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Do sellers have the wrong impression of the short sale process?

By Steve Loynd

Managing Real Estate Broker with Alpine Lakes Real Estate Inc., NHRE# 02863

July 28, 2009 07:08 AM

A decline in current market value doesn’t qualify you for a short sale, you may have a case for a loan modification (if your ARM is about to go up) but just because you can’t sell the property for enough to pay off the note, wouldn’t in and of itself allow you to negotiate special treatment.

Here is a recent conversation I had with a seller (not a real name)

Client Keith: Hi Steve, thanks for bringing me the offer so soon after reducing the price to current market value…what do I do next?

Broker Steve: You have requested a short sale status from your lender right? And you have authorized the lender to speak with me about the transaction right? And you have a contact person I can begin to work with right?

Keith: Steve I know you told me to do all those things when we first listed the property, and I know they sent you my pay off statement. But no I have never asked them for a short sale status on the property…I was hoping you could do all that.

Steve: I can’t do anything until you request authorization for the lender to speak with me, and they will do nothing to help you without a hardship letter and full financial disclosure.

Keith: Well I’m really busy and I thought you were getting paid a commission to close the deal…why can’t you call my bank and do everything?

It’s just not that easy, you qualified for the note when you purchased the property and help isn’t given to those that have means to continue to pay.

The words “the sale is subject to the sellers lender accepting a short sale transaction” in the purchase agreement may keep you from being sued for specific performance…but it doesn’t guarantee the lender will let you off the hook.

Your Mortgage Company is going to want to review your tax returns, retirement funds, income, assets, bank accounts, stocks, bonds and any other properties you may own to determine if you have a case for hardship. And the decline in value to a level below what you owe on the note has no bearing on your ability to continue to pay or to liquidate other assets to come up with your own shortfall.

Owing more than your property is worth doesn’t qualify you for a short sale.

These transactions may be all the rage where you live but they are not a free pass to get out of paying what you agreed when you borrowed the money.

Hell if I were a stock holder in that bank I would want you to pay back the money you borrowed from "Us".

Steve Loynd, your white mountain N.H. real estate expert.

steve@alpinelakes.com / 800-926-5653

www.steveswhitemountainblog.com

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Sally Dunbar

Lyon Real Estate, Fair Oaks CA (Sacramento Area) - Fair Oaks, CA

Fair Oaks Realtor - Fair Oaks Homes for Sale

You tell 'em tiger....

Jul 28, 2009 07:28 AM

Kim Sellers

Lake Arrowhead, CA Coldwell Banker - Lake Arrowhead, CA

Lake Arrowhead Realtor - BRE#01412099 - Lake Arrow

Steve you are right on with a lot of this... I am working one right now that is going very smoothly so far, I put together the package for my seller, just had him sign an auth and new short sale listing and the banks have been easy to work with, almost done with it.

Jul 28, 2009 07:38 AM

Steve Loynd

Alpine Lakes Real Estate Inc., - Lincoln, NH

800-926-5653, White Mountains NH

Kim...It really is a pleasure to work with sellers that do what you ask, the ones that think their problems are going to go away like magic are living in LaLa land.

Jul 28, 2009 07:58 AM

William Feela

WHISPERING PINES REALTY - North Branch, MN

Realtor, Whispering Pines Realty 651-674-5999 No.

With all the privacy rights plastered all over the TV, radio and prints ads, you would think people would get that we can't just look into their personal business.

Jul 28, 2009 10:50 AM

Steve Loynd

Alpine Lakes Real Estate Inc., - Lincoln, NH

800-926-5653, White Mountains NH

Bill...We can do a lot of things to help out a seller or a buyer..we have the tools, but your client needs to be willing to help themselves as well.

Jul 28, 2009 12:44 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Steve working with a Realtor who knows what to do when it comes to short sales is a big plus, but even a Realtor that is an expert with short sales can't do much if the Homeowner is not willing to do what he is told to do. You tried..

Jul 28, 2009 12:48 PM

Satar Naghshineh

Satar - Amiri Property and Financial Services Corp. - Irvine, CA

"Broker Steve: You have requested a short sale status from your lender right? And you have authorized the lender to speak with me about the transaction right? And you have a contact person I can begin to work with right?"

That comment makes no sense. When you meet with your client and you come to the conclusion that a short sale is right for your client, you then either make another appointment to gather everything or do it right there. It's best to get everything in one setting before they change their mind or learn from you and then hire cousin Joe.

Jul 28, 2009 05:36 PM

Steve Loynd

Alpine Lakes Real Estate Inc., - Lincoln, NH

800-926-5653, White Mountains NH

Amiri...Your point is correct, but when the client lists for a number that get the payoff completed, lives 3,000 miles away and then decides to drop the price 4 months later to the price of the most recent sale, and then he is below his principal amount of the loan, you are working on a short sale listing well after the original listing was put on the market.

Jul 29, 2009 02:20 AM

Cathy McAlister

Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA

Sacramento DRE#00648507

Your point is well taken. The seller has got be in for the long haul and carry their share of the load. Otherwise, it just doesn't work.

Jul 29, 2009 04:07 AM

Satar Naghshineh

Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Ohhhh...You and I must have the same seller. Which reminds me to re-email him all the paperwork for him to sign.

Jul 29, 2009 01:11 PM

Steve Loynd

Alpine Lakes Real Estate Inc., - Lincoln, NH

800-926-5653, White Mountains NH

Amiri...If you come up with a good concise letter, that doesn't come across as too insulting or condescending forward me a copy to use as a future template...There should be a boiler-plate response to these sellers that just don't get it. Steve :o)

Jul 29, 2009 01:20 PM

Sidney Jimenez

Keller Williams - Miramar, FL

CDPE, Short Sale Expert, 954-665-9449,

STEVE,

Depending on where you live it might be a time saver to try and pick out those properties that might fall into the Short Sale category. You should determine the price it will take to sell the property and have that in mind irregardless to what the eventual list price is.

I always walk into an appointment assuming it's an upside down transaction and I get a Third Party Authorization signed, even before the listing agreement. As soon as I can get clearance, I will call the lender and get a payoff number...with those two numbers (price to sell & amount owed) you can clearly see if the property is heading towards that eventual point of a Short Sale.

If so, get all the docs before you list the property...There is no more frustrating position than to do all the listing work and then get caught with a non-cooperative client when it matters the most.

Jul 30, 2009 04:44 AM

Steve Loynd

Alpine Lakes Real Estate Inc., - Lincoln, NH

800-926-5653, White Mountains NH

Sidney...It sounds like the pre-emptive strike works well for you, I have 4 going right now and all but one was advance scouted. You have the right idea.

Jul 30, 2009 09:57 AM

Sidney Jimenez

Keller Williams - Miramar, FL

CDPE, Short Sale Expert, 954-665-9449,

STEVE

I think the key is to try and systematize the work so that you can try and cancel out the surprises as much as you can. If there is something that frustrates you then you can create a counter measure to minimize from that frustration to return.

Jul 30, 2009 10:16 AM