10 Issues with Short Sales. Do them right - or don’t do them at all
Yesterday I listened in on a webinar that was conducted exclusively for Short Sale & Foreclosure Resource (SFR) Certified Members, so being a member myself I said I better tune in maybe something new has developed. The hour long webinar primarily focused on the top 10 issues. I have to say I really wasn’t surprised.
DON’T DO THEM if you don’t know what you’re doing. It’s just that plain and simple. In order to know how to do short sales you have had to work them and close them successfully, period. Short sales takes experience and a know how with someone who has nerves of steel.
I choose to work them, as long as I know I can help you. Some situations are easy and some are not. Many banks have come a long way and some can just be plain difficult. Nonetheless, there is a certain etiquette that each lender will want you to partake in. Now this does not mean you shouldn’t challenge them because the first sign of weakness you are basically done. So ask yourself...
1. Do you have enough time? Do a lien search and Are you in a recourse state?
Not much you can do if they have a scheduled auction date that is in the next few days. If you are 100% confident you can stop the sale, or feel its worth trying, go ahead, however, ensure you inform the sellers that you can’t promise them that you will.
Get the title company to do the lien search. You should have this done because you have to submit a preliminary HUD-1 anyway. There can be all kinds of liens attached to the home. HOA lien, Mechanics lien, tax lien. These liens take a while to sort out and there is nothing more worse than a week away from settlement and you find out these liens are there.
Need to understand how deficiencies work and federal tax ramifications. Your sellers need to consult an attorney. Seller cannot just walk away without repercussions.
2. Submit Fannie/Freddie 710 Form (if applicable) Form 710
A lot of this information you are going to need anyway so turn it in.
3. Be aware of fraud and creating waste
Sellers getting cash from buyers. No, No and No...you can’t do that. A good example would be if an investor may want to purchase your home and offer you cash. Any dealings outside of the lender’s authorization is not allowed. Purposely destroying the property. You go right ahead and take the furnace, take the HVAC system, take the cabinets and see what happens. The lenders are starting to come after you. If I were you I’d leave it alone.
4. Price It Right
That does not mean price it based on what the sellers owe, come on do your CMA with a BPO attitude. I would just price it at market value, some price it at the low end, just don’t underprice.
Market the property like any other property. That means you can hold an open house if you want. Disclose in the MLS that it is a ‘short sale’.
5. Prepare the Buyer
Preapproval or cash. You are qualified right? You surely won’t submit an offer and you didn’t get preapproved, right?
6. Timeframe. How long are they willing to wait, that is the answer to the question. It's not forever:) Ensure they are going to hang in there for the long haul. You really can’t do much if they change their mind, because they can, however, do the best you can to figure that out. It is a contract and just getting your earnest money deposit back may not be that simple.
Don’t go submitting multiple offers on other homes just in case you don’t get that one. Hmmm, can you buy both if that should happen?
7. Negotiate the best contract
Negotiate the best contract does not mean submit multiple contracts to the lender. Why would you do that? Price, Earnest Money, Home Inspection, Preapproval, Attorney Approval are all things to consider. I recommend the home inspection is done BEFORE lender approval. Yes, some will have an issue with that, however, prepare the contract with less contingencies. Look at it from the bank’s point of view.
Submit a complete package...please. That means cross your t’s and dot the i’s. Everything single thing that is asked, needs to be submitted at ONE time. Incomplete pkgs will be put to the side. Just because you submitted a pkg one way before, doesn’t mean it will be done the same again. It could be the investor asking for it, not the bank.
9. The Lender is NOT your enemy...I should tread lightly with that statement
No really, don’t be adversarial. That won’t get you anywhere. Average large lender negotiator is handling anywhere from 150-175 transactions at one time...I know, I know...
We got to do lots of it, sometimes on the phone a few times a week with the lender. It’s what we HAVE to do to help our clients.
So do them right - or don’t do them at all
Serving all areas of Prince William, Fairfax, Stafford, Alexandria, Arlington and Spotyslvania Counties. Guiding you through the process of purchasing or selling residential property.
Cheryl Thomson, Realtor ® | 703.216.5635 | firstname.lastname@example.org | Buyers Advantage Real Estate Corp | 4004 Genesee Place, Suite 113, Woodbridge, VA 22192