inability to obtain financing despite they and their agent believing they’re “pre-approved” is a top reason for short sales not getting done - If your buyer is unwilling to be pre-approved through your lender and/or the seller’s preferred lender how serious are they really? - As listing agents we should not be the ones finding out your client is not really qualified and that you’ve wasted a lot of time showing them places
Purchase Price- As a listing agent we are looking for a justifiable price and have very little interest in submitting low ball offers - If there aren’t comparable sales to support your price you’re wasting everyone’s time - Banks work off of data and information not emotions and wishes - Sellers need relief from a mortgage they can’t pay not an offer which is just going to further delay the process for them - Know the rules of BPO’s - 3-6 months back in time and 1 radial mile out
Understanding The Relationship- As a listing agent we routinely advise our clients to accept an offer that isn’t necessarily the highest because we feel that the overall offer presented by another agent gives us the best chance to get to the closing table- This is not an adversarial relationship where you want the cheapest price and the listing agent wants the highest - Demonstration of your expertise as a short sale buyer’s agent goes a long way - Everyone wants the same thing- your job is to make sure that the listing agent knows you and your buyers are the right team to get them to the closing table - Listing agents are in the business of listing short sales not arguing with a combative agent or wasting time educating agents on things they should already know before their client even showed up to see the place
SummaryShort sales are not going anywhere for the next 5-7 years and if you want to maximize your potential as a buyer’s agent- love them or hate them- you need to make it your business to learn how to effectively close short sale for your buyer clients - Follow the 5 Keys to Success I’ve Outlined - Take Advantage of Educational Opportunities/Designations - Make it a point to make short sales a part of your business plan in 2012 and beyond!
More Information Scott Newman Newman Realty www.newmanknowschicago.com Facebook.com/newmanrealty@newmanknowschi and @newmanrealty