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How Do I Sell A Listing That Has No Equity?

By
Education & Training with REO In Motion, LLC

I have gotten this question a lot lately.  Many realtors are not familiar with short sales.  And most who are cringe at the thought of it.  While a short sale is not easy to deal with, it is a fact of life in this market.  Many realtors that I work with are actually being forced into this market because the listing they had has gotten behind on payments, and they have to sell regardless of price.  Others have gotten contacted by former customers about a short sale, and have to do something, or risk sending the seller to another agent.

There are some things that you can do to make your life easier in this arena.  First, make sure you are asking the right questions from your seller at the time of listing.  There is a fine line as a realtor of how personal you get with a seller's personal finances.  That being said, there is only so much you can do with limited information, and by not asking the right questions, you could be setting yourself up for failure without even knowing it.  find out if they are past due on the mortgage, and if so, how urgent is it that they sell.  some home owners will get offended at the idea of selling below their current mortgage balance.  But, it is way more offensive to have it foreclosed on and deal with that for the next 10 years.  Also, make sure that if you are selling as a short sale, the seller will not be getting equity out at closing.  If they understand that early, they will be less combative at closing.

Secondly, make sure that when you get a listing, you have properly disclosed to the public that the sale is contingent upon bank approval.  A buyer that makes an offer expecting to hear back in 24 hours, will very likely walk from the deal when they discover it takes weeks to get this back.  Cover yourself and save time by disclosing this up front.  (BTW - I am located in Florida so be sure to check your applicable state laws for proper disclosure)

You can find out more about dealing with short sales at www.PreForeclosureFSBO.com ,  Happy Hunting!

Show All Comments Sort:
Rick Callaham
Team Quintana Real Estate - Spokane, WA
Spokane Realtor
Nice information and good points, many times just asking a simple question or not makes a big difference
Feb 15, 2008 07:03 AM
Rick Sergison
EXP Realty of Canada Inc., Brokerage - Pickering, ON
Durham Region Real Estate Blog

I just stopped by to welcome you to Active Rain. I hope that you find it a great benefit to your business and that you see the value that I have also found here.

There are some great group both local and broad based,.... enjoy!

Feb 21, 2008 11:19 AM
Debbie Malone
Londeree's Real Estate & Property Management - Lynchburg, VA
From Lynchburg To The Lake (434) 546-0369
Steve, I've had one closing where the seller had to bring a substantial amount to closing. It's a shame, but they kept their credit intact and moved on. I'm going through a transaction now that has to be approved by the bankruptcy judge. It's unfortunate this is becoming more common. Sellers need to be aware they may lose in this current market.
Feb 22, 2008 12:17 AM
Steve Russell
REO In Motion, LLC - Pensacola, FL

Debbie, There's no doubt that sellers are losing in this market.  If a seller had to bring a substantial amount to closing, I suspect it is because the lender would not approve a short sale due to their financial position.  Mortgage companies are very open to the idea of a short sale these days because it can save them money vs. a foreclosure.  The flip side to that is getting a financial package from the seller to aprove the short sale.  If the lender is considering a short sale and they get a financial package from the seller showing that they have the assets to cover the negative equity, the lender will not approve the short sale.  This is because they know that they will have recourse against the seller no matter what, so they will be unwilling to give up their lien position without the seller giving up something too.

It's unfortunate, but it is reality in this market.  Short sales work when the seller is up against the ropes, and the only way out for them is foreclosure and or bankruptcy.  Then the mortgage company knows they will have no recourse and will have to take what they can get.

Good luck...It's a jungle out there.

Feb 22, 2008 12:31 AM