Last week we got an offer on one of the really “rough” properties that we have been marketing for months. This property needed $20,000-40,000 according to the estimates we got. The property had tons of showing but no offers because it needed too much work for most buyers. However, we found an investor willing to do the work and saw the “Diamond in the rough” that most buyers could not see. Don’t forget about investors as buyers when you can get a deep enough discount to make it worth their while.
Last week we covered the stages of foreclosure in Michigan. Now that you’ve got this as a background, this week I want to cover when it doesn’t make any sense to even try for a short sale.
Why not try? In general, it makes no sense to try in either of these cases:
1) The lender is not going to consider a short sale.
2) There is not enough time to find a buyer, negotiate a short sale and for that buyer to be able to close.
Let’s cover both…
One: No Short Sale During Redemption
Who doesn’t short sale during the redemption period? That seems to be a moving target. At this time, if it’s a government-backed loan (FHA, VA, USDA), a short sale is out of the question during the redemption period.
Two: No Time To Close
The closer a house is to the end of the redemption period, the more you have going against you to get the house sold. One reason is the lender is less motivated to take a discount off of fair market value as they will get fair market value as soon as they get possession.
That risk aside, you need to be sure you leave enough time to find a buyer, negotiate a short sale, and allow the buyer time to close. This has to be your call for how late in the redemption period you are willing to take on a new listing. Personally, unless I believe only a very small discount is needed, I won’t take on a new case unless there is at least 3 months left in the redemption period.
How do you know the end of the redemption period? Order preliminary title work and see when it states the end of the redemption period is. Remember the new Michigan law I discussed in the last newsletter? Even if the lender published a 12 month redemption period, if the lender is on top of things, they could drop it down to 6 months because of the law change.
I got a call from Lenny who owns a campground which is in foreclosure. Did you know that you can do short sales even on commercial properties? The rules are pretty much the same, the numbers are just bigger. In this case, he has enough time and equity to find a buyer and pay off his debt so he doesn’t need our help with a short sale. But if this wasn’t the case, we would help him just like we help the people with residential properties in foreclosure.
Do you have any listings like this?
Do you have clients in Lenny’s situation but with no equity? Give me a call and we can discuss how we can solve this problem for your client while making sure you get paid. Don’t lose the listing and your marketing dollars to a foreclosure.
Once you’ve decided to take on a new client who needs a short sale, one of the most important steps in the entire process is pricing the property “right”. Since this is where Realtors® drop the ball most often, you’ll want to watch for the next newsletter.