As short sales and other distressed property sales are dominating the real estate market, the more than 1 million Realtors in the US are scrambling to cope with this phenomenon.
Short sales are extremely labor intensive for Realtors listing these properties. Even after property is listed and the property is contracted to be sold at an agreed upon price (where buyer and seller agree in writing), the seller's lender must approve the sale at less than the mortgage balance. Only a very small percentage of short sales attempted eventually close in spite of all the parties to the contract wanting it to happen. The main reason for this is that there are so many steps to take which almost always lasts for months. Buyers become impatient, sellers are already financially devastated, banks do not like taking losses and Realtors are not paid for many months, if at all, and banks often want to insist that Realtors cut their commissions to reduce the bank's loss.
Prior to this time the listing agent and the property owner work together to put together the "package". This package is essentially proof that the lender is better off allowing a short sale than foreclosing on the property, which would end up being owned by the bank, who must then resell it. This package includes tax returns, financial statements, bank account statements, proof of income and expenses, detailed information on the property and proof of its current value. The package and its contents need to be frequently updated.
The bottom line is that although accomplishing a successful short sale is a good deal for all parties (buyer, seller and lender), it takes a lot of attention to detail, lengthy negotiation between the parties and the financial ability of the listing Realtor to defer any and sometimes all income that is required to make a short sale real estate practice attractive.
The Distressed Property Institute is educating Realtors rapidly. So far 10,000 Realtors have achieved the CDPE designation (Certified Distressed Property Expert). This compares to only 1,200 at the end of 2008. We expect a growing part of our practice to be listing property where the seller has been referred to our company by other Realtors because we specialize in this difficult and lengthy process.