Becoming a better "short sale" expert. A series by Broker Bryant

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

I've been spending a lot of time this week thinking about short sales. My market, Poinciana FL, is going to have a bunch of them this next year so I figure it's time to brush up on my short sale skills to see what I can do to help some folks out.

The first thing I have decided is that I'm going to be very picky with who I work with. My last post touched on that a little. The percentage of getting short sales closed is very, very low. I hear 25% to 30%, if you're lucky.

My goal is to up that number substantially. If I can't close better than 1 in 4, well.....I have better things to do with my time. My target is to close 3 in 4.

So, with that in mind, I will be doing a series of posts sharing my thought process as I try to figure this out. Your suggestions are welcomed.

Here is a rough outline of my thoughts thus far:

  • The Seller has to have a legitimate hardship.
  • The Seller has to be motivated to work with me and the Lender in providing all the documentation we'll need to get the job done.
  • The Seller will need to provide me with full financial information prior to me placing the property on the market i.e. 2 years tax returns, bank statements etc.
  • I will need a signed "authorization to release info" letter and a hardship letter at time of listing.
  • The Seller will need to sign a disclosure stating that I have suggested they seek legal advice and that they understand the negative ramifications of being granted a short sale.
  • And finally, I want to make sure the Seller did NOT purchase the property in a fraudulent manner.

Folks, this last one is very, very important and the one I want to expand upon today. Over the last few years there were many homes purchased using stated income, low doc loans. There were also many homes purchased as "second homes" that were in fact not second homes but properties bought to flip.

Sellers need to understand that even though they didn't have to prove their income when purchasing the home they WILL have to prove it in order to apply for a short sale. If they lied on their initial loan application this can be opening up a big ole' can of worms.

What is the Lender going to say when the Seller provides a tax return for when they bought the property and it doesn't match up with what they "stated" on their application? Have you thought about that? Have you been counseling your potential Sellers about this? If not, you need to start. These folks do NOT qualify for a short sale and could very well be opening themselves up to a fraud investigation by applying for one. They don't need a REALTOR® they need an Attorney.

My point is, a short sale is not for everyone. As REALTORS® we need to do our due diligence prior to taking on a short sale listing. If we can be smart in our approach, to working with short sales, we can surely do better than a 25%-30% closing percentage. I know I plan to.

OK, so that's it for today. Did I give you any food thought? Do you have any suggestions for me? Let's think this through together. I want to do this right so please help if you can.

First post in the series:

A "short sale" is an option, NOT an entitlement!

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 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

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Rainmaker
334,624
Jeff R. Geoghan
Coldwell Banker Residential Brokerage - Lancaster, PA
REALTOR, Marketing Manager
The hardship letter is indeed the crux of the short sale application - medical bills or disability issues are the most compelling to a bank.  Are you handling some sales now, Bryant?
Jan 14, 2008 12:43 AM #31
Rainer
209,196
Marc Grossman
Marc It Sold! - Longwood, FL
GRI, Greater Orlando Real Estate Broker
BB,  Great post and I look forward to the ensuing ones.  Definitely gave me something to think about when you wrote "that even though they didn't have to prove their income when purchasing the home they WILL have to prove it in order to apply for a short sale."  WOW!  Didn't think of that, but so true.  I guess if I get into that situation I'll want to see there closing docs and the 1003.
Jan 14, 2008 02:20 AM #32
Rainmaker
223,250
Rick & Ines - Miami Beach Real Estate
Majestic Properties - Miami Beach, FL
I'm sure TLW will forgive me but have I told you lately how good looking you are?
Jan 14, 2008 04:20 AM #33
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Thanks Ines!!!!

Great comments everyone. As always I appreciate you stopping by and participating. Short sale is certainly the buzz word right now. It will be interesting to see how the lenders handle this avalanche of short sales. My market is saturated with them right now. Anytime you do a MLS search and see a good deal you can be sure it's a short sale. I'd be hesitant to waste a good buyer on a deal that may or may not close.

Jan 14, 2008 06:17 AM #34
Rainmaker
57,925
Diana Corcoran
Berkshire Hathaway Home Services Hudson Valley Properties - Rhinebeck, NY
Rhinebeck Real Estate
Thanks for doing this series.  It is really helpful and stated so clearly. I don't think we have many short sales in our area but it does give me food for thought.
Jan 14, 2008 11:44 AM #35
Rainer
86,689
asdf zcxv
Keller Williams Realty - Ann Arbor, MI
Ann Arbor Area Real Estate
Thank you for this and I'm bookmarking this for future reference.  Have you ever had a client not admit that was what they wanted until you were involved already?  Just wondering and I know someone who said that happened to her.
Jan 14, 2008 11:52 AM #36
Rainmaker
298,848
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate
BB- Yep, you just verified exactly why I don't do Short Sales......too much liability, and we are dependent on people actually telling us the truth.....yep too much liability :)
Jan 14, 2008 01:34 PM #37
Rainmaker
251,783
Katrina Madewell
Charles Rutenberg Rlty- More than 5,000 agents(813) 777-1196 - Tampa, FL
Tampa FL Homes for sale | Tampa Bay - (813) 777-1196

BB  - Be prepared for a lot of emotional stress, because ANYTHING can happen!  I have had to tell sellers they have to move in two days (even though they KNEW it was coming for MONTHS)... still doesn't make any of it easier.

WELLS FARGO IS A PAIN IN THE A*S AND THEY ARE NOT EXACTLY PARTICIPATING IN SHORT SALES THESE DAYS...

                                    Anyone else know what I am talking about and agree????????

Jan 14, 2008 03:42 PM #38
Rainmaker
453,646
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904
A short sale is not an eject button although most borrowers in trouble would like to think so. It is a risky proposition for Realtors as well.  Your advise is very good and it should be given serious consideration before entering into an agreement knowing in the end youmay not get paid for all of your efforts. Well done Broker Bryant!
Jan 14, 2008 09:39 PM #39
Ambassador
2,286,939
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK
The one short sale that I did....I didn't!  I kept waiting to hear from the lender.  VA called since it was a VA guaranteed loan.  Contract expired.  I couldn't get anyone on the phone at the bank that seemed to know anything about it.  A few weeks later, an appraiser calls me and asks me about a property that a bank had sent an appriasal request on and had been laying on her desk for weeks. . . . and had me as the contact person.   
Jan 15, 2008 12:23 AM #40
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Katrina, I don't know what you are talking about but would be interested in hearing the story. Write a post about it and come back and leave me a link.

Judi , That's sounds about right!! Very frustrating.

Karen, I haven't but I'm sure it happens. I am very thorough when interviewing my sellers prior to listing. If I have any doubts at all about their honesty I either walk from the listing or have my title company do a preliminary search for me.  I don't like surprises.

Short sales are certainly opening up the REALTOR(R) to liability. That's why it's so scary to see some of the listings out there where it is obvious the agent doesn't have a clue of what they are doing. I'm hoping that over the next few weeks we can all learn together. We either need to know what we are doing or we need to walk away from listing a short sale. This is a serious issue and we are doing the consumer a great disservice by not being prepared. The best way, in my opinion, is to work hand in hand with an Attorney who specialises in short sales. I'm looking for one right now to partner with. Of course the seller will have to dish out some money up front to cover attorney fees. But that is a very good way to see how motivated they really are.

Thanks everyone for stopping by. I'm a little busy today but wanted to stop by and at least answer the questions that were posed.

Jan 15, 2008 05:01 AM #41
Ambassador
3,914,492
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

BB - once again you have raised some very potentially dicey issues that can arise in the short sale process, and some liability for the agents involved. This is a great series.

Jeff 

Jan 15, 2008 11:58 AM #42
Rainmaker
259,533
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

Katrina,

That is EXACTLY who I am dealing with on my current short sale deal.  I mean the woman is in bankruptcy over 5 properties. I GAVE them the bankruptcy paperwork and they still want her to prove her income. Helllloooo...is the bankruptcy JUDGE's opinion not good enough. 

Jan 15, 2008 12:00 PM #43
Rainer
62,831
Allen C. Wright
RealtyU - Aliso Viejo, CA
NS, AHS, REPS
Very valid point ... a short-sale in some respect is the opportunity for the lender to re-examine the loan that was initially written and see if the borrower deserves the opportunity to SHORT-SALE
Jan 17, 2008 10:33 AM #44
Rainmaker
316,201
James Downing - Metro DC Houses Team REALTORS®, CRS, GRI, ABR,MRP, MilRes
Real Living | At Home - Washington, DC
When Looking to Buy or Sell - Make the Right Move

WOW - I never would have thought of checking the whole "fraud" point you made.  What a waste of my time if I invested a bunch of time; only to find out they lied from the start and will never be able to do a short sale.

Jan 17, 2008 10:48 AM #45
Rainer
788
Goad Team
Vertical Realty - Las Vegas, NV

Sorry somehow I logged out before the post. 

There was an article entitled "5 Short Sale Myths" in today's Broker Agent News that for the most part hit the nail in the head in regards to Short Sales.  However Tim Harris's "Myth #5 Short sales are HARD..." would lead agents to believe that Short Sales are somehow a piece of cake.  While I understand Tim Harris is trying to sell his "Short Sale Class", by implying that this process is no big deal, this sort of idea posses great dangers for the poor seller who may be facing a looming foreclosure.

I have been conducting Short Sales for almost for years (obviously as most markets there were very few going on until the last 1-2 years) and my problem with implying that the short sale process is easy gives the impression that all agents should be doing them.   Remember that as an agent (or REALTOR if applicable) we are hired to protect the best interests of our clients. In a short sale situation, protecting the best interest of the client mean helping them avoid foreclosure.  I would highly recommend that no agent attempt conducting a short sale unless they have a Short Sale experienced agent from their office, or some other sort of mentor, be along side them through at least their first short sale transaction, if not through several of them, before attempting them on their own.  I was lucky to have an agent friend who had a great deal of expertise walk me through the process and be right by my side for my first 2 short sales.

If you are not experienced in this sort of transaction and are thinking of "trying your hand at short sales" without an experienced Short Sale agent coaching you, consider this...If your seller later finds out that you did not have the expertise to handle such a transaction you could later find yourself in court standing before a judge explaining your actions.  Do you really want to stand before a Judge and explain to him/her that you wanted to make money and that you thought you would "take a stab at short sales".  Just some food for thought, I am just simply highly recommending finding a highly experienced Short Sale agent to help you learn, and guide you through the process the first few times.  There is more to a short sale than just simply filling out the Short Sale package.

Jan 25, 2008 12:11 PM #46
Rainmaker
785,114
Don Wenner
DLP Realty - Allentown, PA

I like short sale. My success rate is 100%. They take time, but in this market the banks will take what you offer most of the time.

The owner of very large company that does has 6,000 short sales under contract right now told me they have about a 90% success rate.

Jan 25, 2008 02:17 PM #47
Rainmaker
785,114
Don Wenner
DLP Realty - Allentown, PA

I like short sale. My success rate is 100%. They take time, but in this market the banks will take what you offer most of the time.

The owner of very large company that does has 6,000 short sales under contract right now told me they have about a 90% success rate.

Jan 25, 2008 02:17 PM #48
Rainmaker
337,464
Thesa Chambers
Fred Real Estate Group - Bend, OR
Principal Broker - Licensed in Oregon

you are such a great wealth of telling it like it is knowledge - thanks

Aug 10, 2008 01:29 PM #49
Ambassador
556,968
"The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Baby...

You've written so many of these. I'm started to get confused :)

TLW...ROAR@the other side of the room :)

Aug 11, 2008 01:21 PM #50
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