Anyone thinking of selling their home as a Short Sale is already facing a stressful time, adding the normal emotions of escrow and these sellers need special care. What we usually find, however, is the opposite. Often these sellers spend months without knowing what's going on and dreading the threatening notices in the mailbox. These fragile home owners are listed and then get on the short sale roller coaster.
Finding the right listing agent for a Short Sale is critical to avoid the emotional and financial hazards of a Short Sale. Unfortunately there are no specific rules yet on how to list and handle the Short Sale. So you must ask questions of the agent and find one who is going to handle this for you in a manner which fits with your lifestyle.
Short Sales can take a very long time. Understanding that process is the first step. When you first meet with your agent, make sure they have experience in closing Short Sales and understand the process. You should not be the training ground. Many agents hire a Short Sale Negotiator to work with the lenders and negotiate the sale. This can be very helpful, but make sure that you....as the seller.....do not pay anything out-of-pocket for this service. The agent is making this decision and this fee comes out of the commission. If you are considering a Short Sale and anyone asks you for money, time to keep looking.
Some listing agents don't understand the unique needs of a Short Sale.....and let's face it...we often make significantly less commission on these deals because all fees are determined by the bank. Add to this the fact that close of escrow can be months away, it's human nature to put these sales on the back burner.
So does this mean that you must find a very hungry agent.....one who has nothing better to do...and then hope for the best? No! It means that you need an agent who will run the entire process correctly.
The first step is listing your home. This is going to consist of a listing agreement and a Short Sale Addendum. In the Short Sale Addendum, the local Association of Realtors is going to outline the terms of the sale for you. It will tell you that this is not a guarantee and that we are going to pursue this sale and negotiation for you. That you are not obligated to accept any settlement. It is also going to outline that you, as the seller, will have no out-of-pocket fees.
Does this mean that the bank isn't going to ask you for money? No.....in fact often your lender is going to ask you for money. We simply say "NO."
Every state is different, but in California we are a non-recourse state. What this means is that if your home eventually is sold in a Trustee's Sale, the proceeds from that sale is all the lenders can use to satisfy the liens on the home. This is our bargaining power in the Short Sale....if they don't accept our offer, we will simply let them foreclose and they will get less.
Once you have listed your home, we treat this as a "normal" sale. Present your home as you like to live....neat, clean and pleasant. We put a sign in your yard and give you a lockbox for the keys. The MLS listings will specify the details and show pictures of your home. If a listing has no pictures....does this mean the listing agent doesn't care enough to take them? Your agent needs to treat this listing with respect.
Respect is also shown in the way we handle the offers. The pricing is going to be aggressive.....the sellers will get no proceeds, so the only goal in pricing is to get solid buyer offers. This is where there is the greatest difference in approaches. Some agents will send all offers to the bank, as if they already own the home. In reality....the seller owns the home. We need to look at the offers, counter for the best price and terms, and then send one accepted offer to the bank for APPROVAL.
The right buyer for a short sale is similar to one we would want for a non-Short Sale. We check on their credit, we verify funds and counter for the best price and terms. Then we make sure they are going to be there through the Short Sale process. This involves opening escrow and getting a deposit. I ask for $5000 for financed offers and $10,000 for cash offers.
Does this seem unreasonable? Why? Is the buyer serious about buying this home?
Then we put the home in Back-up and discourage showings so the seller can go back to their lives. What we present to the bank is a solid buyer, solid offer and the Short Sale Package. We ask that they review and approve the offer as given. And we all wait. For the sellers....having the home in back-up will allow them to go back to more normal lives.
Are all Short Sales approved as presented? No....so then what?
Once the bank has the package they will approve it or not based on their internal appraisal and loss mitigation policies. This can take months, but many banks are moving quicker now. The response might include a financial contribution from the seller. NO!!!
Since California is a non-recourse state....we never agree to a seller contribution. I often find that other agents advise their sellers to pay this, or accept a note for the requested money. As a buyer's agent....I'm not going to complain. But as a seller's agent, we refuse!
The right agent will work with you and the bank to the conclusion. That might be a Loan Modification or a Short Sale or a Foreclosure. It's a financial, business decision. But sellers need caring for....they need an agent who is there every step of the way and will handle what comes up. This is not a "numbers game"....it's one of the most important decisions a family will make, and needs special expertise and care.
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