I was inspired to write this post by a thread I was following on Trulia where a buyer was buying a home in New Jersey and it was NOT disclosedthat the house was a short sale until attorney review. So now I must ask all you listing agents, are you asking the question(s) EVERY listing agent MUST ask their sellers?
Scenario #1, you're so happy you got the listing - at least until the sellers tell you the price you're suggesting based on your careful CMA just isn't enough. Why????? They owe more than that on their mortgage and/or home equity loans.
Scenario #2, you're so happy you got an offer on your listing (perhaps even a full price or close to full price offer) - at least until you present the offer to your sellers and at that point they tell you they owe more on their mortgage and/or home equity loans and do not have sufficient cash to bring to the closing table.
How did you get caught up in these two scenarios? You forgot to ask the MOST IMPORTANT questions when qualifying your seller to find out if they have enough equity to sell their home, pay off all mortgages, liens, home equity loans/lines, pay the broker commission, closing costs, attorneys fees, NJ transfer fees, etc. Do you have a mortgage? How much do you owe the lender? Do you have a line of credit, how much do you owe? Do you have a second mortgage, how much do you owe? Do you have a home equity loan, how much do you owe? In the current market, you MUST ASK these questions, and not be worried about offending the seller. On the other hand, the seller must be upfront and honest with their answers and not be worried about embarrassment. All this information needs to be upfront for ALL to see (i.e., DISCLOSURE = it MUST BE DISCLOSED TO ALL PARTIES), including prospective buyers and their agents.
Some think that only upscale homes are short sales, while some think only low end homes are short sales. A short sale can range from a million dollar mansion up on the hill to a one bedroom studio down in the valley. All a short sale is is a sellers that owes the bank(s) more money than their house is worth today. If someone bought their home in the peak of the market, most likely they are flip flopped. They are upside down with negative equity. It doesn't mean short sale sellers are deadbeats. It can be anyone, it could be your neighbor, your aunt, your doctor, it could even be you!!
As with everything else, you must remember to keep an open mind. If your seller tells you that they have negative equity but they have the cash to bring to the closing table to cover the mortgage(s), liens, closing costs, broker fees, New Jersey transfer tax, attorneys fees, etc than it really doesn't matter that they have negative equity but c.y.a. (cover your ass butt) and require the sellers to provide you with proof of cash funds sufficient to cover the entire sale of the house and all the fees and costs associated with such sale. (If they show you proof of funds and its a line of credit on the house you've listed....be afraid, be very afraid).
Just a quick note to buyers buying a short sale in New Jersey, per the Garden State Multiple Listing Service's "Revision to "Lender Approval" disclosure rule: Mandatory Disclosure of Potential Requirement of Lender Approval: Participants must disclose the potential requirement of lender approval when reasonably known to the listing participants. This disclosure must be made, at the discretion of the listing broker, in either the "agent remarks" or "client remarks" section of the listing. When the potential requirement of lender approval is disclosed, participants may also, at their discretion, advise other participants whether and how any reduction in the gross commission established in the listing agreement, required by the lender as a condition of approving the sale, will be apportioned between the listing and cooperating participants. All such remarks must be placed in the "agent remarks" section of the listing." To reiterate, if the property is a short sale, IF the listing agent ASKED the questions every seller MUST be asked and the seller answered truthfully, then the Garden State Multiple Listing Agent Report Agent Complete Report and/or the Client Full Report will disclose that the property is a short sale and lender's approval is needed. Your agent must disclose this information to you.
On the other hand, every seller who was asked the qualifying questions by their agent and were untruthful with their responses to their agent, and then who entered into, agreed to and signed the Garden State Multiple Listing Services Real Estate Listing/Commission Agreement is in violation of Paragraph 8, which reads: "Ownership, Liens and Mortgages. The Owner(s) represent that they are the sole owner(s) of the Property, the Owner(s) have the legal right to sell or lease the Property and that to the best of their knowledge they have Marketable Title to the Property. The Owner(s) further represent that after a sale at the Listing Price there will be sufficient proceeds to discharge all liens and encumbrances and to pay the Commission stated in this Agreement.
Maybe going to jail is a little extreme but had you asked the seller the right questions, you could use your get out of jail free card, sold the house and collected your commission. Am I right or do you really prefer to roll the dice?
Gina Chirico, Sales Associate
973-715-1158 (cell)
973-992-6363 ext 116 (office)
Gina.Chirico@PrudentialNewJersey.com
http://GinaChiricoRealEstate.com
****With deep roots in the Essex County, I service buyers and sellers throughout many Essex County communities and neighboring Morris, Passaic and Union Counties, specializing in the entire West Essex Communities (including Fairfield, Caldwell, West Caldwell, North Caldwell, Roseland, Essex Fells, Verona and Cedar Grove) and my hometown areas of Belleville, Bloomfield and Nutley.****
When Opportunity Knocks...Make Sure Gina Chirico is There to Answer Your Door!
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