Short Sales – The Lowest Offer is Not Always the Best Offer

I spend a lot of time training real estate investors to do Short Sale deals, and  I recently heard from an investor who was trying to purchase a home from a seller facing foreclosure. The investor wanted the homeowner to sign a purchase and sale agreement with an addendum stipulating that the seller will sell the home to the investor if the investor can get the mortgage lender to accept a short sale.

Unfortunately, the homeowner asked for advice from an attorney who obviously doesn’t know much about how short sales actually work. The attorney advised her client not to sign the purchase and sale agreement, on the grounds that it would restrict her client’s ability to market the property to other clients.

Here the lawyer is protecting her client from a potential mosquito bite by throwing the client over a cliff and onto the rocks below.  She is 100% correct that the documents prohibit the client from continuing to market the property or taking other offers.  That is the very purpose of the purchase and sale agreement – to tie up a property so the buyer can spend the time and energy necessary to prepare for a purchase without fear of the seller going to get another „even better“ offer from somewhere else.

A Short Sale does not require a public auction to get the highest price for the lender. If the seller has the time and the knowledge and the resources, they might consider holding a public auction to find the person who will bring the highest offer, but most sellers in need of a Short Sale to sell their house don’t have the time or money to undertake the expense of hiring an auction company or the time to wait around for the highest offer.

Besides, the seller doesn’t need the highest offer, they need the best offer and the best offer for a seller facing foreclosure and in need of a Short Sale is one from someone who can successfully weather the Short Sale journey and get to a closing.

The best buyer for a Short Sale is usually NOT a retail buyer who can offer the highest price – they’ll be long gone by the time the bank approves the Short Sale, having given up from the frustration of the process and leaving the seller in the ditch and headed for foreclosure.

Ms. Attorney, you are 100% correct – the investor’s offer is lower than what your client might get if they waited and shopped around, but shopping around is not necessarily in your client’s best interest.  Your client doesn’t have the time, resources, and knowledge to get the highest offer in these circumstances.

The best situation for your client is to find an experienced professional who (a) knows the process and (b) will be ready to close when the bank approves the Short Sale.  And in order for that experienced professional to be interested in your client’s property, they, like any buyer, are entitled to have the property under contract to prepare for a closing without fear of the seller shopping around for a different buyer – that’s the whole point of a purchase and sale agreement.

There is nothing inherently wrong or insidious about accepting an offer for an asset that is less than what someone else might be able to obtain.  Indeed most people sell their cars to a dealer for far less than what they might get if they had the time, energy, and knowledge to sell the car privately.  But most of us don’t have the time or energy to sell a car retail for the highest price so we willingly sell for less to a dealer.

It’s the same thing here! If your seller has the time, energy, and knowledge to go get the highest offer, then go for it (realizing your seller might lose their house to foreclosure while they sit around and wait for that high offer); however, like most people selling a car – your client’s best interest is most likely served by selling for less to someone who knows what they are doing and can act quickly.

Immobilienmakler Heidelberg

Makler Heidelberg



Source by Ben Pargman

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