Why Short Sales Suck – Smoke and Mirrors

Many real estate information gurus today are touting the benefits of  short sale investing. In a short sale, the investor  is taught to submit an offer far below its current value.  It’s up to the investor to influence the agent doing  the BPO through documentation showing why his offer should be accepted.  Virtually always, there is an impending foreclosure against the home and it’s alleged that it’s in the lender’s best interests to sell it off asap in order to cut losses. The home owner’s financial hardship and the difficulty with selling off the property without a deeply discounted price are also argued for.

Many gurus are promoting the short sale investing method as a way to create fast cash.  Wrong.  A short sale deal can take anywhere from 90 to 180 days.  This is because of, and the exact time frame dependent upon, the need for negotiations between the lender and the investor . The quality of the documentation also comes into play, reviewing the HUD , etc.  Nevertheless, as already stated, we have been hearing a lot about the beauty of the short sale. It is supposed to be a quick and easy way to make a lot of money even if you have very little skill in real estate selling. But the truth of the matter is a far cry from that often-sold fantasy.

Real estate short sales suck. They suck for many reasons, and those who tout them often know this. There is a whole industry of fraud that has emerged around the real estate short sale. This fraud is used to get a lot of publicity and attention for a real estate agent who needs to find new business. The agent will deliberately list a price so low that the lender, who was not even consulted, will never agree to it, and it is probably inaccurate anyway; and the home will not sell. The listing agent knows the home will not sell for that price, but she gets all kinds of new contacts in the process of people finding that out.

But another reason that real estate short sales suck is because they are made out to be easy when in fact they require specialized knowledge to do right. Only a relative few real estate investors or agents really understand how to do them. If you are trying to break into the real estate investing  business, you will need the help of area real estate agents. Many of them, hungry for your business, will insist that short sales are pretty easy, that they have good relationships with the lenders and appraisers concerned, that they know exactly what they are doing, and other all-too-typical slick salesman’s lies.

If a real estate agent is not highly experienced in or specially trained in REO properties and short selling, and if they cannot prove it, you want to stay away from them, if you still insist upon getting into short sales. Then there is the fact that many agents will never tell you that most short sales don’t close–for anyone. Agents who know this but who tout short sales as a road to riches often engage in another sly trick. They use short sale listings to start a bidding war.

The initial low price attracts many interested buyers, but there will be a clause in the contract that says either party may pull out of the agreement right up to the minute before closing, for any reason and without any notification. Allegedly, this is to protect the buyer from the lender suddenly changing their mind, an unexpectedly high final appraisal, etc. But a sly agent will use this to his advantage and tell the current buyer and their agent that a “new, better deal” has just been offered and the lender wants to see a new bid from the buyer who thought they were about to close the deal. Wise, honest real estate agents will pull their clients out of the deal entirely and not let them get involved in a bidding war. A short sale bidding war is a fool’s game because not only do you suddenly start spending much more money than you initially thought you would and prepared yourself for, but you also are at the mercy of the lender. In a short sale, it is the lender, not the seller, who has the final word on any deal!

There are, however, some great short sale deals that get closed. What characterizes these deals? First, an investor or agent who knows precisely how to do that documentation and make a convincing argument, based on real evidence, that the lender should short sell the property for such a price. This agent will also list a short sale price that the lender has said they will accept beforehand.

All in all, getting involved in real estate short sales will require you to go through hundreds of leads to make just a few deals, and those deals might fall through at the last minute. It’s simply not worth the time and effort for most people.

UNLESS….  You have a system of software automation to complete and submit multiple short sale offers. This strategy will save you time and play the numbers game…  With our system and software, you can dominate your short sale real estate market.. Stay tuned..

2 Comments

    • Duncan Wierman

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