Aviod Being Blind Sided by Short Sales

Short sales are difficult enough when you are prepared for them at your initial listing appointment. I have come across several listings where the agent and owner were unaware that their sale would require the underlying lenders approval to complete the sale. I know this sounds crazy but it is happening with ever increasing frequency as prices continue to fall.

A few simple steps can help you avoid this catastrophe.

1. When preparing for your listing appointment check the MLS records for the previous purchase price and date. This is often a good indicator since the majority of purchases in the last 3 years were for prices equal or greater than what the house is going to sell for now. Many of those purchases included 90% to 100% LTV loan. In the Northwest MLS click the property history link and look for the last sale and the price. Private sales will not show up here.
2. Next look up the property tax record in Realist.com. The records will confirm the last sale price and the underlying mortgages on the property. This can be confusing because it does not show which loans have been paid off and which have not. A property that appears to have three loans may in reality only have one. This source will show the initial amount of the loans.
3. Go to the public records look up on your county web site and compare the fulfillment deeds against the list of mortgages that show on Realist.com. Cross off any that have had fulfillment deeds recorded and what is left should be the remaining mortgages. Add up the remaining mortgages for the total outstanding debt amount. To increase the accuracy you can input the origination dates and amounts of the loan in the financial calculator and then take the amortized principle amount owing today.
4. Check the public records for Notice of Trustees Sale filings. If you find a NTS on the record go to the related documents link and check the recording number of the Deed of Trust against the records from Realsit.com to determine which mortgage is foreclosing.

Once you have done this you are prepared to figure out what the minimum price is that you can likely sell the property for and still net $1 or more on the property sale. With NTS mortgages I add 3% to the loan balance to estimate the arrears and penalties since it is taking 2-4 months for the lender to actually file the NTS.

Armed with this information you are prepared to meet with your clients and give them and honest assessment of what the house is going to sell for and whether or not a short sale may be required in order to close. If the amount owing is anywhere near 90% of market value be prepared to ask your prospective client for their most recent copies of all mortgage statements. Few people actually know the balances of your their mortgages so relying on their word is not good enough when balance are high.

These simple steps will help you avoid an embarrasing shortage at escrow and demonstrate your professionalism to your clients.

Ken Crotts

Broker, Certified Short Sale Specialist

www.kencrotts.com