Michael G. Kornitzer
Sniper Real Estate
January 6, 2010

How to buy a Short Sale home.

We get a lot of frustrated buyer calls every week. The basis of frustration is usually the buyers inability to actually purchase a home that they want. Not because they do not have the money or can't get a mortgage, but because the property they want is not really for sale. The property is listed and advertised for sale everywhere. It may appear in print ads, on REALTOR.com and everywhere else. Oh wait! It is a short sale so it's not really for sale at the advertised price? The seller has a mortgage and owes the bank a lot more than the property is advertised for.

Where is the Attorney General, what about the REALTORS fancy code of ethics? What if you went to the supermarket to buy a gallon of milk. You know the normal price is around $3.50 but today the advertised price in the newspaper and on the shelf is $1.99 . You proceed to the checkout counter and the cashier says "I know it is advertised for $1.99 but we can't sell it for $1.99 today. First we have to submit the paperwork to the dairy farmer, who has to ask the cow if $1.99 is okay"

In any other industry this would be a completely illegal practice. For some reason the National Association of Realtors is getting away with it without reprimand.

IF THE SELLER CAN NOT PROVIDE CLEAR TITLE AT THE PRICE A PROPERTY IS ADVERTISED AT THEN THIS IS CLEARLY DECEPTIVE AND ILLEGAL.

If the seller owes more on his mortgage than he is attempting to sell the property at, this is the sellers problem, not the buyers. Throughout history if the seller was "short" he brought money to the closing table. Just like the origin of the term "short sale" related to the stock market. If you gamble sell short and lose you still owe the money and have to pay your debt. In this real estate market we have given REALTORS and sellers a lot of leeway. In understanding the sellers hardship combined with the buyers desire to purchase, we are all working with short sale sellers to arrive at a beneficial resolution for all. Which in most cases means waiting and waiting for the sellers lenders to approve the offer that has been presented?

Okay, so everyone understands the situation what's the problem? The problem is the REALTORS. Every REALTOR who can't make a buck is all of a sudden a short sale and foreclosure expert. Jump on the band wagon, take a two day course be an expert. They are listing property that is not really for sale, marketing and advertising property for much less that what is owed, accepting multiple offers, etc. etc. etc. All of which is illegal and we learned in the first grade, you can't sell the same item more than once. Multiple offers is another common scam for another blog post.

Most of the complaints that we hear are about communication and being mislead. In some ways it's not the REALTORS fault. You can't be angry at a cow for eating grass. This real estate mess is very complex and there is no course that makes it any simpler. The experts in the industry are the people who have been involved in hundreds and thousands of these transactions. Even then, the climate changes daily. If you did not do a deal with Wachovia this week, their requirements might have changed already.

I got a call from Anita yesterday who says that she had a short sale offer on a property from six months ago. That her REALTOR was holding a $500 "good faith" deposit. The REALTOR called her Monday and said "the deal was approved." On Tuesday the REALTOR called and recanted claiming "the bank never got the paperwork" I looked up the property for Anita and found that the List price was $109,000. But the seller owed almost $200,000 on their mortgage. Does not seem like "good faith" to me. This is a common story we hear every day. The REALTORS have misled the buyer about the price and time it would take for approval. They have also tied up the buyer's money inappropriately. With some honesty the buyers could have made a more informed decision. With some experience the deal might have been completed or cancelled prior to six months.

So how do buyers and REALTORS work within the current real estate climate. There are a few basic rules that originate in basic ethics and sales standards.
1) There can only be 1 accepted offer on a property. The offer needs to be executed by both parties with a disclaimer about the short sale situation.
2) There cannot be a deposit or "good faith" escrow because there is nothing to sell. Any deposit by contract needs to be "upon lenders written approval" . If anything the seller should provide a good faith deposit to the buyer for his time and patience while helping the seller out of his misfortune.
3) Every contract needs agreed dates and time periods to which both parties will wait for approval of the sale. The buyer should determine their threshold and stick to it. "I can wait a month for the short sale to be approved" Put it in the contract and extend timeframes if all agree.
4) If an offer has been accepted the listing is "pending". It cannot be shown nor the property altered until the deal expires or property sells.
5) The advertised list price of a property can not be less than what is owed, unless the sellers lender has agreed to accept a reduced pay off to release it's lien. Or the seller plans to provide clear title by bringing cash to closing.
6) Our economy is based in the "briefcase full of cash" theory. If something is offered for sale at a price it must be able to be sold at that price. Both Federal and most State law is very clear on "Fair & Deceptive business practice" the premise of which is false advertising, bait and switch and any other practice that deceives the public about items or services that are for sale.

There are very few homes on the market today for immediate "briefcase full of cash" purchase. Narrow your search, eliminate property that is NOT REALLY FOR SALE. Use a competent very experienced REALTOR to wade through all of the bogus listings. Now is not the time to fall in love with your home purchase. You will be disappointed! Don't love anything that cannot love you back. For buyers it is time to get rich and build equity. Buy based on mathematical and needs analysis. If you do it right your purchase will be an amazing value and increase exponentially when the market comes back. Find an aggressive Buyers Agent who will demand answers and wade through the other REALTORS inexperience and bogus listings.

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