Short Sale Tip of The Week 7-15-09

Posted on 15. Jul, 2009 by ctlms in Short Sale, foreclosure

At what point do I consult with a short sale professional?

You just got a call from a past client.  They are months behind on their payments and foreclosure is imminent.  Do you go it alone and figure out for yourself what price to list it at, if and when to lower it, what to disclose to buyer's agents, what paperwork to start gathering, etc, etc, etc.  OR, do you call your LOCAL short sale professional and ask those questions before you make a potential misstep that could derail your path to a commission?

You call the pro right away.  Part of a professional short sale negotiators job is to help the real estate agent set all the proper expectations right from the beginning.  Along with set the transaction up from the start so that it has the highest possibility of ending in a successful transaction for the sellers, buyers and of course the real estate agents.

Just like in all real estate transaction, every short sale transaction is different.  The pitfalls to watch out and plan for are different for each deal.  Certain facts have to be determined at the beginning to set the proper expectations with the sellers and the eventual buyers and their agent.  These facts include, the number of mortgages and or liens on the proper, the lenders involved, is the house in foreclosure and is there a date set yet, have the sellers declared bankruptcy or are they considering it.  These are just a few of the questions that need to be answered early on.  Just a few minutes on the phone with your negotiator can set your listing on as smooth a path as possible.

Some sellers will be unsure if they want to do a short sale and what it may mean for them.  Another common request is for me to speak with the sellers to answer their questions and explain the process to them.  I have even meet with the agent and the sellers so we can all discuss the options and how to best proceed.

At a minimum, if you have a short sale listing and you receive and offer, this is the latest point at which it is important to contact your chosen negotiator.  If you have waited this long, the negotiator may already be in a more difficult negotiating position than they would like to be.  But either way, before the sellers sign an offer, have your negotiator review it to be sure that the required short sale specific issues have been addressed in the offer.  Issues such as the offer being AS-IS, subject to short sale approval, when the buyers will inspect the property and mortgage contingency and closing dates.

Some of these term, if not addressed properly from the start can delay the process due to changes required by the lender.  We all know that one of the big killers of short sale deals is the time it takes to get an approval.  Anything that can be done to avoid delays will go to minimizing the time involved.

Bottom line is there is absolutely no reason not to call your local short sale professional right from the start, before the listing appointment.  If you know who the lenders are, we may even have the lenders specific short sale documentation on file to forward for your use at your very first face to face appointment with the sellers.

That’s a rap for this week.  See you all here next week for my next Short Sale Tip of The Week.

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Short Sale Tip of The Week 7-8-09

Posted on 07. Jul, 2009 by ctlms in Short Sale, foreclosure

Common Short Sale Myths and Misconceptions.

This week we will delve into some of the common myths and misconceptions about short sales, properties facing foreclosure, and bankruptcy.

My client has a foreclosure filed against them so there is not enough time to sell the property.

The process in CT usually takes a minimum of 90 days and often well over 6 months, so there is usually plenty of time to help your client.

My commission will be cut and it's not worth the hassle.

It is true that there is always a possibility that the lender will require a reduction in the commission.  Some lenders such as Ocwen always try to reduce the commission.  However loans owned by Fannie Mae cannot be reduced below 6%.  But in a market like we have today, isn't some commission better than none.  And with a professional doing the negotiations there is a better chance of retaining the full commission and limiting the hassle involved for all parties involved.

The seller is just better off doing a deed in lieu or bankruptcy.

A short sale has less of an effect on the sellers credit than any other option including deed in lieu, foreclosure and bankruptcy.  If the seller wants to buy a home at any time in the next 7 years, a short sale is a better option.

The bank will still come after the seller for the deficiency.

If the property gets foreclosed on the bank will almost definitely come after the sellers for the difference and they will already have the authority to attach wages and bank accounts.  In a short sale we have the ability to negotiate the deficiency, hopefully completely eliminated.  Also if the contract has the proper contingency the seller will always have the last say after the negotiations are complete.  If the seller doesn't think the outcome is their best option, they can back out.  However most times a negotiated short IS the best option.

Short sales are to complicated and take to long and aren't worth your time.

If your client knew that was your attitude, do you think they would recommend you to others?  However if you did whatever you could to help them, or at least referred them to agent that was willing to help them, don't you think they would speak highly of you to others?

My client can just declare bankruptcy to keep their home.

It is true that bankruptcy is a option and can help some homeowners keep their homes.  However if the seller cannot afford their house payment then bankruptcy will most likely just delay the inevitable.  Either way that is a decision for the sellers with proper legal advice.

The seller will owe taxes on the forgiven debt.

There are a few exemptions that the seller may qualify for.  HR 3648 provides an exemption if the debt forgiven was purchase money and on a primary residence.  Also an exemption that has always been in the IRS code is the insolvency rule.  Put simply, if the sellers debts exceed their assets, the IRS considers them insolvent and they may be able to exempt the forgiven debt from their taxable income.  Obviously the sellers will need to consult a CPA for tax advice specific to their situation.

These are some of the most common myths and misconceptions regarding short sales.

That's a rap for this week.  See you all here next week for my next Short Sale Tip of The Week.

Subscribe to this blog via RSS for instant updates.

As always Visit the Ask The Expert Page to leave your questions or contact me directly if you need immediate assistance at or