Clark, a former president of the National Association of Exclusive Buyer Agents, said he set out a while back to write a simple blog item about things that commonly trip up short sales (which occur when a homeowner's lender agrees to the sale of a house for less than the amount due on the mortgage). Then he decided to survey the agents in his trade group about the potholes they've had to navigate on the short sale trail.
He and a NAEBA committee were looking for a list of 10 things to watch out for. They came up with 51.
The result is a surprisingly readable report that manages to educate in about 10 printed-out pages (from the "Our Blog" section of naeba.org) the often-enigmatic process that other writers have spent entire books trying to lay out for consumers.
Co-written with Ann Arbor, Mich., agent Jon Boyd, the report from NAEBA's member survey suggests that only about 25 percent of all short-sale purchase contracts actually make it to closing, and only about half of all homes that are offered as short sales end up being sold that way, though the percentages may vary by market.
The sales go off the tracks any number of ways, from lenders legally reneging on agreeing to the sale, to buyers who just can't endure months of waiting for a decision and walk away.
Still, in the current real estate market, "short sale" has become a household word. Nationwide, about 110,000 homes were sold this way in the first quarter of 2012, representing 12 percent of all residential sales, according to RealtyTrac, a foreclosure data firm.
The NAEBA report is a litany of advice to the wary about insincere and ill-prepared short-sellers; neglected houses that may fall into disrepair in the months it could take to complete a short sale; lenders who force buyers to jump through multiple paperwork hoops, only to change their minds about the whole deal; closing costs that may be difficult to calculate until just days before the closing.
Among the dozens of items from more than 100 NAEBA members who participated in the survey:
If you're the seller, the "hardship package" list of supporting documents needed to persuade a lender to agree to a short sale is lengthy but critical, and failing to follow the process meticulously may kill any chance of getting the lender's OK.
Lenders are under no obligation to agree to a short sale, no matter what the seller has agreed to in the contract. Sometimes lenders change rules for short sales while the parties are waiting for an approval, killing the process or resetting the timeline.
During the negotiations, several events may occur to derail the short sale. For example, the seller and the bank might agree to a loan modification, instead of a short sale; the seller might declare bankruptcy or end up in divorce; the bank might decide to foreclose anyway.
Some sellers may be listing their homes only as a tactic to delay a foreclosure and aren't serious about following through. Or some sellers may lose motivation and refuse to complete the sale, perceiving there's little benefit to them, since they won't receive any funds from the sale and their credit already is damaged.
Read through 51 of these admonitions (in addition to other background material included) and you might get the idea that short sales are too much trouble.
"Oh, no, not necessarily," said Clark, whose real estate practice exclusively represents buyers. "The purpose (of the report) isn't to steer people away from short sales, it's to help them understand what they're getting into. They have to put in the time and be ready to deal with the stress and uncertainty for the big win."
And for those who make it to the finish line, it can be a win, he said, cautioning that such buyers must accept the potential of unforeseen repair costs for houses that may have endured neglect in the months leading to the closing. Still, in his experience, when such costs are factored in, a short sale could amount to a 5 to 15 percent discount over a comparable property, he said.
"It might mean the buyer is able to get a bigger house or get into a neighborhood that he or she otherwise might not be able to afford," Clark said. HousingNews@comcast.net