This article should be helpful to potential homeowners looking to do a short sale in Las Vegas, but primarily, this article is geared to buyers who may be considering a short sale. I’d like to try and help you understand the mindset of the listing agents and their strategies. With this knowledge, you will be better equipped to target the homes that really meet with your goals, and disregard the short sale listings that appear attractive, but will be difficult to get under contract and ultimately closed.
Most statistics regarding Las Vegas short sales put the closure rate at between 20 – 30% of those listed. There are a number of reasons why, time restraints due to foreclosure, banks that never give final approval for the sale, especially, when there are multiple banks with notes on a particular home. Homes that have significant damage or have obsolete features that are unattractive to buyers also prevent homes from selling. In my book though, the most important reason are listing agents.
Short sales are very time consuming and require a great deal of follow up. Unorganized agents make horrible short sale listing agents. They communicate poorly, the miss deadlines, they lose information. All of these activities mean deals die and buyers are left angry. A far less obvious contributor to unsuccessful short sales is the strategy employed by agents. Agents have business philosophies and often they will not bend to the needs of a buyer or seller. I have seen first hand, perfectly good deals killed because a buyer would not conform to the business practices of the listing agent, even though they had the means and desire to close the deal. Agents should not interject their needs over those of their clients and their buyers, but unfortunately, it happens, especially as agents cope with trying to develop systems to consistently close properties in distressed markets such as we have here in Nevada.
Agents work on commission, so with such a small closing rate for short sales, how do agents make them profitable? Why do you care as a buyer, you ask? Because when you understand their tactics, you now can develop a strategy to deal with them or not deal with them and waste valuable time.
You essentially have two schools of thoughts when it comes to short sales. First, you have the agents that want to run their transactions in a quite mysterious fashion. They do not want let their sellers commit to any one buyer buying signing a contract. They develop disclosures designed to keep a home on the market in an active status and not put the home “under contract”. To entice buyers to make offers (remember, sellers need offers to begin the short sale approval process with their banks), the agents will often price a property way below market as a carrot to keep buyers on the hook even though they do not have an executed contract with the seller! The agents want as many offers as possible and then if they receive approval, they declare they are in a multiple offer situation and everyone is now in a bidding war. Huh, I waited around 2 months just to be in a competitive bidding situation? This is why only people that are dead set on one particular property or investors should really get involved in this type of situation.
The other type of agent runs their transactions in a more personal manner. They are confident in the sellers and they are able to qualify the buyers and their agents to the degree that they are comfortable to allow the property to go under contract. They’ll take the home off the market. If the sellers are late in the game and really want to avoid falling into foreclosure, the agents are suddenly much more friendly and accommodating! Sellers are taking a risk once a home is under contract as it will receive virtually no activity should the deal unravel. It is this fear that drives the previous agents’ strategy to avoid ever taking a home off the market. Agents of the 2nd school work closely with the buyer’s agent to get the deal done. Should the deal go south, they can still save the transaction and market the home as one that is “short sale approved”. Homes that are short sale approved work well for buyers that might not ordinarily consider a short sale. The buyer can usually avoid the long waiting periods involved with the average short sale.
Short sales require patience and the understanding. A buyer’s so-called “deal” may never happen if the sellers cannot obtain approval from their lender to sell the home for less than they owe. First time buyers and buyers who really do not want to deal with aggressive sales tactics should ask their agent to target not only the right home but listing agents who are willing to accommodate a buyer and who really appear to be facilitators. Nowhere on Realtor.com or Zillow or any other real estate site can you do this. Only an experienced agent is going to be able to help you qualify the other agent involved in a real estate transaction.
Paul Rowe is an agent with North American Realty of Nevada and five year veteran of the Las Vegas real estate market.