What does it take to get a short sale completed successfully? First, the sellers have to be qualified for the short sale. The basic qualifications are that the homeowner owes more than the home is worth, is unable to maintain the payments on the property, and has experienced some sort of hardship. Ideally all of these conditions are present, but they don't necessarily have to. Banks are ususally less willing to negotiate favorably with sellers who meet less than the above criteria, but its still business to them. They are going to look for best way for them to recover as much of the money as they legally can. In the beginning the seller should be properly prepared for the journey they are going to take. They must be prepared to be frustrated, and to be patient. In the early stages, the bulk of the work involves preparing financial statements, hardship letters, gathering documentation, and of course consulting the appropriate legal and tax professionals. We always recommend speaking to a layer and a CPA
Once all of the preliminary preparations are complete, it's time to get the property on the market and to get the best price the market will bear. This is a very important factor in a short sale. The seller should get the house in the best condition they can, realizing that many short sellers dont have the money to put into the house. Many of the things I see that detract are not costly things, they just take effort...like cleaning. Then the marketing effort has to be equally substantial. The property needs to get enough exposure to excite people about it and to want to bid competitively on it. This marketing part, and the valuation part, are both completely seperate subjects. Bottom Line, since short sales can scare a portion of buyers away, agents need to do even more to attract the right buyer at the best price, and to eliminate barriers to buying. Low earnest money deposit is one way to prevent a buyer from feeling like they have too much tied up, particulalry if the buyer is an investor. We want to get the best price we can to take to the lender.
When a short sale offer is accepted by the seller, it then goes to the bank for review. In North Carolina, until the short sale is approved by the lienholder, the property is still marketed for sale as an active contingent listing. Other offers can still come in as back-ups and the lender must be made aware of the offers existence. Another interesting point is that the primary buyer, with the sellers permission, can be made aware of the terms of back up offers. This is an advantage, obviously, because it gives the primary buyer, as it should, an opportunity to top the back-up.
Most banks have a processor to review the file to make sure it has all of the ingredients for approval, then they will submit it to a negotiator, who will actually negotiate the terms of the contract and short sale approval letter. Once you reach the negotiator step, most of the waiting is done. The negotiator will offer terms to the buyer regarding how much they will take for settlement, whether they will persue deficiencies, etc. An experienced attorney should represent the seller and negotiate these terms on their behalf. A huge component to success in a short sale is the financial position of the seller in the outcome.
A big reason short sale fall apart is because buyers are not properly prepared for the process and they back out before its over. They need to be aware that it could take several months to get the transaction done. If they are in a hurry to move into a place, the short sale transaction may not be the best option for them. When this happens, if a new buyer is not obtained quickly the process has to start over. Properly prepared buyers for short sales are in a position to take advantage of the down market and get great deals.
With so many underwater homes in todays marketplace, short sales are becoming more and more prominent. As time goes on, I believe the banks will continue to get better at handling them because they realize that they have to. Its the best way to mitigate the loss caused by troubled assets. Short sales require specialized knowledge, resources, and skills. They can be quite frustrating and therefore many agents simply turn them away.
Cape Fear Real Estate Solutions specializes in short sale transactions and we have a complete system in place for maximizing performance of short sale listings in the Wilmington, NC area.
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