There seems to be a lot of short sale confusion as to when short sale properties should be listed as pending in the MLS.  The discussion seems to be around when the offer is truly accepted.  Is it when the seller accepts or the bank approves the terms of the sale? 

The answer is fairly simple.  The term 'subject to lien holder approval' is a contingency only.  It is no different than a building inspection contingency, for example; just one of the terms of the contract should the Seller and the Buyer come to agreement.  The seller is the owner of the property and the only one required to sign the contract, the bank does not yet own the property but only holds the power of agreeing to accept less than the full amount owed.  In some cases, the seller may even bring money to the closing to satisfy the lenders interest in order to get clean title.  In the cases where the seller doesn't have the money to satisfy the lien they, (or their agent or a third-party mitigation company), must get the lender  to accept less than the full amount owed, resulting in a short sale.  This issue is no different than getting the buyers lender to agree to lend money to purchase.  The property is under contract and may be marked pending while the lender does their review.  So in the case of the short sale at the current time it must be marked pending but can be flagged ‘current; continue to show' and back-up offers can be accepted and the Seller chooses whether or not to submit those to his or her bank. 

Our MLS recently made the change to include a new status that will continue to allow the Seller to market their property.  The status is called CSS - Current Short Sale Continue to Show.  Provided the Seller has not accepted language in a contract that says they will cease marketing and taking offers, a short sale that goes under contract may have this status.  The new status better reflects the short sale situation as many times a Buyer will not have the patience to wait and this new status will hopefully encourage more back-up offers.  This also allows the listing to continue to feed to all the websites and therefore keep it as an option to the general public out looking for a home.

In addition, the Code of Ethics Standard of Practice 3-6 requires that accepted offers be disclosed: "REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation."  This new field and policy with MLS will also allow the full disclosure necessary by our Code of Ethics.

I have had many people ask me, how do I know if my agent knows how to do a short sale?  I usually answer with the following:

1. How many short sales have you successfully closed?  (I have closed 30 in 2 years.)
2. How many listings do you currently have that are short sales? (I currently have 29 and appointments and referrals for 5 more.)
3. How many of these listings are currently under contract?  (I have 17 under contract.)
4. Do you use a loss mitigation company to handle the negotiations?  (A company that specializes in doing what they do best and that lets me do what I do best - sell your property.  The answer to this one is yes for me. MH Solutions handles all my short sales: www.mhsolutionsme.com)
5. Have you ever been through a short sale yourself personally? (Yes, I have, which gives me a greater understanding than I would have had otherwise; I know exactly how it feels and what you are going through.)
6. What is your success ratio in closing short sales?  (Mine is between 85-90% success rate.)
7. Do you have any special certifications; in other words have you done any specialized training in this area? (I am a Certified Distressed Property Expert (CDPE). )

Don't be afraid to ask a real estate agent what their credentials are!  Your credit and success is in their hands literally and figuratively.  If your agent doesn't know what they are doing you could jeopardize your success in getting your bank to accept a short sale offer on your property and keep you from foreclosure.  Take control of your destiny and your short sale.

These creditials also apply to finding a great buyer's agent who can help you find the good deal that a short sale is but still be able to evaluate whether the listing broker knows what they are doing as well.  The listing broker is a crucial piece of a short sale equation.  If they don't know what they are doing it may be a shot in the dark that the whole transaction will turn out successful for all involved!

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In a short sale situation there has been a lot of confusion as to whether or not more than one offer should be submitted to the bank.  Ultimately that decision is the property owner's decision alone.  All we can do as real estate agents is advise our seller clients of the ramifications of submitting more than one offer to a lender.  In my experience (successfully closed 26 in the past 18 months) it is in the Sellers' best interests not to submit more than one offer at a time to a lender.  Due to the overwhelming workloads at the banks in handling short sales when an additional offer is submitted it tends to bog the process down and can even in most instances start the whole thing over from scratch!  It's important to have a discussion with your seller clients as to the possibility of this happening.  In most instances my sellers have decided to hold additional offers as back-up offers if the buyers are willing to agree to this situation.  If the seller has asked his bank, the bank more than likely will tell the seller that they want to see all offers.  In this case they have no choice but to do so.  Only in that instance is it recommended that multiple offers be submitted.  Be prepared for further delays and fits and starts in the process should you be forced by the seller clients or the bank to submit additional offers.  The other thing to keep in mind with your seller clients and to relay to them is that if they submit an additional offer, the 2nd buyer may not stay in the deal whereas the first buyer has already been there for a length of time.  There is no guarantee that second buyer will stay on board so there is a huge risk that your seller client is taking on.  Bear in mind the one downside to a seller not submitting a higher offer would be the potential of a deficiency judgment being more if the lesser offer is the only one put through.  My favorite line when dealing with this sticky issue is to suggest that my seller client consult with an attorney in dealing with all the ramifications.  Most of the time the Sellers simply tumble to the idea that they would prefer to only take back-up offers and not submit additional offers.

This blog is to discuss the new CSS status in MLX.  There is a lot of confusion about what it is and when to use it.  The CSS status should be used when a short sale goes under contract but the property owner wants to continue to market and accept further offers.  This status indicates to all parties involved that there is definitely a contract in place.  The new status is a better service to the Sellers we represent when we are listing agents for a short sale.  This status allows the listing to continue to feed to websites through ListHub including Realtor.com.  One of my biggest frustrations as a short sale listing agent was the inability to truly continue marketing and securing additional offers for my Seller clients when we were required to move an under contract short sale to the Pending status.  The buyer agents do not search Pendings for new listings for their clients nor does the listing upload to Realtor.com and other websites once placed Pending therefore eliminating the bulk of the marketing needed to continue actively marketing and procuring additional offers.

As the market continues to swing in the direction of more and more people defaulting on their mortgages there are issues that are being encountered with the buying and selling of short sales.  This blog is devoted to addressing those issues and hopefully making the process easier for agents doing short sales or helping buyers buy short sales.

Title issues:  previous liens continue to be an issue.  If you are thinking of selling a home that is going to be a short sale I highly recommend doing a preliminary title search to turn up any and all liens at the time you list the property.  If you are unsure how to get a lien released I would suggest seeking professional help.  I use the company MH Solutions, Inc. out of Falmouth.  This company has been in existence for 2+ years and I utilitize their services with all of my short sale listings.  I don't have the time to chase these liens down nor do I wish to work with the banks directly.  That is not my forte so I always utiltize their services when helping clients do a short sale to sell their property.  Their fees are extremely reasonable and more than worth the money to have so many successful short sales happening at one time.  (We average a success ratio of 7 out of 10 closings.)  Strike up a connection with your favorite Title Company (mine is Bay Area Title in Portland) and pay the extra money to do these title searches ahead of time.  It will save you a lot of time and money.

Building inspection surprises: It is well worth the money to find a connection with a terrific building inspector that can "pre-inspect" the property ahead of time so you can disclose all issues and therefore truly have it be an "as is" sale where there is no going back to the bank to ask for more money off after the initial offer.  Going back to the bank for more off will in all likelihood result in a lengthy (months!) delay of the final bank approval.  Many building inspectors are willing to do these preliminary inspections for a variety of pay structures - some will wait for close, some will do the inspections and accept payment from the future buyer, many will discount if they know this is going to be an ongoing relationship between you and them.

Sellers unknowingly submit loan modification packages at the same time:  It is imperative that you are clear with your Seller that should they change their minds about doing a short sale that they let you know at anytime.  I had a short sale go bad because at the last minute the loan modification department talked to the short sale department and everything came to a screeching halt while the Sellers tried to decide which way they were going to go. 

There are but three of the issues I have encountered.  I will be blogging more regarding these topics and would welcome and thoughts/questions on this topic.

Short sales in the State of Maine can be done one of two ways.  They can either be retail short sales or discounted short sales.  The first, retail short sales, can involve just the bank, the real estate agent, the sellers and/or a loss mitigation specialist.  The second, discounted short sales, typically involve the sellers, the bank & an investor who is mitigating the debt and often times a real estate agent.  There are many folks out there in the market right now, including agents, that are trying to negotiate short sales with banks that are not qualified to do so.  In some cases, they can make things worse for the homeowner and can basically insure that the property will be foreclosed upon.  At best there are professionals, who belong to organizations like the NAFPP (National Association of Foreclosure Prevention Professionals), who have been well trained in helping a consumer out of foreclosure and can help repair the consumer's credit and offer them a new start. 

In my opinion as a professional, it is in the best interest of the general public and real estate agents everywhere to involve a professional.  Not only is negotiating extremely time consuming but if the paperwork is not submitted correctly to the banks and consistent follow-through applied, it can lead to the consumer being foreclosed upon in a situation that could have had a different outcome.  I currently work with the Maine NAFPP representative, his name is Doug Solman and his company is M.H. Solutions, Inc.  Doug is the ultimate professional, who also cares about the people that he helps.  He is dedicated and goes above and beyond in many situations.  It's not about the money with this guy!  He is truly dedicated to helping people out of a very stressful and sad time in their lives and put them back on their feet again.  His organization gives him the best tools, including financial & credit repair advice.  Their situation is handled with dignity & grace for people that are in a very uncomfortable and embarassing situation.  Many times consumers are in this positions due to one of the 3 D's:  Death, Divorce or Disability.  These situations can happen to anyone.  I have watched Doug negotiate thousands of dollars off a mortgage balance, get folks out of a bad place and help them back on their own feet again.

The bottom line for people facing foreclsoure, or agents who have clients upside down on their mortgages or in foreclosure there is help.  My recommendation is not to try to handle it yourself but to go to a professional like Doug Solman.  If you would like further information about Doug & his organization I would be happy to put you in touch with him.  If you know someone that could use his services please contact me and we can help them out!