Short Sales - Not very short when it comes to time and effort

Short sales seem to be here for a while.  Not that they will ever go away, but in this economic climate they are going to be more of the market than many agents may prefer.  If you have not had the experience of begin involved in a short sale, you probably will.  Below are a few tips to help you get through it.

Short Sale Listings:

1.  Make sure your client understands a short sale.  They must realize any difference on what they owe and what they sell for can be collected by the finance company at any time for up to 10 years (maybe longer in some states).  They also need to be aware the finance company can file documentation with the IRS to show the difference as income.  Meaning they may owe taxes.

2.  Make sure your client gets permission from the finance company to proceed with a short sale.  They need to get a contact name and phone number (email if possible) at the finance company.  This will come in very handy for the agent at a later date.

3. The client should write a detailed letter explaining why they have to proceed with a short sale and they will have to prove hardship before they are approved.  They may need to provide bank statements, proof of other debt, collections, taxes, or other family income.

4.  The client needs to send written authorization to the finance company and provide your name and contact information giving the lender permission to discuss the client's loan with you.  You will need to discuss this and without written permission you will get nowhere.

5.  You and the client need to make sure the lender is aware of any possible repairs the home may need or provide proof that the neighborhood or area has become depressed.  This helps the lender understand why accepting a short  sale now will be less expensive than a foreclosure later.  It also helps when you do receive an offer to eliminate unnecessary steps in the negotiation process.

6.  Make sure you put the proper notification in the MLS.  Don't just put short sale.  You also need to include that any offers are contingent on 3rd party or lender approval.  It is important that the buyer be aware of the fact that a signature by the seller is not enough, the lender still has a say so and probably will want to negotiate the price up.

Short Sale Buyers

1. Do not try to offer a ridiculous price.  Although you do not want to offer current market rates, your offer has to be more attractive to the lender than a foreclosure would be and you certainly do not want to insult the seller.  You will kill the deal before it gets started.

2. Get inspections and make any repair requests known to the selling agent and make sure they pass these along to the lender.  You may not get the repairs completed but you may get the price you wanted.

3.  Be patient.  Make sure your client knows this is a long process and you achieve nothing by putting an expiration date on the contract.  Plan to wait 2 or 3 weeks minimum for an answer from the lender.  The departments that handle these matters are overwhelmed and it will not happen quickly.

4.  Make sure your clients loan paperwork is in order and do not have them lock in their loan rate until you get acceptance.  Rate extensions can add unnecessary expense.  Also make sure the closing date is far enough out.  If you think you are going to write an offer on a short sale property and close within 30 days you are mistaken.

5.  Prepare your client.  They need to understand that instead of two parties negotiating there are now 3 and patience is mandatory.  If you do not explain the process thoroughly you are going to be getting many calls from a frustrated client and you will not be able to tell them anything.  Make sure they understand the process is time consuming.

Good luck with your short sales, and remember the only thing short is the price.

Todd Pierceall
Prestige Properties
www.prestigeproperties4u.com