Today at the office we had a class on how to list a house for sale when the owners cannot afford the payments any longer, or they will no longer be able to make payments after their interest rates reset. Also it could be said that they are upside down on their loans (where they owe more than their property is worth.) One process to remedy the situation could be a Short Sale. This is where we as agents get written permission to talk to the owner's Lender, or even Lenders, and ask (more like beg and plead) with them to accept less for their note than what they are owed. And now with the mess in the lending industry, form after form will be needed to even consider a short sale. A letter of Hardship from the owner's will also be necessary to demonstrate that they are unable to continue making timely or full payments on the note. So we as agents negotiate that instead of the lenders losing a ton of money foreclosing on the property, they might be willing to take a smaller loss on the Short Sale of the property. To do this, you will need to need to call the Loss Mitigation Department or what ever that lender calls that department, and find out if a short sale would be accepted. Recently, I became aware that even then, a lender may require a purchase contract to be written already. But to me, this to would seem like a catch 22. Because you would still have to go through the arduous process of  holding a short sale. And then any offer that does come in would still be contingent upon the lenders approval. In addition, many loans are what we call piggybacks (one loan usually to cover 20% and another loan to cover the other 80%) and have two lenders that may need to be contacted and negotiated with idea that a short sale might be in their best interests. I have heard that the lender in the second position is not always willing to be part of  short sale because they will probably end up with nothing or next to nothing on the note they have with the owners. One way out is to have your sellers offer them to pay back .25 cents on the dollar for that second loan. Or something more enticing to the lender. Moreover, foreclosing on the property means that they will not only be losing large amounts of money. They may also have a hard time getting more money to loan if their portfolio of REO's (Real Estate Owned property) is too large. I believe that a short sale may be the best avenue for the lenders to take because of all the hardships that they may encounter on the road of defaults. I do not believe that lenders would agree but this is my opinion for what it is worth.

On the buyers end, A short sale may not always be what they expect, even if the home is priced way below comps, it does not really mean that is what the lender will accept for the property. Sometimes listing agents who list short sales do so way below comps in order to get the offers rolling in. Again, that may not be what the lender is looking to accept. And that could compromise your legitimate, bona fide buyer to a deal that may never materialize. Even worse than that is if you do not know how to do short sales, and you are working with a buyer and you do not put a contingency in the offer, that it needs to be accepted by a certain time frame you may have done a disservice to your client. For example, (use what you and your broker agree on) but put something in writing to the effect of, the offer needs to be accepted by this date, and after that time the buyer has the right to cancel the contract. Otherwise, you may have just tied your buyer to that deal for long time, and they may still be obligated to purchase that property weeks or months down the road. If your buyers and sellers agree upon these terms for a short sale, or a short sale purchase, then we as agents must perform to our best and be aware of any potential problems that could arise. And who knows they may even get a great deal on a nice home.

In conclusion a short sale seems like more pain than the commission is worth, and for that matter in regards to a commision on short sales, the lender may ask that the commissions be fixed to below what you normally negotiate. For all the trouble that goes along with a short sale though, the poor souls who cannot make payments are worse off than a loss in a percentage point on a commission. They are losing a home, they may have to take a hit on their credit, and taxes cannot be ruled out either. This heartache is something I never wish upon anyone. Besides, if you take good care of your clients and help them out, you never know, they may be buying again sometime in the future. And I believe that if you take care of people, and show them they are more than a paycheck to you, the chances of them coming back to do business with you are very good. And they could become a great source of referrals because of the care and patience you had with them. So take care of your clients interests, and put their needs before yours. For what is worth this is only my advice and I welcome any advice or comments on what I have missed, because, I know there is a lot that is tied to short sales.