So your buyer is purchasing a short sale home. Chris Ann tells us about when buyers agents know they are in trouble..... Read more below
Short Sale buyers agents know they are in trouble when the short sale listing agent calls with this one:
"The second trust is demanding that there be no closing cost assistance to the buyers and that the commissions be lowered."
This was a gem that a co-worker of mine brought to me, looking for advice for her buyers. Evidently, the listing agent of her buyers' transaction is leaning on her and her buyers to take care of the second trust's demands. Of course, being an experienced short sale listing agent myself, I can cut right through the bull here and see the problem is one of two things:
1) The listing agent has no clue what he's doing. If he did, he would never even bring this to the buyer's agent as a serious concern. You see, an experienced short sale listing agent knows that the second trust doesn't have any say over anything that is paid out by the first trust, which closing cost assistance and commissions are. The second is powerless.
What the second trust will sometimes attempt to do is to wrangle costs down for the first, in hope that they (the second) will get more money. Any additional money generally goes to the first if there is still a shortfall. So an experienced short sale listing agent will call the second's bluff and move on to the real issue: How much money does the second want?
2) The seller has been asked to repay funds to the second, either at closing, or in the form of a promissory note. The listing agent could be trying to cut costs in an effort to get more money to the second.
Again, an experienced short sale agent will know that any additional money found will generally go to the first.
Did I mention the listing in question has been on the market since December 2008? And the buyers in question have only been under contract since September 2009. Previous contracts fell through.
I made a suggestion, "Ask for a copy of the approval letter from the second with these demands." My co-worker already had, and since the listing agent refused to do so, as it would be a violation of his client's privacy, I believe we can safely assume that we are looking at scenario two. (This job is so much like playing poker.)
I suggested she get her buyers back into her car and find another house. There are two very important things that her buyers need to infer from scenario 2.
The first is that if the seller is being asked to repay money, and the listing agent's suggestion is for the money to come out of everyone else's pocket, his seller is likely hiding money somewhere or insolvent. (Though lien holder's generally do not ask for money from someone who is legitimately insolvent.) These types of sellers rarely get the outcome they want from a short sale since their lien holders will track down those reserve funds and ask for some as repayment.
Secondly, the definition of short sale approval in the Northern Virginia Regional Sales Contract will technically not be met if the seller has been asked to repay any money, or make a cash contribution. This means the seller can walk the day of settlement and the buyers have no recourse.
For an experienced short sale listing agent, the writing is on the wall with this scenario. Any way you look at it, this is a bad situation for a buyer to continue to be in. They may want the house, but the chances of getting the house are slim.
Chris Ann Cleland, Realtor- Licensed in Virginia, GRI & Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com.