Always suggest loan modification to short sale clients!

By
Real Estate Agent with John L. Scott MPV 104970

Always suggest loan modification to short sale clients

Always suggest loan modification to short sale clients!

This is NOT the look you want to get when they find out you did a short sale for a client that was a perfect candidate for a loan modification. Remember that ethics stuff you learned about?

I get the feeling that there are agents who will tell potential clients about short sales and and try to convince them that it is the best choice but never bother to suggest other alternatives. My suggestion....EDUCATE YOUR CLIENTS ON AS MANY OPTIONS AS POSSIBLE! That way nobody will come back later and say "HEY! Why did you do that! They could have gotten a loan modification and been just fine!" And yet somehow we wonder why so many short sales fail to close.

Here is what you do...After you have explained to the clients about other options and made a genuine request to have them try to get a loan modification. Have them sign something that says that you have given them alternative options to the short sale including suggesting that they contact their lender and request a loan modification and that they are choosing to list their property for sale as a short sale.

Furthermore, I highly encourage you to include wording in that document that also says your sellers have the right to cancel their short sale listing with no fee, at anytime, should they receive a suitable loan modification. This will do a few things....It will help you build trust because they know you are genuinely trying to help and not just get a sale. Secondly, it will cover your tushy to show you did everything you could. Third, they are more likely to sign it when you present it as "this document is an agreement saying that you have the right to cancel at any time if you are able to obtain a loan modification." And lastly, it will allow you to move forward with the short sale listing right away instead of the client saying "oh gee that's a great idea, I'll call you next month if my loan modification doesn't work out." You risk that they won't call you AND you're a month behind and have less time to sell it then! See, this way, you get the short sale listing and begin the process while they look into the loan modification.

Bottom line....EDUCATE THE CLIENT! Give them all the options! Don't simply just shove a short sale on them. It may be their best option, but at least they should know what the other options ARE and have an opportunity at those.

Comments (2)

Troy D. Village
Stearns Lending, LLC - San Mateo, CA
MBA - Branch Mgr | Sr. Loan Officer - NMLS #325112

Good point, Jeff.  This is especially true since the same processes and lender approvals are generally required for a loan modification as a short sale.  Interestingly, I know many Realtors here in California who won't even mention the term "loan modification" for fear of reprisal from the DRE or potential for lawsuits!  It's hard to do business from a fear standpoint!  Thanks again and all the best for 2010!

Jan 23, 2010 02:41 AM
Jeff Rainwater
John L. Scott MPV - Maple Valley, WA

Yeah, that's what I figured was happening. What was that statistic on the percentage of short sales that fail to close again?  LOL

Jan 23, 2010 02:58 AM