Short Sales from  the perspective of the Seller, Lender, Listing Agent, Buyer, Investor, and Buyer's Agent.

Listing Agents Perspective:

I am going to start out from the perspective of the Listing Agent.  First not all sellers are going to divulge to you that they may be short and some may not even know that they will be short.  At the listing appointment or shortly thereafter it is the listing agents responsibility to prepare with the seller a seller's net sheet.  This will disclose to the seller the costs associated with the sale (real estate commissions, pro rata taxes and HOA fees, transfer taxes, escrow or attorney fees, title insurance, home warranty, repair estimates, transfer disclosures, HOA transfer costs, etc.).  Many sellers are not aware of many of these items.  This is the time to obtain their current mortgage or trust deed balances on firsts, seconds, and maybe even thirds.

Prior to this meeting contact your preferred title insurance company and obtain a preliminary title report.  This will show any mechanic or other liens on the property as wall as tax encumberances.  You can ask the owners or check with the County or City to see if property taxes are paid current to date.  Do the same if there is an HOA.

I have an Excel template that I input to and it cranks out the results.

I have a good partnership with an escrow company, so if I find that they may be short I have them prepare a preliminary HUD-1 so we know more precisely where they stand on the shortage

Many agents avoid this important step, either because they do not want to lose the listing by being frank or they feel embarrassed delving into other's financial matters.  Thus a short payment may not be recognized until the parties are into escrow.  Then it is usually too late to work things out with the lender.

This is a critical first step.  If it is to be a short sale listing, say so on the MLS.  You do not want buyers or buyer's agents to be surprised.

Now, here is how a short sale agent excels.  Unless the seller has already been negotiating with his or her lender, the lender may have no knowledge that this may be occuring.  The listing agent needs to get an authorization letter from the sellers that allows him or her to discuss this matter with the lender.  Otherwise it is privaliged confidental information that they will not discuss with you.

Next, get the documentation together to present to the lender.  This could include:

• Appraisal on the property - an appraiser friend may do this for free or at a minimal cost.
• CMA - you want it to be low, even if the initial listing price is higher.  You will be negotiating with the lenders loss mitigation people so select lower end comps, but be honest since you may need to justify it.
• Contactor's bids for repairs - obviously you want the highest, but keep it in line with the market rates.
• Hardship documentation from the sellers - generally no other assets or income.
• Preliminary HUD-1

The next step is to contact the lender.  This may take some time sice loans are sold.  You need to find the current note or mortgage holder and the appropriate department.  Talk to the loss mitigation person and fax to him the authorization and other documents.

Ideally you will get him or her to buy into the short sale and establish the revised listing price.

I will continue with other perspectives in Part V.

*It should be noted that lending and foreclosure practices and laws vary from state to state.  This posting is based on the laws and practices of the State of California.  Although they are similiar throughout the United States, there are differences.  There are also differences between Trust Deeds and Mortgages, although we collectively all refer to them as mortgages.  In California we use Trust Deeds and do not use Mortgages.  Most of the western states use Trust Deeds, however the eastern states generally use Mortgages.  The redemption period during a forclosure is different with Mortgages.  Also the lenders ability to collect delinquencies varies with the type of loan and the choice of the foreclosure process.  To collect delinquencies the lender must use a judicial foreclose.  Few lenders do as this takes more time and involves additional legal expenses.  Most use the non-judicial forclosure method.  Also with purchase loans taken out at the time of purchase, delinquencies cannot be collected.  They can be collected on refinance loans.  On a short sale the delinquency is waived by the lender. Thus there are differences even in California.  Please consult with a real estate attorney and CPA in your state for specific details.

Mike Stankewich, Realtor, Huntington Beach, Orange County, California

ZipRealty, Inc.

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