Aliso Viejo, CA – November 3, 2008 … Over the past year we have seen and read more about short
sales than we probably ever wanted to know.
For most pros out there it’s a market niche that they have avoided
because of the difficulty and uncertainty generally associated with short
sales. And I think we would all agree that the process is, if anything,
daunting. But there is one thing that is
often overlooked that could increase your success rate.
Many times
in the rush to get the lender onboard the documentation process becomes the primary
focus. Everything is zeroing in on
getting the price and the primary lender’s cooperation and in the process a critical
item sometimes get’s put off or forgotten about.
The average
loss on a short sale is around 19% of the loan amount versus 40% for homes sold
after foreclosure. It’s a great
negotiating tool to use with the lender but you need to make sure you are
negotiating with the one that makes the decision. Generally speaking to the lender’s loss
mitigation department can handle the negotiation even if the loan was packaged
into a mortgage backed security. But the
bigger issue is not with the primary lender.
Too often
the failure to identify and factor in junior lien holders until later on in the
process causes the deal to fall through. In the case of junior mortgages a rule of
thumb suggests that if there is 20% left over after dealing with the first you
are most likely in the ball park. But
remember, nothing is cast in concrete until all parties have signed off … and
that is what usually causes the problem.
You are fighting a time crunch from the “get go” and the more complex
the financial issues are the harder it is going to be to hold all the parties
together. The answer may be a simple
step that gets overlooked in the heat of battle.
A simple
title search up front before sitting down with the seller can save a lot of
surprises. Yes, they told you about the
first and the HELOC but they forgot about the tax lien or the 3rd
that Aunt Mary holds. The short sale is
tough enough in a perfect world and the last thing you want is a buyer and
seller in agreement on a price that doesn’t have a chance of flying.
And while
you’re at it, don’t forget what we discussed in a previous article. The sale is sure to be in “as is” condition
and your buyers need to be very confident that they know exactly what it’s
going to cost them to get the property in condition to meet their
requirements. Be certain that they are
getting the professional advice they need to make that decision and are not
relying on something you said in passing – which needs to be “left
unsaid.” And don’t forget to use those
costs when negotiating with the lender on the final price. Put all this together and you have a whole
lot going on with all 3 parties … the last thing you need is for the “rabbit”
to jump out of the hat at the last moment with a sign that says “what about
me.”
The short
sale can be a good deal for all parties but there are very few of them that
close easily. Do your homework and make
sure that both the buyer and seller are fully aware of all the terms and
conditions and are prepared for the eventual delays that are sure to come from
the lender(s). Get Aunt Mary or the tax
man out of hat up front and keep them from killing the deal. If their presence makes the deal impossible
you want to find that out as early as possible to avoid wasting everyone’s
time.
Moving into
the short sale market niche can be very rewarding but it’s a process that
involves a lot of twists and turns along the way. If you want to learn more about short sales
you should check out the Certified Short-Sale Professional (CSP) course from
RealtyU. The CSP online course as well
as all of RealtyU’s other designation courses are being offered in November at
a significant discount in acknowledgement of Designation Awareness Month. Visit www.RealtyU.com
and check out this great offer.
