Best way to deal with this is NOT TO TAKE YOUR CLIENTS TO A SHORT SALE LISTING IN THE FIRST PLACE!!!

Michael,

I sorry to see that you feel this way about it.  Most Agents have a very short sided way of thinking when it comes to Short Sales.  You know, we train so many Buyer's Agents how to pre-qualify the Listing Agent before offering on the listing.  If the Listing Agent doesn't know what they're doing or they don't have all their ducks in a line, then offer to guide them through the process and pick them up as a life-time referral source for all of their Short Sale listings in the future.  You see, walking away from it is the exact opposite of what Agents should be doing.  Everywhere you turn in a Short Sale, whether it be from a Buyer's or Listing Agent's perspective, there is such an enourmous opportunity to build one heck of a commission generating machine!  Most Agents don't have the necessary tools and knowledge to think out-of-the-box and to build a great business in real estate, especially in Short Sales!  Short Sales, for the most part, will be a very large part of our market the next few years.  Don't run away from them.  Learn to take advantage of the opportunity that lies right under your nose!  100% of your referrals can and will come from other Agents!

I encourage you to see things the way we see it.  You may increase your revenue earnings 3 or 4 times over.

Michael Spickes

CEO, America's Home Rescue

www.ShortSaleSolutions.biz

Thanks for your paradigm Michael. I understand you are trying to make a living and this is your way of doing it but the people you are helping in short sales is yourself and the new lender. Please take a moment and read this:

The Impact of Short Sales / Foreclosures on Credit Reports

Sellers may wonder whether letting a property go into foreclosure would be easier and smarter than going through a short sale. With a foreclosure, and depending on state laws regarding foreclosure, a seller could stay in the property, essentially rent free, for four months to a year before being forced to vacate. But that fact alone does not mean a foreclosure is better.

Whereas a short sale involves offering the home for sale, generally listed through MLS. Potential home buyers will make appointments to view the home, some will make lowball offers, agents might hold open houses and, in general, a seller's life will be disrupted, all in the hopes that a buyer will buy the home.

Basics of a Short Sale

Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.

Not all lenders will negotiate a short sale, and that is why a real estate agent or a lawyer can be a tremendous help by contacting the lender's loss mitigation department to find out.

You can't just wake up one morning and decide you're going to sell your home at a loss by asking for a short sale. Typically, lenders won't even consider a short sale if your payments are current. Lenders will be more agreeable to negotiation if your payments are in arrears. Plus, if you have cash assets, the lender might try to tap those accounts. Doing a short sale is not for the faint of heart.

How is the Seller's Credit Affected?

According to David Steep, division manager at Vitek Mortgage, sellers will take as big a hit on their credit report by going through foreclosure as giving the lender a deed-in-lieu of foreclosure. Steep says the points lost on a FICO score are as follows:

•·                                 Foreclosure or Deed-in-Lieu of Foreclosure
Both of these solutions affect credit the same. Sellers will take a hit of 200 to 300 points, depending on overall condition of credit. This means if a seller's FICO score before foreclosure was 680, it could dip as low as 380.

•·                                 Short Sale
The effect of a short sale on a seller's credit report is identical to that of a foreclosure. The ding on credit will show up as a pre-foreclosure in redemption status, Steep says, which will result in a loss of 200 to 300 points. This means a short sale with a previous FICO of 720 will see it fall from 520 to 420.

Catherine Coy, a mortgage broker in southern California, agrees. "The effect on a consumer's credit report -- foreclosure vs. short sale -- is the difference between being hit by a train or a bus," says Coy.

Waiting Period Before Buying Another Home

•·                                 Foreclosure or Deed-in-Lieu of Foreclosure
Steep says a seller who wants to buy another home after foreclosure will end up waiting about 36 months before a lender will offer any kind of interest rate that makes sense.

Coy says, "A notation on a consumer's credit profile of 'settled for less than owed' (short sale) precludes the consumer from obtaining an institutional loan for 24 to 48 months, depending on the lender / program and regardless of FICO score."

For more information, see the Fannie Mae Selling Guide online. Click on the PDF link in the yellow box and see page 75.

•·                                 Short Sale
Some agents say the good news for short sale sellers is the wait is much shorter before buying another home, but that belief is a falsehood.

Can a seller buy again under two years? Not true, says Coy, "It's an utter myth that a consumer can 'can buy again in about 18 months at a good interest rate.' Fannie Mae guidelines require 24 months' seasoning, and there's no way to get around this."

Short Sale / Foreclosure Deficiency Judgments

The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, equity loans and refinances are. Some other states have laws regarding personal guarantees, which could also result in a deficiency judgment, if the home owner is held personally liable for loan repayment.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, talk to a real estate lawyer.

If you're a seller trying to decide whether to let a home go through foreclosure versus attempting a short sale, salvaging your credit may not be an advantage to doing a short sale. Coy says that according to "Score Factor Code #22, there's no credit score advantage to a short sale over a foreclosure." But seek legal and tax advice before making that decision.

So you can see Michael that as a Realtor it is my fudiciary duty to advise my client that Short Sales are not better for them just an option and in my opinion not a good option.

11 Reasons for Not Buying a Short Sale

Short Sales happen when home values fall and sellers do not receive enough cash from a buyer to pay off their existing mortgages, providing lenders agree to take less than the amount owed to them.

On the surface, it may appear that a short-sale buyer is getting a good deal. Although a slim margin of short sales may be profitable for a buyer -- because there are always exceptions -- much of the time, a buyer would be better off buying a home that is not in default.

You are unlikely to hear real estate professionals tell you that it's not a good idea to buy a Short Sale. In part, that's because real estate professionals profit on short sales.

Everybody makes money except the sellers and buyers. Realize, too, that listing agents might push sellers to list as a short sale, because if the sellers went through foreclosure, the listing agents will not get the listing.

Here are 11 Reasons Why Buyers Might Not Want to Buy a Short Sale:

1) Sellers Paid Too Much.

If a home sold for $500,000 a few years ago and is now for sale at $400,000, that doesn't mean the buyer is picking up $100,000 of equity for free. It means the seller paid too much in a rising market and now the market has fallen. It means the seller has no equity.

2) Sellers Borrowed Too Much.

Banks that were eager to lend money in appreciating markets sometimes allowed borrowers to over-mortgage the home, meaning the borrower's loan balance exceeded the value of the property. Appraisals are subjective, and not all appraisers will place the same value on a home. Although against the law, some appraisers are pressured by banks to appraise at the amount the home owner wants to borrow.

3) Stringent Qualifications.

Inexperienced or unethical real estate agents might push a seller into considering a short sale when the seller does not qualify for a short sale. Sellers must prove a hardship and submit evidence of the hardship to the lender for approval. Some agents list homes as short sales without ever talking to the lenders or pre-qualifying the sellers.

4) Homes Sell at Market Value.

Lenders aren't naive or unaware of the value of a home. Lenders will insist on a Comparative Market analysis, known as a CMA, or broker price opinion, known as a BPO. If a lender believes a better price can be obtained by taking the property back in foreclosure over a short-sale offer, the lender may hold out for a higher price. That price will be close to market value. Lenders accept short sales when the home is worth the short-sale price, which means market value.

5) Homes Sell "As Is".

If a mortgage company agrees to a short sale, it is most likely also paying the closing costs in the transaction. Lenders ask buyers to purchase the home in its present condition. Lenders typically will refuse to pay for:

•·                                 Suggested repairs disclosed on a home inspection.

•·                                 Pest inspections or work necessary to issue a clear pest report.

•·                                 Roof certifications or roof repairs.

•·                                 Home Protection Plans for the buyer.

•·                                 Deferred maintenance.

6) Length of Time to Close.

Depending on when the Notice of Default was filed, the lender's back-log of foreclosures and how much paperwork the seller has already submitted, it could take anywhere from two weeks to four months to get a response on a purchase offer from a lender. In addition, if two lenders are involved because there are two loans secured to the property, it could take longer to satisfy the demands of the second lender.

7) Lenders Can Change Conditions.

Some lenders reserve the right to renegotiate the terms of the short sale at the last minute. If the market changes, new laws pass or new information crosses the lender's desk, the lender can attempt to change the terms of the contract. Lenders generally have lawyers at their disposal, and ordinary buyers do not.

8) Lenders Discount Commission.

I don't know of any lenders who are paying traditional real estate commissions to real estate agents. They will want a discount. Moreover, agents end up doing two to three times the work of a conventional transaction and don't appreciate getting paid less to do more work. If you have agreed to pay your agent a certain percentage under a buyer broker agreement, you could be liable for the difference between what the lender will pay and what your contract stipulates, if your agent refuses to waive the difference.

9) Higher Buyer Closing Costs.

Because lenders rarely will pay for any extras, like a seller would be willing to do, if you want any of those extras, you will pay for them yourself. Sometimes lenders will refuse to pay for standard seller closing costs such as transfer taxes, too. If you want specific inspections, you will probably pay for them out-of-pocket.

10) Lose Control of Transaction.

If you need to close escrow by a specific date, lots of luck with that. A short sale home closing process takes an indefinite amount of time. The seller's lender calls the shots, not the buyer nor the buyer's lender. If you are trying to close escrow concurrently with the sale of your home, it might not happen.

11) Little Seller Motivation.

When the seller discovers that the short sale effect on credit is identical to that of a foreclosure, there is little incentive for a seller to cooperate with a short sale. There is no benefit to a seller to consider a short sale and move out before the foreclosure is concluded, except for peace of mind that the nightmare is over.

Michael,

Again, I am sorry that you see things this way.  Some of the information you have pasted above actually isn't correct.  I'm not saying this to say you're wrong.  However, much, in fact, most of the information posted by the media, mortgage brokers, and Agents regarding Short Sales are inaccurate or incorrect, because very few people, except those who have a great deal of experience and those who have documented every single angle of the Short Sale process, have a clue.  After receiving confirmation from mortgage brokers nationwide, the difference in the hit a borrower takes on their credit for a Short Sale verses a Foreclosure can be upward of 200-250 points.  On the other hand, the underwriting process for a borrower who has previously participated in a Short Sale can be somewhat of a problem, especially how quickly they attempt to qualify for or buy another home.  You must know how to articulate and distinguish the difference between the two effects.

The bottomline is this.  Less than 2% of the education on the market on Short Sales is written by experienced Agents for other Real Estate Agents.  For those Agents that we have trained, nearly all of the issues you pasted above don't become an issue, because the experienced Agent knows how to do the right things in order to stay one step ahead of the many frustrations and obstacles that most of the other Agents are experiencing around the country, which lead to articles like the one you pasted above.

Once again, I would encourage you to completely shift the way you see and follow the news surrounding the Short Sale process and its effects.  The loss mitigation reps see it their way.  The Agents see it another way.  The mortgage brokers see it their way.  The media see it another way.  In the end, while everyone is too busy pointing fingers, the person who is harmed the most is the homeowner that is going to foreclosure!

Michael Spickes

America's Home Rescue

www.ShortSaleSolutions.biz