Avoiding the Short Sale “Investor” Trap
A short sale can be an effective opportunity for a seller in distress seeking to alleviate a financial burden as a result of the current standing of their home.
If you’re a seller in this situation, in order for the short sale to be effective, it is imperative that you choose the right buyer willing to hang in there through a lengthier process. Prior to the opening of escrow, a chosen offer gets submitted to your lender for approval, a process than can sometimes take in upwards of 90 days. During this period, the buyer has no contractual obligation, and can simply walk away at any time without any penalty.
There is a trend happening within our industry right now with certain type of investors who take advantage of this loophole by submitting multiple offers simultaneously, obtaining several acceptances, then deciding during this bank approval period the right opportunity to pursue, and which ones to simply cancel on.
While these investors are technically allowed to submit as many offers as they’d like, it is hardly fair to the seller who may have chosen this buyer over another opportunity, where time is of the essence as the buyer fends off a foreclosure, and who would have to start from scratch when this investor decides to cancel.
Here are some great ways to safeguard against the uncommitted investor buyer:
1) If the offer is submitted “blindly,” that is, the buyer and buyer’s agent have made no attempt to physically view your home, where they submit the offer without ever having looked at it, this may be an indicator that you are one of many offers an investor is making.
2) Have your agent call up the buyer’s representation to get a gauge on just how committed they are to your particular home. A major factor in determining the right buyer on a short sale is finding the one passionate enough to wait it out through the bank approval process.
3) Make the buyer’s deposit non-refundable after a certain time period prior to the opening of escrow. This isn’t necessary for all buyers, just the ones who may be raising those red flags, and can help determine just how committed the investor truly is to your home.
Taking the time to get to know the buyer can save you so much time during a process that is already lengthier than normal.