It has been four years since I worked with my first short sale. I listed a townhouse for a friend and while it was on the market she stopped making payments and I ended up with my first short sale.
The process was stressful for all parties. It worked out, and we are still friends — which will always be more important to me than a commission.
We got bank approval on an offer after only three months, but the “file” was sold to another institution two days before the anticipated closing, which caused more delays. But it did eventually close.
Personally, I would have come out much better if I charged an hourly rate instead of a sales commission.
Short sales are more common than ever, and I think that is a shame. Many short-sale attempts end in foreclosure.
And even if successful, a short sale hurts the credit rating almost as much as a foreclosure does. As agents we need short sales and they can be good for business. There are classes real estate professionals can take to become more skilled in working with short sales.
Sellers can go through a lot of drama and pain over a short sale, and after months of waiting they may discover that banks can foreclose on a loan much faster than they can approve a short sale.
Short sales can be tough on buyers, too. And buyers seeking bargains may be better off buying a bank-owned home — they could even choose to wait to buy from an investor who purchases, fixes and flips bank-owned homes.
Some of my buyers have ended up with beautiful homes that are almost like new but were less expensive than new construction.
Some agents believe that they are helping people who are upside down and or behind on their mortgages by offering short-sale services. There are sellers who believe that a short sale is a way to prevent foreclosure and that it is preferable to a foreclosure.
Perhaps it seems more honorable to some owners to give the bank some of what is owed than to give them the house and walk away. Either way, their credit rating is harmed.
A short sale may not be the best path to avoid foreclosure, and we should not be selling our services to distressed homeowners as a way to prevent foreclosure — as that may be the outcome for the owner.
I get calls and notes from homeowners asking about short sales. There are some who think that if they are upside down on a mortgage they can complete a short sale.
In some cases, they can afford the payments but they just don’t want to make them anymore. They don’t understand that banks may be more likely to approve a short sale if there is a hardship, such as a job loss or a serious illness.
There are sellers who believe that they can get approval for a short sale, sell the home, and then turn around and borrow money to buy another. More than half of the sellers who contact me are looking to sell a home that they have owned for less than five years — they can afford the payments but they just don’t want to.
Homeownership does not come with any guarantees of wealth or happiness, and having purchased a home that is dropping in value should not be considered a hardship.
It has been a year since I have represented a short-sale seller, and two years since I have represented a short-sale buyer. In general, I avoid short sales.
And I don’t have any problem with letting others have the business.
Teresa Boardman is a broker in St. Paul, Minn., and founder of the St. Paul Real Estate blog.