Over the past year I have been involved with approximately 100 short sale transactions in the Springfield Massachusetts area. (My real estate law practice is located in Springfield, Massachusetts. I have been practicing real estate law and conducted real estate closings for approximately 13 years.)  Many of my short sale transactions have come through successfully and I am happy to say that this week I have three that look like they are "ripe" for settlement.  In my experience, not all short sales are created equal and many are doomed to failure from the start. Others fail because of the "wrong pairing" of Buyers with short sale Sellers.  Following are a few guidelines for evaluating the likely success for a short sale from the Seller and Buyer's perspectives:

Seller perspective on short sale:

1. How many creditors and what kinds of liens are we talking about:  Many Realtors get hung up on the numbers involved in the short sale.  My mantra in these affairs is simply: Is the property being sold for market value.  That is all that matters.  I do not care how much of a haircut the lender is going to take; that is their reality in the cycle of foreclosure, buy back, hold, and resale.  The Lender will not get market value and is usually happy to get out of the mortgage at market value.  The problems come when there are multiple mortgages or executions, or attachments for unresolved legal matters.  These types of liens can be extremely problematic.  If there is unresolved litigation and an attachment on the property, it becomes extremely unlikely that a short sale involving the lien holder receiving $0.00 will be successful.  It pays to review the title with a real estate attorney before you accept a short sale listing in order to guage how difficult (read likely) the short sale will be. . .

2. Who are the creditors:  There is a huge difference between negotiating a short sale with a local bank and negotiating a short sale with a large national bank.  Generally, local banks have loss mitigation staff that can be reached all the time on the first call.  I find myself dealing directly with a decision maker when I call local banks.  I western Massachusetts we usually have a two step process when negotiating any residential real estate transaction consisting of an offer and a purchase and sale agreement.  When I deal with local banks, I am more likely to present offers directly to the bank because of how quickly thy will respond.  I do not do this with larger banks.  They take months just to assign the file to a "negotiator".  In the meantime their collections office is foreclosing on the property.  With the big banks it is a race against time and I insist on having fully executed contracts before I submit my client's information.  Local banks are easier mostly because they are faster!!!!

3. Do you have the right Buyer: Time is what kills these transactions.  When I have the seller in a short sale I cringe when I see a Buyer reserving their rights to inspect the property until after short sale negotiation.  What is the point?  There is no money for repairs and if something comes up in the inspection where the Buyer will absolutely not buy a house that has "X", why wait 90 days to figure that out? (The opportunity costs are huge)  Very quick "drop dead dates" are also difficult for me to tolerate.  While I appreciate the opportunity costs, you are either in this for the bargain and love of the house and for the long hall or you are still shopping around.  I feel that you must have Buyers make a serious commitment to the process or everyone is wasting a lot of valuable time.  I like the usual good stuff that keeps a transaction together:  big deposits and default penalties with a commitment to remove inspection contingencies at the outset.  Finally, these transactions are not for people who are buying their first home and are relying on government subsidies, grants, seller paid  closing cost money or loans that have strict guidelines that require extra appraisals.  These issues will only complicate the short sale and may lead to a rejection of a line item that is a deal breaker for a Buyer whose financing is completely contingent upon for example, seller financed closing costs that the seller's lender will not allow.

Buyer perspective on short sale:

Items one and two, above can be reviewed by a Buyer just as easily as the Seller.  Buyers should ask their real estate attorney to review the title to the property to see what is owed and to whom.  They should also review any other issues that can make this transaction difficult difficult. . .

Most importantly however, is the question: "Who is moving this short sale forward?"  Is there an attorney involved or a Realtor with a lot of experience?  What can they tell you about the likelihood of success of this transaction.  Of course I like to see attorneys involved whenever possible.  It is my opinion that an attorney that specializes in Short sale negotiation will generally have the staff and experience to bring these deals to the finish line within a reasonable amount of time.  The real esatte professionals have to be on top of these transactions or they will crumble along with your Buyer's dreams of owning their short sale home.