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What about Short Sales? -

By
Real Estate Broker/Owner with BCI PROPERTIES, LLC

Hello Ladies and Gents,

This is my first post to ActiveRain. Looks like a good forum to share thoughts! I have agents and brokers who ask about short sales, so it appears that not all agents have done these before. Here are my thoughts:

For Buyers: if you are trying to buy or sell a home without a Realtor or Licensed Real Estate Agent, its a tough market ... and especially "Buyers" often need expert assistance or help in putting together a "Logical Offer" to present in a Short Sale.., but also this would apply in almost all cases when a buyer wants to purchase any home or property in my humble opinion.

For Sellers: do you think that the person that ends up buying your home will be represented by a Real Estate Agent? Most often yes they will. ---- Why would a buyer not hire a Licensed Real Estate Agent? The seller, as you know, pays all the commissions so why would a buyer not get some expert help to make one of the biggest purchases of their life? Did you know that sellers have a 90% better chance of finding a qualified buyer if the sale is professionally marketed by a Licensed Agent? If you must do a short sale on your home, it may be better than a full foreclosure. - Sellers note; your lender can come back if they choose to charge you with any deficit or shortage later after the sale. Be aware that you may want to seek the council of a qualified Real Estate Attorney. Here is a letter from my Attorney that I will share with you in PDF format: www.realhomes.us/foreclosure.pdf - offering to help stop foreclosure. If you are not yet into the foreclosure process the short sale can still be done but you may need to ask an Attorney how to stop the lender from seeking debts that in arrears after a short sale. Some banks/lenders will negotiate away their rights to come back later, some will not.

What is it: A Short Sale is a term that is used when a Bank or Lender who holds the mortgage or Note on a property is... or is about to, go into Foreclosure and a buyer or Buyers Agent puts in an offer to the Lender that is less than the actual payoff. Thus "short" sale, short of amount due.

Here is a few things to consider:

1. The Bank/Lender will look at all offers when the owner is way behind in payments. The seller must in most all cases sign the Purchase and Sale Agreement naturally, prior to the Lender review.

2. A potential buyer should do some homework to find out: A. who the lender is...and B. what is owed both on a first or second note..., but also any other liens on the property. Do your research.
 
3. When putting together a Short Sale offer, find out by asking ahead of time if the Lender has any addenda that they will require that is not part of what your local market expects. Often they do.

4. When putting together an offer, you MUST find out if the seller/owner has any ownership "rights" by Law, either in the State of ownership or from the Lenders standpoint. They normally do have rights.

5. Most Short Sales do require the current owner of record to agree to and sign all Purchase and Sale documents, which is of course a lower offer than what is owed on the property. I can tell you this..., for the buyers who want to do it themselves, in the end they will be happy to have a "Buyers Agent" approach the owner or owners Agent with that low offer and the majority of non-licensed buyers do not know how to do it anyway. I mention this because there are people trying to work magic without an agent.

In almost all cases the seller/owner's Bank would not have looked at the offer without the buyer/seller being in "mutual agreement". At some point the property goes to Auction....be Aware of this. We have had Short Sales that seemed to be approved by the seller/owner and Bank go right up to closing and be stopped... and crazy as it seems, they can go to auction still EVEN AFTER you think you have a deal. I had one failure just two days before closing with all conditions final, we were just waiting to sign. Countrywide Home Loans told me that we must start over as they didn't have time to finish, no joke. We were all within contract time limits too. At Auction later the next month the house sold for $50,000 less. THAT is the sickest, weirdest thing I think I have ever seen. So just be forewarned.

6. Involved within the 32+ pages of just the initial P&S Agreement will be an assortment of Addenda that pertains to Legal requirements in our state, including but not limited to: Lead Disclosures, Septic & Health Dept O&M Letter, Inspection of property (most lenders on a Short Sale will not pay credits), finance addenda, several Optional Clause pages regarding size/terms etc.....and so on.

7. The Short Sale offering should include: A. The Purchase and Sale Agreement - B. The BPO Letter, "Brokers Price Opinion"...or two if possible. - C. A letter from a recognized Licensed Inspection company will help if there is damage and repairs needed, along with a contractors bid as to cost of such renovation. If done properly this can be a big factor in getting your price. Most Lenders will also require the following if this is a new account for their Loss Mitigation Department: D. A pre-approval letter for the buyer. - E. Hardship Letter from the seller - F. Financial Worksheet, DTI for the seller. - G. Listing Agreement. - H. They want a HUD-1 statement from buyers lender. --- note, there can be other stipulations too depending on the lender.

8. You need to be aware that there may be other people, Investors, Buyers Agents etc that could be putting in offers similar to yours.... do not be fooled. If you do not do this offer right, you will NOT get the deal. Have all your i's dotted and all your T's crossed.

Final analysis: There are a few other things that can and should be done to help the process, but in the end the one most prepared will get the deal.

Personally I do not like Short Sales. But I do them as it is part of our business. We are dealing with others grief and sadness, plus most buyers want to come in so LOW that other savvy buyers beat them out. IT IS A TON OF WORK and most Lenders will only pay a max of 2.5% SOC... for what results in at least double the work and a 95% chance of not getting the deal. THOSE are the real facts.

Be real, be smart ...get your facts straight and be aware that others may beat you out.
Best of Luck,
-Don

Comments (4)

DALIA KIBBY
One Sothebys International Realty - Cooper City, FL
Selling Florida Homes with Passion!
Excellent advice!  I've just picked up some buyers interested in properties that are largely short sales.  I dread having to deal with this but that's the business.  Thanks for sharing.
Jan 06, 2008 12:46 AM
Rick Marnon
The Michigan Group - Brighton, MI
Howell Real Estate Agent
This is a great post. I have had a few situations like this present themselves. People selling a home on as a short sale can be difficult not only for the buyer, but also for you as an agent. If the selling agent is not familiar with short sales it can be long and drawn out. Great post.
Jan 06, 2008 03:32 AM
Keith Elliott Jr
KEIRE Realty Group - Manassas, VA
Principal Broker/Owner

Hi Donald,

Welcome to Active Rain! The opportunities to learn and network are incredible here. Best of luck to ya!

-Keith

Jan 06, 2008 02:25 PM
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Jan 06, 2008 03:43 PM