06/09/2010 03:04 pm ET Updated May 25, 2011

Pity the Poor House Seller

If you thought the recent real estate market was unattractive, you'd better look away, as it's getting downright ugly. Pressed to their walls by their inability (and sometimes refusal) to pay their mortgages, scores of home sellers are listing their houses as "short sales." In reality, many of these deals should be called "poor sales."

In most short sale scenarios, home owners try to avoid the total annihilation of their credit scores resulting from foreclosure by entreating mortgage lenders to accept buyers' offers for less than the outstanding home loans. The plan is for all parties to give and take so lenders avoid acquiring more inventory, buyers get "deals," and sellers suffer less lethal credit hits.

However, the unsightly short sale truth is that most sellers expect the "give" to come on the buyer's side. Once an offer is made, the customary post-offer card playing commences. But in short sales, no matter what hand the buyer shows, the seller pulls the same ace out time after time. If the leaking roof needs repair, the seller refuses, claiming: "I have no money." If termites require extermination, the seller tells the buyer to bug off, declaring that there's no money to eradicate the pests. If a seller built a second story deck without municipal approval (to avoid paying taxes or complying with building codes, or both) the buyer's legitimate request for legalization is rebuffed by a seller contending he's too destitute to pay the fees and file the plans. Should the hot water heater or the refrigerator break before closing, the penniless seller will profess her poverty and refuse to make the repair. And if a stubborn tenant won't leave? A seller recently told my eager-to-close clients that she "was too low on funds" to evict the basement dweller!

I am well aware of how many sellers are truly impoverished, and how preferable a last-ditch attempt at a short sale is to losing a home through foreclosure. I have represented these sellers all too often. However, the short sellers that I am seething about have resources, yet have declined to pay their mortgages for quite some time. They justify their refusal to pay (and to maintain their homes) on the fact that they owe much more than they borrowed. They declare that they were "ripped off" when they bought the house or "taken advantage of" when they pulled equity out over multiple refinancings. I seethe when my clients encounter such sellers; they seek to reel buyers in to get themselves off the hook, without offering sufficient bait.

When I meet with clients in genuinely reduced circumstances forced to consider short sales, I counsel them to set up I can't pay -- do you still want to play? ground rules. Listings shouldn't just state "short sale;" they should proclaim the houses are "as is, as of closing." When negotiations begin, sellers should immediately make it known that they "will not improve, legalize, or repair anything." Sure, most buyers might recoil right away, but some will hang in. For those that do (lender willing), the reward for all are successful deals that close without wasted time or bitterness. And how refreshing it is to avoid hearing that never ending refrain of "poor, poor, pitiful me" sung by a tone deaf seller!