Most of you by now are familiar with the term short sale; when the market value of a home for sale is less than the indebtedness.  Many realtors have ranted for a few years about the ineptness of the banks holding those loans in processing and responding to and closing short sale transactions.  This is not that rant.

Over time, the lenders holding the loans on short sale properties have figured out how to do them.  They have instituted processes and formulas allowing these transactions to be addressed on a predictable timeline with predictable milestones.  In addition, some government programs, HAFA and HAMP have added layers of steps and protections for sellers in this position.  Generally, and there will always be exceptions, short sales can move more quickly and smoothly than they did a few years ago.

This rant is about the plethora of real estate agents who consider themselves short sale specialists and the wild variety of medieval theories and processes these agents have put into play.  These “experts” see THEIR method as the best, even if it thwarts multiple listing service rules and regulations and may not be in the best interest of their client, the seller.  An aside; being a realtor can take a fair amount of confidence and ego, especially in marketing yourself.  But some of us have a hard time keeping our ego out of other people’s transactions (a whole different rant).

Here is MY short sale method, which of course, is the right one    A buyer writes their offer subject to the approval of the underlying lender.   The seller may counter that offer to achieve what they hope is the best price.  That best price offer is then submitted to the lender for approval.  No other offers are solicited, the house is marked as having  a pending offer.   Once the lender approval is obtained, the transaction becomes “normal” with timelines for inspection and such commencing at that time.

Some of the other schemes out there, that drive me crazy.

1)  Multiple offers are collected and forwarded to the underlying lender at various times, while the listing remains active in RMLS.  My rant: the poor lender is trying to process this file, but keeps having to reset the tasks and such as these offers come in; clogging the system and slowing things down.  In addition, buyers think properties are available when they may well not be.   Who knows?  Our multiple listing service has a spot  to show whether or not any offers have been received which can at least give agents and their buyers a hint that it might not be available.  Many agents decline to use this field.  Another note; sellers needing to do a short sale often have the clock ticking on an impending foreclosure.  Getting a short sale approved quickly is often a huge priority for a seller.  Good buyers who are ready to buy and pre-approved may not wait around for this ongoing process; often leaving lowballers and those of questionable financial ability to ride it out.  Getting approval, with foreclosure looming and having a sale fall apart on the buyer’s financing is not in the seller’s interest either.

Another method: The seller doesn’t sign a buyer’s offer.  One or more unsigned offers are sent to the underlying lender.  Unsigned contracts don’t bind anyone to anything. So the sending multiple offer issues above are compounded by nothing being binding.  Lord knows what the lender is approving or how the buyers may or may not be feeling once they get a response.  This has the same issues as above.

In approving short sales, most lenders limit, usually to zero, the amount of money or assets a seller can take from the transaction.  The lender doesn’t want to take a loss while the seller walks away with $’s.  The lender does, then, look at the seller’s assets and if there is cash lying around,may require the seller to pay some of that (retirement accounts are generally exempted).   Many houses, when they were bought, had personal property as a part of the transaction; that cool stainless steel fridge,  wolf range etc.  Now, when going into a short sale, some agents are suggesting the seller remove or hide these appliances from the lender. The seller can then sell these separately and pocket the money.  This feels a bit like loan fraud; hiding something froma  lender is rarely good.  I don’t wajt any part of one of these transactions.  So in a sense, those houses aren’t really on the market either.

As a managing broker who actively lists and sells real estate I see new versions of short sale “prowess” daily, and long ofor a simpler time.