Short Sales
Short Sales are typically defined as a transaction in which the lender agrees to accept less than the full amount due on the mortgage. This prevents the lengthy and costly foreclosure process, which is especially beneficial to both the lender and home owner when the home is equity deficient.
When a homeowner first goes into default, their file automatically goes to the foreclosure/ collections department. Many times homeowners are not aware that their mortgage company will work something out with them on request. The homeowners have been badgered by the collections departments numerous calls and sometimes even threats. Often times this causes the homeowner to stick their head in the sand and “do nothing”. They are unable to objectively look at the situation and see that the collections department job is to collect money and not to work out a solution. The job of the short sale expert is to create and finalize a solution by collecting all of the financial information, get signed listing agreements, and inform the mortgage company that the home is being listed for a short sale. This process then can move to the loss mitigation department.
The Realtor must be able to accurately determine the value of the property. Usually homes in financial distress, have significant deficiencies and are in need of repair. Many times the homes have a lot of deferred maintenance or have been abused due to lack of money to due the repairs. The repair amount must be summarized and taken into account when pricing the home. The short sale expert does not have the luxury of over pricing the property and later lowering the price in order to get the home sold. The foreclosure process does not stop while the home is on the market. Upon receiving an offer the short sale expert’s job is to provide the loss mitigator with all of the necessary documents, in order for them to analyze their position, and their position in the chain of title. Time is of the essence
The lender’s motivation lies in the fact that it is better to get something now rather than risk receiving nothing in the foreclosure. The lender knows if the home goes to the foreclosure auction, they run the risk of receiving no immediate benefit. When the home is in an equity deficient situation, the lender usually will have to end up taking the home back after the sheriff sale, and later having to sell the home. The post foreclosure assets are called REO, Real Estate Owner. The regulators only allow the lenders to own so many homes at one given time. The lenders have multiple expenses when they have to hold a REO property, for example, legal expenses, deficient property taxes, deferred maintenance and possible damage.
A short sale has the potential to be a win scenario for both parties. The homeowner wins by selling the home prior to foreclosure, avoiding the long term damage to their credit score. The seller also saves their family from the embarrassment of their home going to the sheriff sale auction. The listing and selling realtors win by obtaining commissions paid by the lender. The buyer wins by obtaining a property at a good value. The lender wins by avoiding the costly foreclosure process, taking the property back, hiring a realtor, hiring a clean up crew, marketing the home, and property maintenance.
The two most important things during the short sale process are timing and patience. This is especially important to realize because usually people in financial distress tend to procrastinate until the threat of the foreclosure auction is imminent and in some cases already occurred.
Timing is crucial because the clock is ticking. The lenders have hired attorney to foreclose on the home, and unless the attorney receive notice from lender to stall the foreclosure, they will proceed with full force.
Patience is extremely important in this process. All parties involved, sellers, buyers, realtors, lenders, have to realize that they are not the only home that is going thru this process. Because of past predatory lending practices, the lenders are currently overrun with short sales and foreclosure actions. They simply do not have the qualified staff to handle the large numbers of homes going into foreclosure. The process of working out a short sale can sometimes take months. Often times, the true decision maker is not the lender, but a third party investor or mortgage insurance company.
Finally, you have probably seen extreme commercials where they say “don’t try this at home”. Short Sales should only be handled by experienced Realtors with the expertise in this field, and aggression to deal forcefully and urgently with the mortgage holder. Very often the loan has been sold but the collection stays with the original company. Knowing how to find the decision maker is a skill not easily acquired. Remember, your financial future is in the hands of a Realtor. Don’t employ a rookie, rather use our tested in battle short sale specialist. It could be the best decision you have ever made.
Joe Pryor
RE/MAX Associates
1900 S.E. 15th Street Bldg 500
Edmond, OK. 73013
Phone: 405-590-2135
Fax: 405-359-8729
Joe Pryor
RE/MAX Associates
1900 S.E. 15th Street Bldg 500
Edmond, OK. 73013
Phone: 405-590-2135
Fax: 405-359-8729
