Over the past several years, short sales have plagued our market with horror stories and lack of seller and buyer confidence for success. It has been slightly reassuring however to see what used to be a seller described ‘nightmare experience’ evolve over the years into a ‘slightly more tolerable but still frustratingly slow experience.’ Short sales are thankfully on the decline in stronger markets, and have much less negative influence on market values than they once did. That being said, they still exist and will continue to exist for many years to come. If you are an owner contemplating a short sale, you cannot do it on your own, literally. Your lien holder will not allow you to engage in a short sale by owner. You must seek professional help, and that is good news – embrace it!
- See an attorney first. Specifically, see an attorney that specializes in dealing with distressed properties and short sales. Have the attorney review your financial history and credit picture. Make sure that you provide the attorney with all the information they are requesting from you when you meet, they are there to help you determine the best option for your circumstances. The more prepared you are, the more the attorney can help you. After reviewing your overall financial situation, the attorney may or may not recommend a short sale. Additionally, the attorney may recommend other actions and strategies that you would likely not otherwise know about. All of my short sale clients have a consultation with an attorney before we delve into the process of listing their home.
- You may encounter a deficiency judgment. Add this question to your list when you see your attorney, find out if you qualify for Home Affordable Foreclosure Alternatives (HAFA). If you do qualify, the program will help alleviate you from the shortfall difference between what the home sells for and how much your mortgage value is. There are other legal benefits under HAFA that may help you with your short sale, which is all the more reason why you need to consult with an attorney. If you don’t qualify for HAFA, you will need to have a conversation about negotiating the value of the shortfall. For example: Mr. Johnson owes $750,000 on his mortgage, but the current value of his home is $635,000. Mr. Johnson is suffering a hardship due to loss of employment with no other option to keep his mortgage current. Unfortunately Mr. Johnson does not qualify for HAFA, so he has to seek another alternative to deal with the short fall. The attorney can help him negotiate the value of the deficiency with the lien holder during the short sale process.
- Choose your listing broker. The attorney that you see will likely have recommendations for you of experienced brokers they have worked with. I can help you with your short sale if you live within the Puget Sound area in Washington State. If you need a good referral broker outside of Washington State, I can help you with this as well.
- Stay out of hot water with your HOA. Do not cause yourself to be in jeopardy with your Homeowners Association, make sure you and your home stay in compliance. First and foremost, pay your dues on time. Keep your property maintained to the standard your HOA expects – cut your grass, keep your property clean and presentable. Don’t allow your home to ‘look like a repo’ if you are in a neighborhood that keeps and enforces HOA rules, that will attract the wrong attention for you. Every penny counts on the settlement statement when the lien holder is reviewing your file for approval. And if you are delinquent with your HOA dues, or have fines levied against the property for non-compliance with the rules, it will be a cause to set you back and may even be the culprit for a failed sale.
- Patience is key! This is the biggest challenge to processing a short sale. Brokers and attorneys have little to no control over the timeliness of gaining an approval from the lien holder, and every lien holder is different in how they process their short sales. The good news is that short sale processing now has evolved significantly from the time that they began being more mainstream several years ago. But to make the point again – be patient! If you’re a buyer contemplating a short sale, don’t make an offer on one unless you are truly flexible and can wait for a minimum of 6 months for an approval if necessary. You may end up waiting for less time than that, or you may end up waiting longer than 6 months. Don’t make an offer on a short sale unless you are truly committed to buying the home, otherwise you are only contributing to the dysfunctional process of closing that short sale.
Thanks for reading. If you have questions about short sales, or anything else related to residential Real Estate, please reach out to me!