” ‘Subject to lender approval’ is the real estate contract clause that makes short sales notoriously tough to deal with. In an equity sale, buyer and seller deal with each other in an arm’s length transaction and when certain terms are met, usually within 30 days, the escrow closes and title is transferred. In a short sale, the lender must approve the whole transaction which makes the sale more lengthy and complicated.
Many short sale transactions “fall out” because the buyer backs out of the deal after a period of time; usually this occurs due to unrealistic expectations. It is imperative that the real estate professional inform the buyer of realistic timeframes as soon as the transaction is initiated. For short sale transactions to be successful, buyers need to come into the deal fully aware of the vicissitudes of the short sale transaction. As in all aspects of real estate, education and awareness are of the utmost importance. The real estate professionals involved in the transaction need to be utterly candid to all parties and set proper expectations throughout the process.
There are many reasons why buyers will walk away from a short sale transaction. As mentioned above, many buyer’s expectations on short sale timeframes do not jibe with actual short sale transaction timeframes. Thus, they get impatient and nix the deal before it gets completed. Second, buyers walk due to non-short sale specialists handling the transaction. As a buyer, one needs to be keenly aware of who is transacting the short sale. If the real estate professionals involved in the short sale have no experience in short sale transactions, the deal is doomed from its inception. The best case scenario is to have a professional short sale negotiator involved in the process, facilitating it through completion. Along this same vein, buyers have a tendency to walk due to lack of follow up from the professionals involved in the short sale. In more than any other real estate transaction, short sales requires constant due diligence and continuous follow up.
Lastly, many buyers walk due to their perception, and often rightly so, that the sellers and their agent are not fully committed to them. For example, say a short sale offer from a buyer is approved by the seller and submitted to the lender at $500,000. Many sellers will keep this offer “in pocket” until a better offer comes along. If and when the better offer occurs, the seller will find a way to extract themselves from the original deal and move forward with the higher tendered offer.
The best business practice is for all parties to do their due diligence on each other. As a seller serious about closing a short sale, one should always choose the best possible buyer and fully commit to closing with that particular buyer. Too many listing agents and their sellers commit to a buyer prematurely, then either simply hope the deal will close as is or will follow the above scenario of waiting for a better offer and then re-submitting to the lender. “
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