Should First Time Buyers Avoid Short Sales? Right Now…Yes!


short sale warningIt’s already September and the $8,000 First Time Homebuyer Income Tax Credit (ITC) ends on November 30, 2009. That means that buyers hoping to take advantage of the ITC need to close on or before November 30.

Assuming that the “average” conventional loan is taking 30 days to close, 45 days for the “average” FHA, 60 days for the “average” VA loan, these buyers need to be UNDER CONTRACT on a property within the next 30 days! It’s time for the last-minute lookers to get in gear and begin their searches.


A recent agent poll published in REALTOR magazine asked agents across the nation about their challenges in today’s market. The good news is that REO properties are becoming “easier” to deal with as the banks’ staff and asset managers streamline their processes. REO deals seem to be almost normal now.

Banks allow and encourage inspections, share whatever inspection reports they may already have, and communicate by email now so we have written paper trails of the negotiations. Title issues are still a problem from time to time, though, so get that title search done early!


The bad news for agents, though, was in the field of Short Sales. Almost every single agent reported that negotiating deals for Short Sales was the most frightening, time-consuming, frustrating, demoralizing and complex experience in real estate today. 

Why? Because of the confluence of: 

  1. sellers not being candid or honest about their situations
  2. banks not being staffed to handle the flood of Short Sale offers
  3. bank staff not being trained on the Short Sale process
  4. sellers unwilling or unavailable to complete the Short Sale package demanded by their lender(s)
  5. lack of communication between various mortgage lien holders on the same property
  6. real estate agents who call themselves “experts” on Short Sales but who deluge sellers’ lenders with an abundance of very low offers and clog up the system (and the lender turns them all down)
  7. buyer’s agents untrained on the Short Sale process who get a sudden dose of reality when another, later offer comes in on the house their buyer has “under contract” and pushes the first buyer out of contention
  8. buyers also caught unaware. 


Agents are reporting that Short Sale contracts are taking from 30 to 180+ days to be approved by the seller’s lender(s). And the more lenders, the more time needed. 

Does it make sense to take a buyer wanting the $8,000 First Time Homebuyer Tax Credit to look at Short Sale properties at this time? Unless Congress extends the ITC, which they won’t even discuss until they reconvene in September, no.  No, it’s not worth the risk to the buyer that he/she won’t be able to close by November 30, 2009.

Just my opinion, but, hey, I only get the calls from the disgruntled buyers…

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12 Responses to “Should First Time Buyers Avoid Short Sales? Right Now…Yes!”

  1. Arthur Harris Says:

    Great post Anne you hit the nail on the head, short sales are extremely difficult and require a lot of patience! If your buyers are in a hurry to close avoid short sales as the chanceof closing in 60 days is remote.

  2. Keke Rachel Says:

    Short sales have been a very frustrating process thus far, but it also teaches you a lot about the process of short sales and all the paperwork involved. Anne was on point with the time in takes to get an offer accepted. If you have buyers who have a short time line of when they need to move, short sales aren’t going to be quick. It does help to have all parties involved familiar with the short sale process. Please inform your buyers of the timeline in advance!

  3. Dennis Doll Says:

    Timely topic Ann! Seems that even “approved” short sales are taking a good amount of time. Also, foreclosures can take more time than expected. There are plenty of good resales out there priced right and without the hassle. When I set up buyer visits today, I cull the group to avoid homes I know cannot close in time for my first time buyers. …or any buyer who cannot wait at least 3 – 4 months.

  4. ann bone Says:

    The blog post mentions that it’s the end of August, but obviously it’s later than that – tomorrow is the 15th of September! That makes this even more timely. Do NOT do your buyers the disservice of encouraging them to attempt to close on a Short Sale this late in the ITC program.

  5. Margaret Kees Says:

    Ann not only hit the nail on the head — she built the whole house! We need to have a number 9 on the list stating all of the above. Short sales are more than a mess. I’ve heard buyer agent after buyer agent say that they will not show short sales period. They would all rather show the REO properties than the short sales. The lenders are more than just bad. Not only are their staff not trained they are most likely temp employess as I recently expereience in a negotiation. The lender in this case was more interested in driving the poor performing loan to the foreclosure steps than working on the offer at hand – which turned out to be what they eventually listed it for as an REO — go figure. That’s a blog all by itself! As long as we have the tax credit, avoid taking the first time buyers to the short sales.

  6. Mark Laycock Says:

    This is definitely something to consider for First Time Home Buyers wanting to qualify for the $8,000 Tax Credit (more info here: or Any Buyer working with a short time line.

    The good news is that Metro Brokers/GMAC Real Estate is sponsoring a Home Buyer Work Shop on Saturday, September 19, 2009 ( more info here: ). This will be a great opportunity for buyers to get up-to-date information about the current market conditions and come up with a strategy to move forward so they can find the right home, do it at the right time (before they miss any opportunities), and get the best financing. Basically, they will be able to make educated decisions and find out how easy home buying can be – especially with the “one stop – one shop” buying experience offered by Metro Brokers/GMAC Real Estate.

  7. Monique Mills Says:

    Ann you are so right. But Buyers now think they know so much more than the agents…the professionals in the business. The “reality” TV shows have most Buyers thinking that the atmosphere in the market will change just to appease their wants and desires. Unfortunately, there is a struggle to convince them otherwise.

  8. Anne Langley Says:

    It all starts with educating the first time homebuyers. If they are in a hurry, short sales are not the way to go. Many of them have misconceptions of the term “short sale” and some of the misconceptions come from well meaning family and friends. I am going to print out your blog and start handing it out. Good job!

  9. LaTrina Clark Says:

    I agree, There is nothing Short about a Short Sale! Buyer’s need to be informed upfront in the Buyer Consultation Stage the pros and cons of every type of property available for sale. Resales includes the following ingredients to cook up a good deal. Very Motivated Seller, lower property taxes due to home exemption, buyer incentives and rarely no competition with other buyers. Buyers must take advantage of the Tax Incentives Now! Get off the Fence and call a Professional Full Time Realtor® Today!

  10. Lorelei Fischer Says:

    Here! Here! Thanks for the realistic point clearly made! And the above comment by LaTrina sums up the reality of what can be a wonderful experience for both the first time and experienced home buyers! You just can’t beat the old “Win, win transaction.”

  11. Jay Little Says:

    I do agree… word to the wise, start conversation with the bank RIGHT WHEN YOU GET A SHORT SALE LISTED. Have the Seller apply for a Pre-Approval on the Short Sale which will speed up the process of approval so that when you do get an offer, the headache is GREATLY reduced!!!

  12. Marilyn Fraley Says:

    You are so right! We must continue to talk to our buyers and educate, educate, and educate.

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