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In this and the following two episodes I’m going to share with you some very well-used tips that I’ve shared with my boot camp students to make it possible for them to get their short sales not just listed and sold, but listed, sold and closed.
Selecting the Best Buyer Part 1
Many agents make their very first short sale mistake by pricing their listings too high, which makes it nearly impossible to find the best buyer.
In this and the following two episodes I’m going to share with you some very well-used tips that I’ve shared with my boot camp students to make it possible for them to get their short sales not just listed and sold, but listed, sold and closed. Notice I said listed, sold and closed, because it does you no good to list a short sale and not sell it, or worse to list it, sell it, and then have it not close, have it cancel.
Why would a short sale listing be listed and sold, but not get closed? Well, in most cases it’s because you had the wrong buyer, the not best buyer. The number one most common reason for short sales falling apart is paperwork, bad paperwork, and the number two most common reason short sales fall apart is not the best buyer, but the wrong buyer.
Notice I didn’t mention price as a reason that short sales don’t get closed. I want to emphasize this over and over again. Paperwork is more important than price. The right buyer is more important than price. If you go back to short sale truism number one, properties that are put on the market at too high of a price are at greater risk of going to auction than properties that are priced correctly.
So let’s assume that you have followed my advice to the T. You have listed the short sale, you’ve priced it aggressively, offers are pouring in. Now what? Well, let’s understand what you’re looking for, the characteristics that are going to increase your odds of success so that you go from a listing that is sold to a listing that is closed, versus a listing that is sold to a listing sale that has cancelled.
The characteristics that you’re looking for, there are three of them. The number one characteristic is that you find a buyer that is getting a good enough of a deal that they’re motivated and committed to doing what you ask them to do. It has to be a deal. If it’s not a deal, why would they stick around long enough to get this thing closed?
Number two characteristic is you want a buyer that knows exactly what they’re getting into and is willing to spend the money to find out what they’re getting into. In other words, they’re willing to spend the money to make sure that the property is worth the right amount and it is in the condition they think it’s in. We’ll discuss that a little bit more in detail.
The number three characteristic is you want a buyer that has a degree of financial flexibility. Again, you’ll hear me describe that in greater detail.
Now let’s compare those characteristics to what the lender, this is the lender for the seller who’s going to have to approve this buyer, what are the characteristics that they’re looking for? Well, there’s only two.
Number one, they want to make sure that the property is being sold at a fair price to a solid buyer. Number two, they want to make sure that they’ve got all the paperwork to prove number one. Let me say that again. They don’t want to waste their time if they don’t think they’re getting a fair price or if they don’t think it’s a solid buyer, and the only way you can prove it to them is by giving them paperwork.
So you have to understand a little bit about what they think is fair price, because you as a licensed professional, I’m assuming you’re a licensed professional, you owe it to not only your seller, but the buyer and the lender to do what’s best for everyone. That may sound complicated, because as the buyer’s representative you want to get them the best deal possible, as the seller’s representative you want to do them as well as you can by getting this property sold and closed and off their back.
But as far as the lender, as the listing agent, no matter what price it ends up selling for, you are going to be responsible to support that price. In our example, our pricing example, we took a $150,000 valued home, that would be after repairs, and we’ve got the seller’s permission to list it at whatever price we want, so we decide to put it on the market at $108,000, which is the wholesale number. If you can’t in good consciousness support a sale amount of $108,000, then you have to adjust for price accordingly. If someone comes along and wants to try to steal the property for $40,000 and you push it through, in all fairness to the bank if you could’ve sold it for $108,000, you should have. But if you could only sell it for $40,000, then you have to prove that that’s as much as you could sell it for, and this is where a lot of deals fall apart because the only way to prove it is paperwork.
Here are some things that you’re going to hear me refer to again and again, but when it comes to dealing with offers on your short sale listing, remember you’re doing what I told you to do. You got the listing. You got all your paperwork from the seller. You went ahead and you put the property into the MLS, and the first thing that I’m going to tell you about dealing with offers is this, don’t plan on accepting any offer in its original state. Count on the fact that you’re going to have to counter that original offer to clean up the terms or the conditions of the sale and maybe even price. But notice I say price last. So the offer isn’t going to be accepted as it is. You’re always going to be countering to clean it up.
Another issue in dealing with offers is there’s nothing wrong with a buyer getting a deal on a property so long as you can support the price. In other words, what I’m saying is if the property would be worth $150,000 after repairs and someone is buying it for $108,000, it may be that the current appraised value is $120,000. The lender isn’t going to say, “Well, it’s worth $120,000. You must pay $120,000.” They understand the current state of the economy.
If you can sell $120,000 as-is property for $110,000, $115,000 or $108,000 ,it doesn’t mean a lender is going to say, “No way Jose, you’ve got to back to the drawing board and get us a $120,000 offer.” There’s nothing wrong with the buyer getting a decent deal. Lenders are fine with that. But it’s usually those low-ball, unsubstantiated, unsupported offers that come to you from novice wannabe investors that you find are typically a waste of your time, and they don’t often close.
Third item regarding dealing with offers, if your buyer and I should say and/or the buyer’s agent, because it could be either one of them, remember you’re the listing agent. The buyer comes with the representation of a buyer’s agent. So you’ve got the buyer’s agent playing in between. They’re doing their job to protect their buyer. But if they’re difficult and uncooperative at the beginning of the process, they’re going to only get worse as you get down the road further.
So what’s my point about that? Well, you’re going to find that if you price the listing aggressively, you’re going to find that buyers and their agents are more grateful and willing to cooperate. When you price it too high, you’re going to find that the buyers have an attitude, as do their agents, of doing you a favor. Price it right, they feel like you’re doing them a favor and they’ll be easier to deal with. Price it too high, they feel like they’re doing you a favor and they’re going to be a challenge.
My recommendation is follow my advice. It’ll make your job easier. You’ll be able to close a lot more deals, because what you want is a committed buyer who’s getting a deal and a buyer that knows what they’re getting into and willing to pay for that and a buyer that has financial flexibility.
In the next episode, we’re going to talk about the mechanics of using the counteroffer to create the absolute best buyer.
Thanks for Listening and Happy Learning,
Scot Kenkel, Instructor
P.S. What do you think? Leave your comments below. Thanks.
The post SSP 011 : Short Sale Help: Selecting the Best Buyer Part 1 appeared first on How to Sell More Houses.