...and What You Didn’t Know Might Cost You

Short sales…. You hear the term almost every day!  It’s the new buzz word in our market, and yet many agents have no real training on how to handle these potential money makers, nor how to set up their buyers and/or sellers to create the best overall financial situation that helps them resolve the issue with minimal financial and personal damage.

What’s the difference between a short sale and a foreclosure?

Many agents surveyed tend to lump a short sale and a foreclosure in the same club, but they are quite different, even though they both deal with properties with financial issues.

A short sale is a sale in which the outstanding obligations or loans, against the real estate are greater than the amount for which the property can be sold.

A foreclosure on the other hand is legal proceeding that the lender implements when the loan holder (or owner) fails to comply with the lending agreement and fails to make payments per that agreement. The lender can then begin legal proceedings to lien the property and eventually repossess the property.

If the sale does not bring enough to pay the existing balance of principle and fees the mortgagee can file a claim for a deficiency judgment.  This process takes longer and the lender must be able to have the financial “reserves” to cover the mortgage amount and more in order to proceed.

The short sale on the other hand, relieves the lender of the reserve issue and avoids having to keep massive amounts of reserves on hand to cover the outstanding loans, making a short sale a better solution to the lender. 

In either case, the buyers and the sellers, (and the agents of course!) must know the intricacies on how to proceed, what questions to ask, and what pitfalls can occur during and after the transaction.

Here are a few do’s, don’ts and what you didn’t know about short sales that can pack your wallet, or leave you busted.

• Short sales are NOT for every buyer - A large percentage of buyers have a fixed period of time to buy and close. Depending on the lender and all parties in between, this purchase may not fit the time scope of the buyer and therefore may not be the best solution for every buyer.
• Short sales don’t close: Not necessarily true! If you set up the transaction correctly from the beginning, and follow certain procedures, the short sale can be a money maker, especially since many agents and their customers and clients haven’t a clue about how to work the process effectively. Learn how to navigate the process and you can find major opportunity!
• Sellers are free and clear of obligations after a short sale: Not True!…. And this can be a real financial kick in the pants to the original owner after the transaction is closed. Taxes and other obligations will follow you until you die and then beyond…

As occurs in any professional counseling session, good questions get good answers, and client counseling is a key component in how an agent can best assess a seller’s financial situation.

 According to  Ron Garber, a foreclosure expert and  the brainchild behind http://www.shortsalesplan.com/ , short sales provide an excellent opportunity to not only be of service, but to develop a niche that can provide a nice payoff, but you have to be willing to do the work to get good or get gone!

It is imperative that if you have interest in short sales. You need to:

1) Develop a deep understanding of the short sale process

2) Create a tailored listing presentation to show short sale competence win the trust of the short sale seller

3) Understand the systematic and sequential order of the short sale process

4) Be keen on the savvy pricing strategies to make the property sell

5) Have a marketing plan that brands you as the short sale specialist

Agents have never had a better window of opportunity to demonstrate real VALUE to their customers and clients by hunkering down and really becoming an expert on these facets of a real estate transaction.

By pre-qualifying the seller, the agent can determine if the seller has what is referred to as a “qualifying hardship” and if it can be substantiated can help you help them.  Counseling them will reveal:

1) If their property is a primary or secondary residence,

2) What other assets they may have,

3) How many loans encumber the property

4) How they should proceed to mitigate their problems with a plan, and finally

5) How to avoid the latest short sale scams will prove invaluable. Just signing over the deed to their property to someone else will NOT necessarily relieve their loan obligations.

The key here is that a successful short sale follows a process, and if you are not deeply familiar with this process, don’t offer to help with short sales!  It’s not hard or cumbersome to become a short sale expert, but it is imperative as a professional that you learn how to best deal with this segment of our current market to best serve your clients and customers.

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