3 Common Short Sale Mistakes to Avoid

If you’re negotiating a short sale, you know just how prickly the deal can be. Missing paperwork, mistakes, lag time are all commonplace in short sales but create nightmares for buyers. If you’re not prepared, you can’t help your client be ready for what will happen. And if you can’t do that, this could be a frustrating few months for both of you.

Avoid these common mistakes:

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3 Common Short Sale Mistakes

Short sales are not like traditional home sales. There’s a lot of waiting involved, and these errors can make the waiting even longer.

1. Incomplete Paperwork

The borrower must complete a packet that proves economic hardship. If any part of that packet is incomplete or signatures are missing, the process will be delayed. A short sale cannot occur without the approval of all the lien holders. This includes the mortgage lender but may also include a homeowner’s association, a government entity in the case of a tax lien, or a construction company if a lien was placed on (unpaid) work done on the property.

If you’re the buyer’s agent, there’s little you can do to ensure they file the correct paperwork but if you represent the seller, make sure the entire packet is complete before sending it. If you don’t, the process will be delayed.

2. Trying for a Tight Close

When your buyer finds their dream home, it’s easy to get excited. However, if it’s a short sale, it’s important to manage expectations in order to avoid disappointment down the line. If your buyers need a home quickly, if they want to be in by a deadline (like a school start or a holiday), or if they just want a tight close, a short sale may not be the way to go.

Banks have many short sales to process. They are often overwhelmed with the paperwork. Placing a deadline on them won’t make them move faster. The only thing you can do as the buyer’s agent is answer all of their requests for information quickly. A seller’s agent can keep in close touch with the lender but even that doesn’t always speed the process along.

3. Rushing an Offer

Most people are under the common misconception that a short sale is always a great deal. While often it is, it’s not always. In the case of an over-inflated market, your buyers could find themselves in the same situation as the sellers in a very short time. The lender will not let the property go for pennies on the dollar. As a matter of fact, the price is usually only 17% lower (on average) than comparable homes. In an over-inflated market, that could mean that even with this discount, your buyer couldn’t rent or sell the property for what they would owe on it. Make sure you pull comps for them so they understand the value.

Short sales can be a long process and there’s a lot to know about them in order to meet the needs of your client. Don’t be left wondering. Download our free real estate agent’s guide to successful short sales.