Saturday, November 10, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part V)

Rule #5 - If You've Got The Right Agent, Show Them Your Commitment

Link back to Part IV

Most people are aware that it will be a good idea to work with a real estate agent that is well versed and experienced in the short sale market, but many people do not realize the commitment they in turn need to show to their real estate agent if they really want to deal effectively with short sale properties.

To understand this, it helps home buyers to see the world from a Realtors perspective. To a real estate agent, a short sale does not necessarily equal a paycheck. Agents do many things for free within the industry, and as much as they understand that the #1 job is to help people buy and sell real estate, they also have bills to pay.

Buyers looking for foreclosure real estate need to understand that many times short sale properties do not pay as well as normal real estate. Many times the difference is very significant, to the tune of a 30-50% reduction in pay! This alone makes pre-foreclosure real estate less attractive to your Realtor.

In addition to being less profitable (for your agent), short sale properties can also be more time consuming. The extra time it takes to research the properties, negotiate with the bank, and write purchase contracts make them even less appealing from an agents perspective. The silver lining is that Realtors, for the most part, do like to help people and will sometimes accept a pay cut if it can greatly help a wide range of people. In the case of a short sale, it helps the buyers find a deal, the seller salvage their credit, and the bank avoid foreclosure. With that being said, pre-foreclosure home buyers need to do a few things to show their agent that they are serious, qualified, and loyal.

To show that they are serious, prospective home buyers need to first be honest with themselves about their goals. Then they need to share these goals with their agent as it will help both parties to determine if the expectations are ones that can realistically be met.

Being qualified is the next hurdle that a prospective home buyer will need to navigate if they want to work with a top short sale professional. This will mean talking with a lender about financing options, credit history, down payment, closing costs, and employment. Once again, much of this info needs to be shared with the Realtor, not only to prove buyer is qualified, but to make sure the buyer is getting a reasonably good deal.

The last step of entering into a buyers agreement will show your real estate professional that you have chosen to work with them, and solely them, in finding a pre-foreclosure home. There is no real advantage to working with multiple agents if a buyer is already working with one of the best. A written buyers agreement will go a long way in solidify this relationship all the way up until the date of the agreements termination.

With the nature of short sale real estate, it is not uncommon to employ a strategy where a prospective buyer will make multiple low ball offers on a wide variety of property in an attempt to find a willing seller. Without getting into the effectiveness of this strategy, we can say that this approach will create a substantial amount of extra work for the real estate agent. In addition to the above steps, prospective short sale buyers looking to use a canvas type approach should expect to provide additional compensation to their agent on a "per offer" or "time" basis out of their own pocket. It may be realistic to have some or all of this compensation refunded to the buyer after the close of escrow on a property sold through the subject agent.

A final note on trust and loyalty deals with the pricing on real estate. Assuming one has followed our steps for hiring the right Realtor, it is a great idea to listen to your agents advice about pricing for the subject home. All too often, home buyers hear their agents price opinion but don't really listen when it comes time to make offers. It should be understood that home buyers are not negotiating against their agent! Real estate is a team sport and it is wise for consumers to take their teammates experts advice very seriously.

While this 5th rule was mostly about protecting the agents time and resources, prospective buyers need to also understand how these acts will benefit them. The principle of reciprosity is in full effect as an agent who knows they have loyal, serious, qualified buyers will be in a much better position to find property and will actually be more likely to bring the good deals to these buyers first. This fact alone can pay big dividends to short sale home buyers.

Link to Part VI