Should Sellers Sign a Contract Prior to Short Sale Approval?

A recent posting from an Ohio broker highlights how real estate differs from place to place. In it, she says that she advises her clients to not sign a contract with a buyer if the house is a short sale prior to getting the bank’s approval. While I won’t quarrel with what works for someone else in another market, I disagree.

That may work in Ohio, but it is ill-advised in New York. I do most of my short sales in Westchester, Rockland, Putnam, Dutchess, Nassau, Suffolk, Queens, Orange and Fairfield (CT) Counties. It is the same in each place- when the buyer makes an offer, it is submitted to the lender with the seller’s hardship package and a contract that is conditioned on the approval of the short sale. The contract is prepared by the seller’s attorney. If the short sale is approved, we have a deal. If it is not approved, my seller is not obligated to sell and incurs no financial obligation to the buyer. Most of the time we continue to negotiate with the lender anyway, but the contract protects both parties.

For the buyer, the contract ensures that they will not lose the house to another buyer after enduring the long process of short sale approval.

For the seller, whom I represent far more often, the contract ensures that the buyer will not simply walk away without penalty or recourse after that same lengthy process. If I list a short sale, my job is to protect my seller. Handshake deals do not protect the seller, only contracts and deposits protect them. This does not “imprison” the buyer. It is virtually the same sort of contingency as their own financing, which is in almost every real estate contract, and no seller objects to such contingencies.

Moreover, the lenders require a valid contract of sale before they approve a short sale. With no contract, the offer is hypothetical. Hypotheticals don’t help my clients whose goal is to avoid foreclosure.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

The Single Mom- Orange County Short Sale

This transaction came several years ago, before the market decline was fully accepted by home sellers. The client was a single mother who, because of a heart condition, missed a great deal of work and fell behind on her home loan. By the time I had met her, she was finished with another agent who failed to sell her home. She was skeptical of agents because of this, and felt that it was not her home’s price that was an issue, but how it was marketed. However, by the time we competed the CMA, she was clear that she owed more than the house would bring from the market.

Being the mother of two teenagers, my client was both scared and proactive. She was under terrible stress, which isn’t good for someone with a heart condition, but she was a fighter. She engaged with the bank as few sellers I have seen before or since. She hung on their every word. Anything they requested was faxed and followed up upon. She kept me on my toes. The buyer actually found the house through her craigslist posting. It never fails to impress me how much better things turn out for my clients who help themselves.

It was a tough process, but the short sale was approved. My clients’s attorney, well, let’s just say I wish he had half the initiative of the lady he represented. He did a sloppy job, and as a result of title issues he failed to detect, I walked away from the closing with about 75% of my commission going to cure a defecit. Niether the buyer nor the seller attorney seemed to feel at all badly about this draconian loss I had to eat. I never recommended the scoundrel again.

Regardless, my seller got out from under the house she could no longer afford, and she got her fresh start. Her attorney promised to refer me a client in exchange for my severe loss, but he never kept his promise. Just as well; I don’t want to hear from him. My client calls me from time to time, and she is rapidly approaching the point where she can buy again if she chooses. All in all, a tougher deal on me than my seller. That’s baseball.

 

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

We Want a Baby -Orange County, NY Short Sale

Some transactions stay with you your whole life. This occurred almost 2 years ago and seems like it was last week. The clients lived in Orange County, an exurb of NYC about 40 minutes north of White Plains. They were desperate, and their situation was compelling.

First, they were restoring an older Georgian. Even in an incomplete state, it was a magnificent place. As with many younger couples in the multi-tasking pursuit of making a family, they were also trying to have a baby with little luck. Then, she got pregnant.  Their daughter was born prematurely, and never made it home. Language limps in describing such a tragic event. She became understandably depressed, and then he lost his job.

I met her at the house on a cloudy day. She was back on her feet, physically and mentally, with a fat file filled with research on short sales on the kitchen table. She knew everything I was talking about. She educated herself. Unlike many people with overwhelming financial problems, she was not paralyzed with fear. I’ll explain.

While she was showing me the house, explaining what was completed and not, we came to what was the baby’s room. The poor Little Soul never slept in it. Briefly, she was sad again. She became depressed when she was told she couldn’t have a baby. I am blessed with 4 rugrats- what could I say? Have you thought of adopting, I asked. She looked me right in the eye. “Of course. But they won’t let you adopt if you have a foreclosure.” How dumb of me! Adoption agencies weigh finances very heavily!

And THAT is why she was on her feet, lucid and fighting. She wasn’t fighting to save her credit; she wasn’t fighting for sheetrock and plumbing;  she was fighting for motherhood. She was on her toes for a child who wasn’t even in her life yet, a child who was just an idea.

I am proud to say that there were multiple offers on that house (it was expired with a prior broker who tried to sell at a higher price because they didn’t know short sales). The lender approved the short sale, an offer about $15,000 over asking price as I recall, and it closed successfully. Was it easy? Hell no. Did I care? Hell no.

They mailed me a photo of their daughter later that year. You can’t make this stuff up.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com  

Read Full Post »