While short sales are becoming more common, and lenders are overwhelmed with foreclosures, it's still far from a slam-dunk in getting one through the process. If you're going to handle short sales for seller clients, it's critical to thoroughly understand the process, the lenders, their motivations and procedures, and how to handle your seller to get the information you need to help them. Here are 8 tips to help you make it happen for your sellers.
1. Are You Experienced in Short Sales?
If you're about to become involved in your very first short sale negotiation, you need to go into a high gear learning process. Get advice from someone who is experienced, and read everything you can about the process and especially why short sales fail. If you have a few successful short sales under your belt, you still need to keep up with current events and news, as things change and lenders change policies and procedures.
2. Are You The Only Negotiator for the Seller?
Some sellers want or need an attorney or short sale specialist involved in their sale. This could be something you may not know until it happens, because you took the listing at the beginning without a short sale in the plans. Involving an attorney or short sale specialist isn't necessarily a problem for the real estate professional, but get the rules spelled out up-front, especially about fees and commissions.
3. Which Lenders Are Involved and How Do They Operate?
If you're working short sales regularly, you should have a file of lenders you may encounter, and in it should be all the information you can gather on how they process a short sale, the time line involved, and the percentage that actually make it to closing if you can find that out. Some lenders are much more difficult, and a short sale can take a lot longer with these lenders.
4. Get The Lender's Short Sale Forms Package Right Away
Lenders and banks LOVE paperwork and procedure. They'll have their pet forms, some of which may not even seem relevant or important, but they're the forms you and your seller will have to submit. There will be a lot of information to be gathered and entered on these forms. Every lender, account and the specifics of all debts are only the beginning. Very important is an authorization form allowing you to communicate with the lender on your client's behalf. Then there's the hardship letter explaining all the details about why the seller cannot continue to pay their mortgage.
5. Always Be On Top of The Time Line
Always be aware of where your seller is in the process, how many payments they are in arrears, and when foreclosure filing is likely to happen. Make sure that you are copied on all communications from the lender. Know what the lender is saying and when, and know all deadlines that are communicated to your seller from the lender.
6. What Type of Loans Are Involved?
What type of loan or loans are against the property? VA, FHA, Conventional, USDA, or something else can make a difference in the lender's response to offers. Some loan types give them more flexibility, and some are quite limiting in how the lender can negotiate an offer. Loans guaranteed by government or other entities can provide a hint as to how far the lender can come down based on how much they'll recoup from the guarantee.
7. Work With Your Seller - Know About ALL Loans and Liens
Whether it's intentional or an error brought on by the stress of the situation, your Seller may forget to inform you about a loan or lien on their home. Keep asking for all documents and mortgage information, and every payment they make. Sometimes they may even have a HELOC or other equity loan that they forgot was guaranteed by the home.
8. Don't Submit Ridiculous Offers
While you're out there fighting and marketing to get a buyer to make an offer on your client's home, it's not wise to take any offer and submit it to the bank. Lenders don't act in the same way as individuals in negotiations. A ridiculously low offer can often result in a flat rejection, not a counter offer to stay in the game.
