This Week’s Segment with Mark Teytel: Foreclosure and Short Sale Expert
Brett called into the show this week while driving around looking at houses. He found a short sale he likes. The neighborhood is perfect. The only problem is that the seller is not behind on his payments and owes more than what the property is listed for, and the listing price is more than what Brett thinks the property is worth.
The seller wants Brett to agree not to look at any other properties while the contract is in process of getting approved. Brett doesn’t know if the bank will approve a short a sale like this. The seller’s agent is saying that yes, they do short sales like this all the time to protect the doctors’ and lawyers’ credit. The buyer’s agent says he almost never sees this situation work out successfully.
Brett wanted to know what I thought. I told Brett that he should not agree not to look at any other properties, because why waste 6 months waiting only to find out that the bank won’t sell? He has the cash and should maintain control over the transaction. It’s unreasonable for the seller to try and control the buyer’s actions in this case.
When Mark Teytel came on the show, I asked him to comment.
First, Mark agreed that it is unreasonable for the seller to ask the buyer not to look at any other houses. The seller has to trust the process as much as the buyer – though that is not an easy task.
“When I started working in the real estate market here 17 years ago, foreclosures were a nightmare. You had to jump through hoops to buy the properties. Short sales have so many barriers to get through the finish line today. Buyer and seller agents are frustrated and are wondering if they even want to work with short sales,” Mark said.
But you can get amazing deals with a short sale, and most banks have cut back the time it takes to figure out whether they’re going to accept an offer.
“The bank needs to have a broker price opinion (BPO) from an independent agent that will tell how much the property is worth. Lenders will accept an offer that is about 88 to 89 percent of the BPO. But to start the process, you need a written, binding offer, signed by all parties,” he explained.
“What I would do is if I want the property, is give the process a chance at the price that makes sense to you. Without playing the game, you won’t know if it makes economic sense for bank to go ahead and agree to a short sale rather than foreclosure. My sense is that as long as your offer is a reasonable and fair (i.e. “arm’s length”) transaction, the bank will come out and help you out because no one wants more foreclosures in Georgia.”
Have you bought a short sale? Are you a short seller? How has the process worked out for you?