Short Sale Seller Secrets
by Hal Feldman (MiamiHal.com)
Shhh... don't tell anyone, but the first secret is that short sales are (a) very common, (b) nothing to worry about and (c) don't have to be complicated to deal with.
The “Can Do” Short Sale
When a homeowner finds themself in a situation where they cannot make mortgage payments or is forced to move, but knows the sales price will not satisfied the outstanding loan amount, a likely path is a short sale. While many fear or are embarrassed to do a short sale, it is actually an opportunity to clear the slate and move forward, with dignity.
Financial difficulties and short sales are common these days, certainly nothing to be embarrassed about. No one tries to get into situations like this, they just happen. The true mark of a responsible person is to address the issue proactively and make the best of it.
Once you are a likely short sale candidate, it’s time to act. Burying your head or delaying is a natural tendency, but in this case it will make things worse…much worse.
If your mortgage company has contacted you, the process has already begun. Yes, it is likely to take an extended period of time before the lender forces your hand to either take action or vacate (be foreclosed), but that day is coming.
The worst thing you can do is nothing.
Lenders do not want to hurt you, nor do they want to go to the expenses of hiring attorneys and carrying out a foreclosure. Eventually, they will proceed, but their early letters to you are actually a friendly notice of opportunity.
I get asked all the time, “How long can I hold out?” My answer is always, “Why haven’t you started your short sale yet? If you don’t want to lose your ability to borrow again for years, you should have already started working on a solution.” By being proactive, you can guide the timeline. If the lender moves forward, you are likely to be forced out of your home when you don’t expect it.
Imagine five people owed you money. If four of them ignored you and one was cooperating, whom would you pursue? Banks are the same way. If you are helping, even in the slightest degree, they are much less likely to pursue you in a foreclosure.
Your Short Sale Friends
While tensions may be high, understand that you really have no enemies in this process. All parties, including the lender, are professionals that deal with short sales every day and can provide you support and guidance. Sure, they will expect to get paid, but they are not profiting on your misfortune. They are simply doing the work they do daily. Today, it just happens to include your short sale as well.
Your only enemy in a short sale is time, your worry and inaction.
Unlike conventional wisdom, the best place to start is to find a real estate agent you trust. These days, nearly all Realtors® will tell you they are short sale experts. Some will have the CDPE designation (certified distressed property expert), which let’s you know they completed an education and certification process about how to handle short sales. Other agents will talk about how many short sales they have personally handled in an attempt to win your confidence and business.
The second secret I’d like to share with you is that a Realtor® should not be doing short sales without a support network. So, if a real estate agent tells you they are personally going to negotiate a short sale with your lender, I'd think twice about using that agent.
As your Realtor®, besides helping guide you through your short sale, I immediately involve a title company that specializes in short sales. Why is this a better approach? In short, because they are built and designed to make short sales successful.
A good short sale title company does the following:
- Has an attorney who is able to legally review and guide your home sale
- Has the systems and staff to constantly monitor and communicate with your lender(s)
- Due to constantly dealing with lots of banks on a daily basis, the title company is often on first-name terms with the lenders.
- Helps you understand your finances and how to properly create hardship letters and fill out forms for your lender.
There isn't a Realtor® on the planet who can do all that for you with the skill and professionalism as the title companies I partner with. Further, it keeps me focused on what I do best: market and sell your home. Best of all, the title company does not cost you a dime!
The Short Sale Timeline
While the details and paths can differ quite a bit, here are the broad strokes to a successful short sale.
- Homeowner becomes aware they are unable to pay back the lender the balance of their loan, whether in monthly payments or when the home is sold.
- Homeowner proactively finds and partners with a Realtor® to get their home on the market before the lender starts foreclosure action.
- Realtor® and homeowner (along with short sale title company) present the lender with a reasonable offer/contract for the home.
- Lender reviews and get acceptance from all parties involved with the loan(s) against the home.
- 1st mortgage holder (lender) responds to homeowner and buyer with an approval letter.
- Home sales is completed with the title company acting as the closing company. Homeowner is often forgiven for the remaining balance of the loan and sometimes is provided a payout of a few thousand dollars for completing a short sales and not forcing the very expensive foreclosure process to take place.
Steps 1-3, if done well, can happen within one month's time. This is where the homeowner has complete control. Steps 4-6 can take between 90 days to 9 months, depending on the parties involved. Regardless, these steps are far better than being kicked out of your home due to a completed foreclosure.
Now, more than ever, lenders simply want to have everyone walk away with the least amount of damage. If you proactively work with them, they will work with you to keep your dignity intact and your credit as unaffected as possible.
Short sales are not a perfect scenario, but they are a graceful path to a new beginning.