real estate

Why do short sales sputter, fall apart?

Steve McLindenQuestionDear Real Estate Adviser,
We're in the process of short-selling our home. At our closing, the buyer didn't show. This apparently happens frequently.

Why do so many so-called short sales take so darn long and fall apart so often? By the way, when we called the showing service that our Realtor is using, we got a phone message for our lender, which is a major bank. What's up with that?
-- D. Dresser

AnswerDear D.,
Let's address the fallout factors first. There are about as many reasons for a short sale to fall apart as there are documents and involved parties.

"With every short sale, there are dozens of required documents requiring as many signatures, dates, witnesses, initials and sometimes notaries," says Garrett Heaney, a spokesman for Realty Infusion in Seminole, Fla., a real estate technology firm that sells short-sale processing software.

There is also a long list of parties involved in each deal, including buyers, sellers, brokers, lenders, agents, attorneys, negotiators, loss mitigators and bankers, he says.

Moreover, the large amount of "numbers" in the process -- including numbers related to appraisals, broker price opinions, offers and negotiated terms -- create even more snafus as they're bandied back and forth between the parties involved.

"Now, try to visualize getting all of these documents collected, organized and submitted through the required channels within any time frame and you'll have a good idea why less than 20 percent of traditional short sales are successful," Heaney says.

In your case, it's possible the buyer may have just moved on to another property. Because of those lengthy closing time frames, potential buyers who make an offer on a short sale probably will continue to look at other properties, even if their offer gets accepted by the initial seller in the meantime.

Many short-sale real estate agents wait to submit their clients' additional offer only after the bank had accepted an earlier offer. That can trigger the reset button and lengthen time frames further.

Additionally, many major banks went through significant personnel changes and departmental restructurings over the past two years -- imagine what that can do to the short-sale process. Smaller community banks, by the way, are typically much faster at processing short sales than the majors.

It's fishy that your Realtor's showing service and the bank seemingly are acting as one. While some short-sale specialists may appear to be surrogates for banks that use them most often, real estate agents and the service firms they enlist are expected to act independently and without conflict of interest. That's part of their fiduciary duty to you. The law typically requires them to inform you if they're getting referral fees from banks, mortgage brokers, etc., much less setting up shop with them.

I hope you've since received a good explanation from your Realtor for that puzzling phone cross-up. Otherwise, a complaint to your state Realtor board may be in order.

Get more news, money-saving tips, and expert advice about mortgages and real estate by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page, and select "buying, selling a home" as the topic. Read more Real Estate Adviser columns and more stories about mortgages.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

News alert Create a news alert for "real estate"

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE & REAL ESTATE NEWSLETTER

Timely market news and advice for consumers ready to buy, sell or invest in real estate. Delivered weekly.

Blog

Polyana da Costa

Borrowers get $2.5B from Citi

About $2.5 billion of Citi's $7 billion settlement will go to consumers  ... Read more

advertisement
Partner Center
advertisement

Connect with us