Special offer

Don't get short with me! Okay you can I can certainly handle it.

By
Real Estate Agent with Keller Williams

I thought I would take a moment and talk a little bit about a nightmare that we as Real Estate pros. are running into out there. As one of the more popular workout strategies in the banks bag of tricks is the time consuming short sale. Short does not referr to the time it takes to get one of these things done. I have taken part in a few of these and I have become quite adept at securing an offer on these properties submitting the short sale package, and closing. I have done two in the last 3 months as a matter of fact, and am just starting a new one.

For those of you who don't know short sale is a procedure where the bank allows a seller to sell for less then they owe, Typically you also try to get their expenses covered too,. For instance a seller owes 100,000.00 but market conditions dictate that the most they could get for their home is 90K. You would present that offer less your commission, taxes, and attorneys fees to the bank. You also have to submit a hardship letter stating why the seller is having a hard time paying their bills as well as a wealth of financial info.

This is where it gets difficult because each lender has different and specific requirement and it is usually at least 25 pages of material. Once that is complete you fax it to the bank they have 60 days in which to approve the offer, and it seems to take at least the full 60. At which point you can then sign contracts. The trick is they usually give approval for 2 weeks at a time. You then have to request extensions until the actual closing date. Which we know in NY can be 45-60 days away from the contract date.

If it goes through your seller client will be happy that this burden has been removed from their shoulders (check with your accountant because I think there is a special tax break on the forgiven portion of the debt). Your buyer client might have gotten a great deal on a home. You as the Realtor might be the only one who gets beat.

How you get paid:
The commissions are pre-approved by the bank however if there is not enough money to pay you because of fees or fines the attorneys at the closing will start to look for money to pay the rest of the bills. Title insurance, title closer, agents, attorney and so on. Beware that the first pocket they dip into will be yours because you are getting the largest pay out at the table. We all know how much work we do to get them there and it stings even worse when you have spent hours dealing with a faceless bank that has employees all around the world.

You should have a plan of action to protect yourself already worked out with your client. Will they cover the shortage, will you and the other agent split the difference, will you split the shortage proportionally or equally around the table.
You should also notate your listing that the commission, and sale price are subject to 3rd party approval.