Choosing the right Realtor to handle your short sale cannot be understated. While short selling is fairly common in today’s market, not every broker (regardless of their years in the business or amount of non-distressed annual sales) is qualified to handle this complicated, delicate process.
There are two different types of short sales. One is the kind where a seller wants or needs to move, but cannot sell the home for what is owed on the mortgage and doesn’t have the funds to make up the difference. The other is where the seller is no longer able to afford the home, has fallen behind on the mortgage payments and is heading into a foreclosure. In this post I focus on the short sale process that needs to happen when the seller is going into foreclosure.
Being a home owner in distress has to be one of the most stressful events in life and since so much of the outcome depends on the Realtor you chose to get your short sale closed, finding the right agent from the start is crucial. Here is some food for thought when looking for an agent to best represent you.
Short sales are still prevalent in Denver, but not every real estate agent is experienced with that type of transaction. Many brokers may have taken short sale classes or seminars, but that alone doesn’t make one an expert, My advice to any seller listing their home as a short sale would be to find an agent who has actually closed short sale deals, because as I mentioned, they’re complex.
Since short sale listings are a different animal than a regular resale, sellers need a Realtor who will be able to explain details and walk them through the entire process start to finish and educate them before they list. Short sales are usually time sensitive due to the seller’s approaching foreclosure date, so being represented by a broker who has a learn-as-we-go-attitude might not be the best choice.
While every real estate transaction is unique, here are some points to consider when listing your home as a short sale in Colorado:
1. During your first meeting with an agent he or she should educate you about the entire process. The complexities of short sales require special expertise. My partner and I use a professional short sales negotiating service on our listings, which also includes a consultation with an attorney (free of cost to the seller). Before you list your short sale, it’s important you understand the possible ramifications (will the deficiency amount be forgiven, is the amount taxable, etc.). If your agent doesn’t provide, or at least suggest an attorney consult, my advice is still that you get one prior to listing your home. After you’ve learned about the entire process and decided to move forward with the short sale, the hardship package is put together for the lien holder to review.
2. The next step is to decide on an aggressive, yet justifiable list price. The key is to get an acceptable offer on your home right away (hence the aggressive price to generate interest), get the contact between the seller and buyer executed, and send everything (including your hardship package) to the lien holder for approval as soon as possible in order to stop the foreclosure process. The temptation might be to price the home ridiculously low, but unfortunately that can backfire and sometimes does. During the approval process the lien holder will review recent sales for your neighborhood, to make sure the contract price is reasonable. An underpriced short sale contract will usually generate a counter offer from the lien holder, which in turn might cause the buyer to terminate their offer. I strongly feel that it is our job as short sale listing agents to make sure the offer you chose to accept is from a serious buyer. Short sale approval can typically take anywhere from 2-5 months, so your Realtor should screen buyers to identify those that are going to see the transaction through and wait until the approval comes in. The last thing any seller would want is to finally get the lien holder’s sign off on the contract just to learn the buyers have moved on to something else. I’ve learned to stay in close contact with the buyer’s Realtor during this waiting period, assuring they are still vested in the transaction and receive regular updates during the process.
3. The next step is usually more behind the scenes. Short sales require almost constant negotiation with the bank (lien holder). Some agents (my partner and me included) use a professional short sale negotiator for a more efficient and desirable outcome. Communicating with banks about short sales is a demanding, full-time task and I believe my sellers benefit from my choice to outsource this task to a professional who does it all day, every day. I recommend that when sellers interview Realtors to represent them in a short sale, they ask how the agent plans to handle negotiations with the lien holder; like I mentioned, it’s a full-time task in and of itself.
Facing foreclosure is stressful but choosing the right Realtor to help you through the process can ease the burden. When interviewing agents, ask the important questions I covered in this blog. And of course don’t hesitate to contact me with any short sale concerns, my business partner and I would love to help you!
You can also learn more about short sales on my website