Contra Costa, California Real Estate

I received a potentially dangerous phone call on one of my short-sale listings.  Let me give you the overview.

A Realtor called and said he was representing a "professional short-sale buyer" who purchases short-sales in great neighborhoods, negotiates the short-sale with the lender and has a 89% success rate.  Always curious, I asked how this proposition works.

• The professional short-sale buyer has his own attorney-drafted purchase agreement
  
• The seller must put the property in a Living Trust and, within that trust, authorize the buyer to negotiate with the lender(s) on the seller's behalf.
  
• The seller has 45 days to back out for any reason.  After 45 days, the seller must provide a notarized commitment to proceed.

Every filament of my brain screamed, "DANGER!" I told the agent that I would specifically advise my seller AGAINST taking an offer with any such arrangement.  He was quite surprised and again reiterated that his buyer had a 89% success rate negotiating short-sales.  I explained that negotiating the price of the short-sale is only a small part of the overall negotiation and a buyer would not be as careful to represent the seller's best interests in the non-price concerns.

(Please note, my concerns should not reflect negatively on the selling agent who approached me with the idea.  He is doing his job which is to identify properties on behalf of his client, the "professional short-sale buyer".). 

• The use of the non-CAR (California Association of Realtors) contract absolutely requires my seller to hire an attorney for contract review.
  
• Any transaction that requires a seller to make alterations to title should also be carefully reviewed by a real-estate attorney.
  
• Changes to title could void the current Title policy and moving a property to a Trust is considered a change in ownership.  Few Realtors and sellers know to ask if there are any specific riders necessary to maintain the title policy when moving the property to a Trust.
  
• The C.A.R. Short Sale Addendum clearly states that the seller is not obligated to accept the Lender's short-sale terms.  (There are some short-sale approvals that are so onerous that the seller is financially better letting the home go to foreclosure). 
  
• Some lenders add previously undisclosed conditions of short-sale approval to the closing package. 
  
• There is no guarantee that the full terms of the lender approval will be received within the 45 day period.

The buyer has a vested interest in getting the property for the lowest possible price which will result in a higher potential tax liability for the seller. Additionally, the buyer has absolutely no vested interest in protecting the seller from potential recourse (a judgement or collection) after closing.

Use Extreme Caution!