It wasn’t your first choice. It wasn’t your second either. In fact, the short sale you wrote the offer on was likely more a product of attrition than anything else.
Short sales take time. Like most astute 2012 home buyers, you are all too aware that the offer you submit on an upside-down property will likely take a minimum of 60 days for a response from the seller’s lender. You are also aware that the list price of the home is not necessarily reflective of the price that the lender will ultimately be willing to accept. If you are like many buyers I encounter, the cumulative uncertainty of a short sale transaction is likely what ultimately convinced you to first trawl the regular resale and/or foreclosure market for a home before turning your attention to short sale candidates. Fact is, unless you are an investor or in no hurry to move out of your month-to-month lease, you likely don’t have the luxury of waiting on an uncertain outcome.
With the pace that the good homes are selling in early 2012 due to a heightened demand and greatly reduced inventory (approximately 18,250 active property listings in the Arizona Regional MLS at the time of this post), it is also likely that you have either lost out on a property or five to competing buyers or become disenfranchised with the lack of choices.
Enter the Placeholder House.
You see, in recent years it has become en vogue for buyers and their agents to tie up a short sale while continuing to look for a more expedient and/or desirable option. Utilizing a standard AAR (Arizona Association of Realtors) short sale addendum, you don’t have to deposit earnest funds, complete inspections, pay for an appraisal or otherwise commit yourself to the transaction until you get the yea or nay from the seller’s lender.
In essence, you get to tie the property up for free. If something better pops up while the bank is going through its laborious machinations, you can bounce at a moment’s notice. Sounds like the perfect backstop, right?
Not so fast, my friend.
Wising up to the ploy, short sale sellers and their capable agents have taken to adding penalties to such indiscriminate escrow hopping. The shrinking inventory means that there is more competition from your fellow buyers on short sale properties, too. No longer do the better opportunities lie all over the market, waiting for an indifferent buyer to pick them. They are sought after commodities. As such, you can expect to encounter terms such as non-refundable earnest money placed in escrow upon seller acceptance of your offer (before it is submitted to the bank for approval) for the first 60 days (or until bank response, whichever comes first). Some short sale list agents have taken to demanding that the inspection period begin upon seller acceptance as well.
These are measures undertaken to tie you into the deal; they provide you with a vested interest in sticking around for an approval rather than discarding them for the first best alternative that comes down the pike.
If you enter a short sale transaction in 2012, it’s best you leave the placeholder mentality where it belongs: 2010.
Time to abandon the contractual hedging of bets and get back to entering a purchase agreement with the intention of buying a house, lest you get stuck in a purchase you only sort of want to make.
Short sales: they aren’t just for Real Estate philanderers anymore.