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By Tara-Nicholle Nelson | Broker in San Francisco, CA

5 New Short Sale Myths - Busted!

Common short sale myths once evidenced widespread confusion about what a short sale is - mostly misconceptions that they are quick, or faster than “normal” real estate transactions.  In reality, the “short” in short sale has nothing to do with timing. Short sales usually take many multiples of time longer than traditional real estate deals - running anywhere from 3 to 8 months-plus, on average, from contract to closing!

The only thing short in a short sale is the sales price - it is less than, or “short” of, the amount the seller would need to pay off all the loans and other outstanding obligations (tax liens, delinquent HOA dues, etc.) against the property. In these situations, unless the seller is willing to write a check to make up the difference, their lender(s) must agree to forgive the shortfall in order for the sale to close.

But most short sale buyers - and sellers - know this stuff by now.  With one in four homeowners in America owing more on their homes than they are worth, short sales won’t be going anywhere for a long time to come.  And the more people get involved in a short sale transaction, the more confusion and misunderstandings result. 

Here are 5 of these “next-generation” myths about short sales, and the facts to shatter them:

Myth #1: That there is anything typical, standard or normal when it comes to getting a short sale approved.

Fact:  There’s no such thing as “normal” in a short sale.

Some of the most frequently asked questions in the Trulia Voices Community include things like:
  • Is it normal for a bank to respond to a short sale with a counteroffer higher than the list price and the appraised price?
  • What’s the standard amount of time it takes a bank to approve a short sale package?
  • What’s the rule of thumb for how much below asking a bank will approve?

Despite the recent goverment “streamlining” efforts that promised to impose a set of standards most banks would follow in processing short sales, it’s still a black box experience for most buyers and sellers.  Buyers submit their offers, sellers sign them and hand over all their financials to their listing agent who submits it all to the bank - and then often no one hears anything back for a few months, if ever.  Other times, the whole thing is approved in a matter of weeks (though this is much less rare).

The bank is in the power position, and can respond to your offer however they want. They may counter at a much higher price and demand a cash payment from the seller.  Or not.  They may take weeks, or they make take six months.  They may approve a way-below asking offer, or require a hundred thousand over the asking price.  Forget the idea of standard, when it comes to a short sale.

Hint: short sale listing agents who have done a lot of recent, successful short sales with the same bank do often have insider knowledge that is the closest thing to a rule of thumb over what any individual bank’s practices are. If you’re a buyer, prioritize short sales that are listed by short sale masters - your agent will know who they are.  If you’re a seller, ask prospective listing agents for a list of short sales they recently closed, including which bank(s) were involved.


Myth #2:  It’s smarter for homeowners to walk away than to short sell their homes. 

Fact:  Increasingly, I’m hearing those who own upside down homes ask why they would bother with a short sale, when they could just walk away with much less effort and drama.  The reality is that walking away and letting your home go to foreclosure is an extremely serious, personal decision - the wisdom of which varies dramatically owner to owner and state-to-state.  Some states allow lenders to sue homeowners who default on their mortgages, and impose state taxes on the mortgage debt cancelled out in a foreclosure, sometimes totalling tens of thousands of dollars.


Other homeowners’ family and financial plans would be impaired much less by a short sale than by a foreclosure.  For still others, it’s pretty much a wash.  For everyone, though, it is faster to recover your credit and ability to take out another mortgage on a new home after a short sale than after a foreclosure.

Given that a short sale costs a seller little or nothing except some time and effort, in many instances it is smarter to make the effort to short sale than it is to walk away.

Myth #3: A short sale is the same as a pre-foreclosure.  

Fact: A short sale is a home being sold for less than what is owed on it. A pre-foreclosure is a home that is in some stage of the foreclosure process because the owners are behind on the mortgage payments.  Many short sales are pre-foreclosures, because the owners stopped making payments when they put the home on the market, either because they can’t afford them, they are simply done with the property and don’t see a need to continue paying on it, or because they feel the bank is more likely to approve their short sale application if they are in default on their loan (a position many experienced short sale agents argue is true).


But not all.  Remember, nothing is standard when it comes to short sales. Short sales are closed every day on which the seller is still in good standing on their loan - these are mostly the short sales of owners who elect this strategy out of a desire to maintain their credit as much as possible, but have to move for work or family reasons.

Buyers should not assume that every short sale will come on the market later as a foreclosure; they should inquire as to any foreclosure notices against the property, and keep track of those time frames.  Many a buyer has been surprised when the bank auctions a property they are in contract to buy.

Myth #4:  The the buyer’s broker - or even the buyer’s offer - has much to do with getting a short sale approved.

Fact: Writing a clean, well-qualified offer is important to getting a short sale seller to believe that a buyer will hang into the short sale for the duration so they will sign the contract. However, the buyer’s offer and agent have little, if anything, to do with whether the seller’s
bank green lights the deal, as needed to close it.

While the bank obviously cares about the price you offer, even that’s not as important as several other factors, including:
  • the bank’s perception of the home’s fair market value (as usually indicated by a third-party broker’s opinion, or an automated computer model),
  • the seller’s financials (if they have a bunch of cash stashed, the lenders is unlikely to let them sell the place with no contribution from them)
  • the completion of the seller’s workout application package and follow-up (squeaky wheel gets the grease and all that, and it’s the listing agent that needs to be that, often, for these transactions to get closed).


Myth #5.  That the bank “can’t” do X or “has to” do Y. 

Fact: The seller’s bank in a short sale is being asked to waive debt that they are legally owed. They have the absolute right to simply refuse entirely to accomodate this debt forgiveness request. However, if they do choose to waive some or all of the shortfall, they also have the right to place whatever conditions on that waiver. They can ask for more money from the seller - or the buyer (and often do). They can ask the agents to reduce their commissions (and often do that, too).  They can refuse to pay various closing costs, if they want.  And the buyer or seller can counter, accept or refuse any or all of the bank’s demands, too, but know that the banks do have the right to place whatever conditions on the short sale they want.  After all - he, she or it who has the cash (or the mortgage, in this case!) makes the rules!



Psst - you should follow Trulia and Tara on Facebook, too!
So, why buy a short sale?  With all the hassle, there are still some great deals to be had.  In many cities, most homes on the market are short sales, so if you rule them out, you may never find a home. 

Comments

By Janine Kowalski,  Thu Jul 15 2010, 04:37
I still encourage my buyers to look at non short sales first. Buyers often think they have the patience to deal the process, but 90% get impatient ,back out then lay the blame on you, the Realtor, no matter the outcome. Escrow deposit disputes are also an issue as in most cases the Title company or the Attorney are holding the escrow.
By Rosemary,  Thu Jul 15 2010, 05:06
I have been representing a buyer in a shot sale for going on nine months. We got it approved and then the Bank auctioned it off right out from under them even with a fully executed purchase and sale. They have now come back to us after the auction trying to sell it to my clients for what they had orginally offerred! The shame on this is that they a. lost their 0% down fiancning tey had locked in and b.) probably lost their 8,000 tax credit. We have a state rep workingon this since this was in my opinion the most ludacris thing the bank could have done. The state representative has filed to sue BOA and Freddie Mac to fet this resolved.
By Voices Member,  Thu Jul 15 2010, 05:30
Good general comments. I am finding an acceleration in the strategic default arena particularly in the higher end homes. Remember as an agent be very careful to advise your clients to get the proper legal, accounting and tax advice. Get this notice signed by your seller that they have received this advice. We follow up and make sure they did so. Good for the client and good for us. Oh by the way I am never too busy for your referrals to the Scottsdale/Phoenix area. don@azgolfhomes.com
By Judy & Lee Riggenbach,  Thu Jul 15 2010, 06:10
My husband and I have been trying to sell our house for 16 mo. now. The problem is, there are several foreclosures in our development and that's hurting us. We are upside down, like so many other people. We are considering a HomeBuyers program but are somewhat skeptical. What do you think about this??? We just want out to move back to Florida to be closer to our families. We have a house already picked out and we qualify for a VA loan. We also have a couple that wants to buy this home but they have to sell theirs, first. It's a mess and we're getting more and more discouraged. What help can we get??? Judy Riggenbach
By Linda Kemp,  Thu Jul 15 2010, 06:36
This is great information for both real estate professionals and the consumer. I just encountered a problem when I went on a recent listing appointment. The couple had divorced last year and the judge presiding over the case told both the husband and wife to let the house go into foreclosure! Because of this the husband wouldn't sign the listing agreement. I was astounded that a judge would actually contribute to the economic hardships rather than be part of the solution! We all have a responsibility to do whatever we can with inttegrity and compassion.
By J,  Thu Jul 15 2010, 06:37
I enjoyed reading your post! So much of what you've written is true. Unfortunately, banks are not being held accountable for their actions related to short sale option requests. It is a slippery slope and many are at the mercy of the financial institution. It is unreal the position some banks are forcing agents, clients and buyers into. The seller's agent is stuck with trying to competently explain to all parties when a bank switches tracks without anyone's knowledge. As short sale option professionals, we are trying to bridge a gap and offer resolution to the banks and home owners. Of all the short sale options I have been involved with and regardless of experience, some days I get lucky and others I do not. It is always a gamble.
By Mortgagelady,  Thu Jul 15 2010, 06:55
Just a quick comment Tara, All good info by the way!....As an agent you may also want to have your sellers, if they are going to be prospective buyers looking for a mortgage, speak to a mortgage professional, along with there accountant and attorney. They may need to determine how there decision, short, sale, forclosure, short sale with late mortgage payments and without, will impact there ability to get a new mortgage. There are guidlines to consider regarding wait times to apply for new a new mortgage depending on the type of loan they need on there future home. Please note there will almost always be a wait time but it will vary depending on product ..i.e. govt loan vs conforming conv vs jumbo...and the situation surrounding there short sale or forclosure. Just an FYI
By Bill Morris,  Thu Jul 15 2010, 07:07
All good info .... Many prospective home buyers think that short sales and foreclosures are where the "bargains" are. That is almost never true. As the article above says, even if a short sale is priced low the lender (or, worse, lenders) have no obligation to approve any offer at all, at any price that doesn't allow for full payoff. Moreover, in a market like ours in the Austin, Texas area, with balanced supply and demand, the market is very effective at matching price and value. If a property sells for a below market price, there is always a reason!
By Glenn,  Thu Jul 15 2010, 07:07
The theory is solid. While possession is 9/10 of the law, banks do not want to be in the real estate business. It has only cost them money and seldoms benefits their greater good. Banks do have the upper hand at making the final decision but the bottom line is that as a buyer I will only pay up to what I feel is a match of value to price. That means a home is really only worth what a buyer is willing to pay.

Intimidation should not be a precursor to buying a home. Short sale, long sale whatever - treat it like any other purchase, value for dollar. If the marketers don't like your bid, walk away. God knows there is a lot to choose from out there.

You can chat about all the gory details but that's the bottom line. Indeed it does however offer an option for upside down sellers.
By Maggie Dokic,  Thu Jul 15 2010, 07:13
Tara, kudos to you for an excellent post. Great info for both sellers and buyers considering short sales. I have found that most banks have gotten better at this, although, as you say, nothing is standard. Every single short sale listing I have had this year has closed and with less effort than it took last year. Of course, it has helped that they were all single lien transactions and the few that did have a 2nd, were with the same lender. I strive to consult accurately with my sellers so we are all on the same page as to whether they qualify or not. Just wanting to short sale because the house lost equity is not a hardship.
By Matthew Miner,  Thu Jul 15 2010, 07:32
All the issues mentioned in these posts are do to agents lack of knowledge while conducting a short sale. Homes go to auction all the time during a short sale. The reason is the listing agent trusted the bank to communicate about the transaction with the trustee. BIG mistake. You must always find out who the trustee is and contact them as the listing agent.

Another issue I'm surprised this article did not cover is the approval letter. Banks are using cryptically written letters that sound as if they are forgiving the debt on first When in fact the banks are leaving all doors open for future legal remedy. Most agents and sellers do not know this. The borrower will sign off and three years down the road the bank comes after them for the deficiency on the first mortgage. Remember, in Washington state foreclosure is the sole remedy the mortgagor can pursue against the borrower on a primary mortgage. Not so with a short sale. Agents need to get the approval letters change or you may find yourself in a lawsuit in three or four years.
By Kimberley Kelly,  Thu Jul 15 2010, 07:39
AS a Short Sale specialist in the Coachella Valley, which has been extremely hard hit, I love reading posts from agents in other areas of CA and other states. Ultimately, the bank can do what they want, BUT a good short sale List Agent can usually keep the deal alive until the very end. THe only reason I have for them falling out is the Seller deciding to let it go to foreclosure because the Bank will not sign a non-pursuit for deficiences letter. If I tell my Sellers up front to meet with their CPA of course, then to tell me exactly how much they can put towards the note, (s), I will also ask the Buyer's Agent to see if the Buyer will put in anything if asked. The BUyer can figure that amt. in their highest and best price they will pay for the home and at that point, we usually all hang in there together! For short sale info: http://www.k2sells.com
By Matthew Miner,  Thu Jul 15 2010, 07:40
FYI the average saving on a short sale is 13% off market value.

I've been told California passed a law preventing lenders from using deceptive practices during short sales. This would include pursuing deficiencies on first mortgages in California. California is also a non-judicial foreclosure state. We need to pass something like this in Washington. Unless the national banks change there boiler plate letters it's never in the sellers best interest to sell short. They should just foreclose. If we passed laws protecting consumers from the banks we could close many more short sales.
By Matthew Miner,  Thu Jul 15 2010, 07:44
Kimberley,

Thank you for you post. Does that work with say B of A or Wells Fargo? I too specialize in Short Sales in Seattle. I have found it hard to get these banks to change the letter. I will stick it out to the end of course. We have some ideas but any input would be greatly appreciated.

Take care,

-Matt
By Bonnie Aubin,  Thu Jul 15 2010, 08:01
When I learn of a potential short sale, I insist my sellers hire attorneys who are experienced in working short sales. The attorneys help the sellers write their "hardship" letters, put together the whole package right the first time, and follow up and negotiate with the lender(s). They have the staff to make regular phone calls to the lender(s) - I don't have the desire or the time to sit on hold nor do I have the patience required when passed from one bank rep to another! The attorneys are successful in negotiating their fees with the lenders so it's a win-win in a less than great situation. Counting the days until short sales are a just a bad memory!
By Carl Massi & Nancy Sarazen,  Thu Jul 15 2010, 08:32
Great information, and very helpful. But we still try and stear our buyers away from short sales first. There are great homes out there that are not short sales and very good prices. Yes there are those buyers who feel they are not getting a deal unless it is a short sale or foreclosure,

But there are no deals! Buyers need to remember if a seller is going short or into foreclosure, and they cannot afford to pay the mortgage---what makes anyone think they have done anything to keep the home up. This goes for bank foreclosures as well. Most banks do nothing to keep a home up, and just let it sit and deteriorate. So what a buyer may think is a deal really turns into a money pit .

However, you are right and sometimes there is no getting around a buyer who wants the Quote Unquote "Deal"---and they have to find out for themselves---that dealing with these banks is a long and drawn out process. One thing is for sure---these banks are not as smart as they would like to you believe---or they would be moving these distressed properties faster before they lose even more value on their books.
By Diane and Gordon Kane,  Thu Jul 15 2010, 08:37
Great explanation of why short sales are so frustrating and time-consuming. Lenders have all the power. They take as long as they want to make decisions, can ask sellers for as much money as they want, and they pay as little commission, past due HOA fees, etc. as they want. As you said, with one-in-four behind in their mortgages, we will be dealing with short sales for a long time to come; especially in the first-time home-buyer price ranges so we need to have patience, knowledge and nerves of steel.
By Trent Slatton,  Thu Jul 15 2010, 08:51
My experience is that short sales are only frustrating when you are on the buy side as you have zero control over the situation and may be at the mercy of a Realtor who does not have a clue about how to properly execute, negotiate, escalate and close a short sale.
On the listing side, my experience is that they are only frustrating if you let them be. It is a specialized transaction and you must have some know how, and you can only get that through experience or training. The same rules still apply, you have to treat everyone nicely and you are still going to deal with numbskulls, just as in some "normal" real estate transactions. They going to be here for a while, so quit whining and learn how to deal with them.
Helping a homeowner avoid foreclosure is an extremely satisfying experience!
By Roxanne Sarmento,  Thu Jul 15 2010, 09:58
Great article and feedback! I think everyone considering a short sale sould be informed about the possibility of the banks coming back down the road and demanding payment. I understand a loan agreement should be honored but let's not forget that the banks and lending insitutions played a major role in the real estate collapse.
There needs to be firm regulations addressing this issue accross the board.
By Mary Guariglia,  Thu Jul 15 2010, 10:00
I have a question about "in lieu of foreclosure". I am putting the package together that Chase Bank has requested for my client on a mortgage property in Detroit, MI that turned out to be not only un-rentable, but unsellable due to the fact that it is in the "war zone" area. It was not 2 years ago when he bought it and had Section 8 renter in place.

Anyone with any knowledge of where I can fine a good hardship letter to compare to make sure I cover all the points that they are looking for. I was asked to help out on this for he is totally submerged in his work to make ends meet.
Honestly, I have not dealt with this type of issue in RE for I am assignments with owner financing property deals.
Any advice would be appreciated and welcomed.
By Michele Peters Esq,  Thu Jul 15 2010, 10:16
As an attorney working in Manhattan with luxury short sales, and as a volunteer attorney in the foreclosure division of the New York City Bar - there are important issues to keep in mind. It is a fact that the banks are not being closely scrutinized by the government in how they implement their programs - short sales and loan modifications. It is a fact that if a homeowner is in the formal proceeding of a foreclosure, attorneys and the court system can then truly help a homeowner. This is a horrendous truth and I wish our country would rise up in anger over this injustice. Once the homeowner falls under the "umbrella" of the judicial system - the court will do the scrutiny of the procedures that no one has held the banks accountable for in the ordinary course of doing business. An extremely important point to keep in mind for homeowners contemplating a short sale -- first priority is given to homes that are primary residences; and IMPORTANTLY - the banks are not always waiving the deficiency amounts and reserving the right to pursue the homeowner for the short fall to the loan.
Regarding Mary Guarigila -- a hardship affidavit is relatively short and CHASE provides the form on their website that they want used. Just state the facts. https://www.chase.com/chf/mortgage/hrm_shortsaleinfo
By Flower Medley,  Thu Jul 15 2010, 10:20
Great explanation and useful information for the buyer as well as the owner!
By Curtis Harris,  Thu Jul 15 2010, 10:50
We have been doing shortsales for 5 years and find there are winners and losers. Most bank will give you a payoff of usually 82% of the BPO (brokers price opinion) so it has to make sense to the bank. Yes it is all about the numbers. If you are in the New York area (5 boros) contact us for you shortsale needs. http://www.c2property.org.
By Michael Winkler,  Thu Jul 15 2010, 10:52
Well done. Here is a great article about short sale timelines: Deutsche Bank Ranks Servicers on Speed of Short Sales... http://bit.ly/shortsaletime.
By Peggy Roberts,  Thu Jul 15 2010, 10:53
Excellent article -- great overview. In a challenging environment where so much is outside of our control, the more we can manage client expectations and educate our clients -- both buyers and sellers -- about the potential pitfalls of short sales, the more valuable our counsel and services will be and the more we can help them navigate these choppy waters successfully. Realtor liability is a huge issue and that is why we require our sellers to obtain legal counsel prior to attempting a short sale.
By RJ Laffins,  Thu Jul 15 2010, 14:36
Thank you Tara, very helpful!
RJ Laffins

http://realestate.rjlaffins.com
By Mark Doran,  Thu Jul 15 2010, 18:13
Judy Riggenbach, my name is Mark Doran and I'm a realtor with Keller Williams; our offices are in Glendale, Burbank and La Canada areas.

Should you need help or advice you may contact me, if I can help terrific; if not I'll bet I know who can.
By Melina Tomson,  Thu Jul 15 2010, 18:53
Myth #5 is the most important I think. Buyers assume that the banks will act in a way that is logical, but what is logical to lay people is not the same as the contracts that they have with investors.
By Roxy Van Bockel,  Thu Jul 15 2010, 21:38
1) It is good to advise your clients to check if a Deed in Lieu is a good alternative to either a short sale or a foreclosure
2) Seller's need to be aware what it means if the letter of approval indicates that the bank is reserving the right to come after the seller after closing for the deficiency. Have your seller's discuss this with their attorneys or legal aid. Michelle addressed this as an attorney. READ IT as I think agents are not addressing how serious this could be later!!!!
3) If the seller's attorneys advise them to do a foreclosure rather than a short sale....back away from the listing.
4) If there is more than one lien against the property reconsider if it will be a viable listing that you can close.
By Kalli,  Fri Jul 16 2010, 04:33
As a first time home buyer of a short sale property in DC metro area/ Fairfax county. I am in deep water with more then $10,000 under water. now. I am waiting for BOFA to clear it from NOV 2009, I cam close to closing last month but the underwriter did not get proper letters from both banks. my underwriter asked for extension to BOFA for closing as BOFA took more time to provide explanation for the approval letters. But it took 3-4 weeks for BOFA to see the request for extension and now they have asked for BPO at this stage..delaying it and frustrating everyone involved in the process. I hope government comes up with some big sticks to strike against these banks. I am stuck bcoz of the $8000 credit otherwise..I must have pulled out long ago.
By Kimberly Barton,  Fri Jul 16 2010, 14:33
Several points that I would add: as a Realtor, we should not "steer" a buyer away from short sales. We must learn how to educate and set expectations using good communication skills. Yes, Short Sales on both the List and Sell sides are challenging. They both utilize different skill sets. Some will be better equipped in time, skills, systems and patience than others. "When in doubt, refer it out."

Another point that I would clarify, emphasize and reiterate: Just because a bank AGREES to allow a homeowner to sell at a shortfall on the mortgage, does NOT equate to an AGREEMENT to forgive the debt. The homeowner may face future collection for the short fall PLUS collection, attorney and legal fees (as per the original lender mortgage documents). In order for the homeowner to be truly released of the remaining debt and fees, a deficiency release must be legally drafted in writing and signed by the lender and the homeowner. Otherwise, the bank may reserve the right to pursue at any time in the future when the homeowner may be in a better financial situation; or sell the debt and rights to collection to a third party debt collection agency.
By Bill Rudge,  Sat Jul 17 2010, 03:07
If one reads through the article and the posts given by many agents it is my advice to all buyers, "buyer beware". Many , "so-called" short-sale experts / specialists have noted their problems. I have worked several short sales in my area and there is no such thing as a "short-sale" expert or specialist. As the posts say the bank or banks call all of the shots and no 2 short-sales are ever the same and there are absolutely no guarantees of anything that takes place during a short-sale ever getting through to the settlement. Yes, some do but far more fail and a lot of time and effort becomes wasted. In fact, as an agent for the buyer's in most cases you not only lose the deal but also a client after months of long, hard, and frustrating work.
By Terry Dawson-Realtor,  Sun Jul 18 2010, 11:51
We are finding with the NEW HAFA rules - which will hit next month - we can reduce the process from 6 to 8 months to as few as 60 to 90 days. The Banks will have 14 days to respond - watch the updates - get your CDPE certification. Go to http://www.cdpe.com - updates and news is free. Terry Dawson, REMAX Select 1 - Friendswood Texas
By Helen Oliveri,  Sun Jul 18 2010, 14:10
Very interesting piece of information.
By Free Short Sale Negotions,  Sun Jul 18 2010, 20:00
Realtors, stop doing your own short sales!! This article proves that it is a financial landmine out there when trying to get short sales approved. Trust a company that is nationwide with over 18 years experience in the field. http://www.shortsalesforamerica.com The best part is, you keep 100% of your commission!
By Jeremy Higginson,  Tue Jul 20 2010, 00:18
Great article! FYI, Fannie Mae has a standard max $2,500 or 2% which ever is less that they will pay towards buyers closing costs. So if your buyer needs 3% towards their costs it could become a problem. I recently learned this in a short sale I am working on.
By Ben Benita,  Tue Jul 20 2010, 02:29
LOTS to comment on here, so let's go:
JEREMY - there is no such thing as "standard" in short sales, EVERYTHING is negotiable. Escalate your file high enough up the food chain and you CAN get 3% closing costs, you CAN get 6%, commission, etc., and, it will come with a voice mail or e-mail stating "Jeremy, we made an exception for you....just this once".

SEVERAL PERSONS -- using professional negotiators, I have NO CLUE why agents do not do this. Highest and best use of an agent's time is finding Buyers and Sellers, not navigating the short sale jungle, leave that up to companies like mine, we have helped more than 500 Sellers across the country since we started doing short sales several years ago.

TERRY -- time frames ar a JOKE and TOTALLY dependent on the Investor. Ever wonder why some B of A short sales are done in 30 days, others in 3 or 4 months?
ANSWER - -the ones done in 30 days are portfolio loans (where the Servicer and Investor are one in the same, B of A in this case). When the Investor on the note is government backed (Fannie, Freddie, etc.), or it is a private Ivnestor (the Terry Dawson Pension fund), you will note MUCH MUCH longer short sale processing times

KIMBERLY -- dead on, educate your Buyer's and ALWAYS ALWAYS ALWAYS ask the listing agent how many short sales he/she has done previously (if less than 3, I would head for hte hills), also ask if they are using a professional negotiations company and if so, find out who and pre-screen them....

MICHAEL -- LOVE LOVE LOVE your link on Deutsche bank ranking servicers, does anyone here think it just MORONIC that they rank GMAC number one with ONLY A SIX MONTH TURN TIME!!!! Do they not realize GMAC and the other Servicers are just taking these guys to the cleaners on Servicing fees!!!!

QUICK NOTES:
Understand the NUMBER ONE REASON SHORT SALES TAKE SO LONG:
Servicers get paid more money to drag out the process. Servicers (who your Seller writes his/her check to) typically get paid 1/4% annually to Service performing notes (when payments are made on time, and, 1/2% to Service non-performing notes (when payments are late....ever wonder why some Servicers tell you your client should start missing payments.....now you know why you hear that).

How hard and efficient do we honestly expect ANY of these Servicers to work to get these done, and, STOP GETTING PAID SERVICING FEES!!!!

Did anyone here catch how B of A had one of their best quarters to date as a loan Servicer....anyone hear working on a B of A short sale and now know the answer!!!!!

OK, enough venting and ranting, all my best to everyone on here and keep kicking butt for your clients.....they are going through the most difficult financial time of their lives.

Be certain to get a copy of my short sale negotiations book on Amazon (TONS of good stuff in there):
"Are You More Likely To See Bigfoot Or A Short Sale Approval Letter?"

Sincerely,
Ben Benita, Author, Speaker, Short Sale Expert
By Becksnfx,  Tue Jul 20 2010, 10:29
well coming from a buyer I really do hate dealing with a short sale house we actually had found 3 short sale and many reo only to find out with many in the end they will not pass fha especially in regards to unpermitted additions the first house we thought we had we found out in the end the bachelor apts where not permitted and even thought the listing agents now knew for a fact the apts where unpermitted still relisted it as permits unknown it has now fallen out of escrow 3 times so why not post on the listings will not pass fha as to not waste the buyers time or we bid on houses never to hear back from the selling agent as to weather our offer was accepted , no offense to the rael estate agents out there but we have encountered so many unprofessional ones out there we have been looking for almost eight months and have become so disenchanted that we just might be saying arizona here we come .
By Kevin O'Rourke,  Wed Jul 21 2010, 20:39
While I agree that experience is important, I disagree that sellers should not work with an agent who has handled less than 3 short sales. This arbitrary number seems designed to try to exclude other agents from the market rather than significantly assist the distressed homeowner.
As everyone agrees, each short sale is a unique situation, and it is possible for a smart but less experienced agent to do a fine job. One who has taken the time to learn as much as possible about Short Sales, eg, getting a CDPE accrediation, reading forums such as this and keeping up to date with Government programs and guidelines, in addition to being a good salesperson and negotiator. Short Sales are still Sales!

Remember, everyone of us started with one transaction.
By Jayson Wingfield,  Thu Jul 22 2010, 05:57
I'm looking forward to the day when there aren't any short-sales left - aka, when the market has improved and home owners aren't upside down anymore. Short-sales are a nightmare since they take so long to close / get an answer from the bank and that many agents listing them for sale don't have their "ducks-in-a-row".
The only reason a property is upside down is because the bank's supported the rapid price appreciation during the boom years by securitizing and bulk selling the debt on institutional levels (at unimaginable leverage ratios), which at the heart of their formulas always assumed price appreciation. Now the gig is over, the banks were bailed out by US, the tax-payers, and it’s time for them to give back to the general population by allowing these short sales to sell quickly and not to punish owners caught in the financial whirlwind they created.
Unlike what Gordon Gecko says - Greed isn't good.
I'm happy to hear that the new HAFA program requires the banks to respond to a short-sale within 10 days. It's a start a getting back to normal.
By Rita Gibbons,  Thu Jul 22 2010, 06:14
I list short sales and have helped several buyers purchase short sales. I always inform both the sellers and the buyers to expect the process to take 90 plus days to close. I agree with Jayson above ... I too am looking forward to the day when the market is "normal."
By Scott,  Thu Jul 22 2010, 06:23
great post. I have been in the middle for a short sale for about 3 months now. We came in after someone bailed on the deal. We had all the paperwork approved, the realitor just sent back in our offer instead of the original offer. Everyone thought it would go quick(4 to 6 weeks). still waiting and don't know if they are even going to accept the offer. I thought waiting would not be a problem with my current home not on the market but I was wrong. We get a little info and then nothing. I hear stories of up to 14 months for the process and I could not wait that long. I also don't think the deal is not that great. At first I thought short sales is the better way to go. Now I think anything but is better.
By Bahman,  Thu Jul 22 2010, 07:45
How do the problems with a short sale differ from an actual foreclosure? Do banks act faster and in a more standard manner when a buyer makes an offer on a foreclosure listed by the bank's agent?
By Tom Hanigan,  Thu Jul 22 2010, 07:49
Short sales are frustrating and I believe it's because the lenders are apathetic to anyone else's situation. They believe they're the victims; though we know their actions are the major reason for this situation. Don't give up when dealing with the lenders, they're usually negotiating when they tell you that it's a long process. They're making money when the transaction goes longer.
Finally, be very skeptical of the lenders, they're legal loan sharks working on their bottom lines. They won't chop off a finger or shoot you in the knee cap, but they'll certainly go through all legal venues to get as much money as they can out of a transaction.
Legal advice is out there for buyers and sellers and it should be sought. Quiz your attorney to know what to expect when entering into a short sale or distressed property sale, when in the middle of the transaction, and after the closing. Protect yourself.
By Kbridge,  Thu Jul 22 2010, 08:03
Finally, an online explanation for the public- way to go! I have found that when dealing as a buyers rep. on short-sales upon acceptance, by the seller and before it is presented to the bank, have the listing agent give permission to the buyers agent to talk directly to the bank. This really works as now you have 2 people working on getting it done. Plus, less headache for both agents.
By RF72,  Thu Jul 22 2010, 08:19
Interesting article but I have to take issue with something stated in myth #2... "For everyone, though, it is faster to recover your credit and ability to take out another mortgage on a new home after a short sale than after a foreclosure." I am not sure this is true in reality. I sold my condo in a short sale March 2009, after 10 months of negotiating with Countrywide. Payments stopped being made in March of 2008 (we had moved away for a better job), no foreclosure proceeding were ever started because we were close to closing on offers three different times. That said I have been told I need to wait 3 years in order to qualify for a new mortgage, same waiting period as if I had done a foreclosure.
By Mark Pike,  Thu Jul 22 2010, 09:19
Short Sales are a way for an agent to make the phone ring! They can market the house for $50,000 under the rest of the neigborhood. This makes their phone ring! They can pick up buyers! So many agents are so called "experts on short sales" and the truth is they have never closed a short sale!
By John Johnson,  Thu Jul 22 2010, 10:10
Disturbingly, the tenor of the majority of the comments above suggests that it is one's human right to not repay the full amount of a loan (mortgage) if the collateral for the loan (the house) is now worth less than the amount owned on the loan. Furthermore, it is suggested that laws should be passed to beat the lenders into conformance with this concept. Sounds great on the surface, but consider that, under this logic, were you to lend your neighbor $10,000 to buy a car and two years later that same car is only worth $5,000 on the open market, you should be forced, by law, to agree that your neighbor need only repay $5000 of your $10000 loan. Does this make any sense to you, especially considering that your neighbor chose the car in question, used it for 2 years at that point, maintained it only as he/she saw fit (perhaps not at all), and originally promised to pay you back the full $10000?
Remember that the entity who funded a mortgage loan (say, for example, a pension fund, or a bank itself) did so on the basis of a receiving a small annual interest rate on the amount loaned (4-7%, typically, and MUCH less than normal loan rates for other types consumer loans) and WITHOUT the right to participate in any upside profits associated with the property should it go UP in value. So why should it be the lender's burden to accept the losses when the property goes DOWN in value?
In California (my state) people have now learned very very well how to use the foreclosure/short sale process to their enormous advantage by simply walking away from any of their mortgages of their choosing (some have more than one!) and not be subject to (1) any deficiency judgments nor (2) have to go through bankruptcy (where one is allowed to keep only a small amount of specially protected assets). This in order to divest themselves of investment properties that are underwater or principal residences where the cost of the monthly payment is now far more than what they would to rent an identical house across the street. And we are not talking about foreclosures involving the now 10-15% of folks that are unemployed in CA. I've personally seen entire neighborhoods of very nice houses built in the 2006-2007 range go through foreclosures, whereas obviously, if only unemployed folks were being foreclosed upon, only 10%-15% of those houses would have foreclosed.
In fact, the so-called "Strategic" foreclosures in California ("Strategic" meaning that buyers who could still afford their mortgage payments simply decide not to make those payments, rather choosing to accept a 3-7 year credit ding instead), now account for 50% of all foreclosures (hard to believe, I know, so check it yourself with RealtyTrac.com's, and other's, published statistics). This huge raft of additional unnecessary foreclosures is undoubtedly doubling the depth to which the housing market must sink before reaching bottom (the more foreclosures, the lower the property values - the lower the property values the more new "Strategic" foreclosures). This causes additional widespread and longterm economic pain to everyone so that these folks can selfishly benefit by what I believe to be an inherently immoral act.
Would be interested in other people's thoughts on this...
By Jewel Rogers,  Thu Jul 22 2010, 11:22
cool explanation and pretty much sums up what ive been going through with B of A since March. I guess for me and a lot of people though we dont understand why it would take so long once you have the buyer thats down and the seller, the bank counter offered and I accepted and yet we are still waiting????? This whole process seems more like the bank doesnt know what their doing more so than anything
By Stephanie Weiss,  Thu Jul 22 2010, 11:23
Good Information! I had a buyer client who made a $250K offer on a short sale property listed at $259K. We waited 2 months and lender came back and asked for $275K. Buyer final offer a net $260K, lender final offer $265K, only $5K apart and neither could agree. The homeowner loses in a foreclosure and that same lender now has it listed at......you guessed it.......$259K! So because the bank would not accept $260K from my very well qualified buyer, the homeowner had a foreclosure instead of a short sale for a price that the bank would previously not agree to and now has it listed for that same price. There is something VERY WRONG with that picture and someone needs to step in to get a handle on these banks who have personnel that don't appear to understand what they are doing. These banks who were given billions of taxpayer dollars!
By Michael Corley,  Thu Jul 22 2010, 12:07
Hi Tara,

I've read this post and commend you on taking on this subject matter in this short article.

But I'm not sure that any of the information you've presented are myth busters for the readers.

Don't get me wrong, if anyone who hasn't had any experience in arranging a short sale, there might be some valuable information here to enlighten them on some of what they'll encounter but not so much about the process.

Unfortunately, while NORMAL may not be the best term to apply, there is some degree of convention when it comes to arranging and closing a short sale.

Most agents are not aware of the financial decision making that's involved by lenders when it comes to addressing the investors concerns in a short payoff.

After 20 out of 21 short sales successfully closed, there is process that, if followed, will provide as predictable results any agent would experience in a retail property listing available for sale.

I'm writing on a 7 part series on foreclosure short sales in Brooklyn real estate and have just published the 5 entry.

I think what all agents are missing is the information I share in the post entitled: A Homebuyer's Ability to Purchase a Foreclosure Short Sale in Brooklyn.

Here is the link: http://mybrooklynreport.com/2010/07/07/a-home-buyers-ability-to-purchase-a-foreclosure-short-sale-in-brooklyn/
By Jim Walker,  Thu Jul 22 2010, 13:19
Kimberly Barton wrote: "as a Realtor, we should not "steer" a buyer away from short sales"

Wrong. Agents have the right (and duty) to explain to buyers that most short sale listings may be much more difficult to transact than a traditional seller or even an REO transaction. Agents should advise buyers who have a low tolerance for illogical rules, roadblocks, delays, snafu's and fubars to consider short sales only if there are no traditional or REO listings available to offer on. If that is "steering," Then, oh well. Agents should "guide"

Mark Miner wrote the average discount from market value is 13%, Curtis Harris wrote that the average net a bank is willing to settle for is 82% of BPO (After commission and closing costs this is a smaller discount than Marks estimate.) Sounds good, huh?. Well, If you subtract the deferred maintenance and needed repairs, on the distressed property from the market value, then subtract the refusal to pay buyer closing costs from the distressed property, you will find that the "discount" has shrunk to less than 5% in the majority of sales.

Lets be realistic. Even a REAL 3% or 4% savings - after repairs and extra buyer closing costs (that banks won't pay) is attractive enough. Members of our industry should stop overpromising and underdelivering on these savings. Offering unrealistic expectations might get the phone to ring, but it is not a good way to do business.
By RF72,  Thu Jul 22 2010, 14:05
John Johnson,
In reply I would point you to Tishman, Morgan Stanley and others. Below are some recent developments. My stance is what is good for the goose is also good for the gander....


The biggest residential real estate deal ever has blown up.

January 24, 2010 WSJ reported that Tishman Speyer is giving back the sprawling Stuyvesant Town apartment complex in Manhattan to its lenders to avoid a foreclosure proceeding. Pressure had been mounting in recent weeks as the property’s creditors threatened foreclosure. The Stuyvesant Town deal–the Tishman led venture paid $5.4 billion–is one of several Tishman Speyer did at the top of the market that the company is trying to save. But the company itself isn’t threatened. It took advantage of easy credit and investors’ eagerness to buy into real estate during the good times. As a result, it didn’t put much of its own cash into deals.

Tishman’s not the only operator to return a multifamily property to the bank. As the WSJ story says:
Nationwide, scores of other apartment deals also are tanking as landlords are being forced to cut rents and offer incentives like flat-screen TVs to attract and retain tenants. San Francisco’s Lembi family, the biggest apartment owner in that city, has been forced to give up numerous apartment properties to its lenders because it couldn’t repay debt.

Last month we wrote about how Morgan Stanley returned five buildings to its lender. We asked then and the question bears repeating: How are the actions of these companies different from those of individuals who “strategically default” on their mortgages?
By Scott Godzyk,  Thu Jul 22 2010, 14:57
There are many great deals, i still find the key is that a short sale will only go as well as the agent and negotiator are expereinced in short sales. An expereinced listing agent and an experienced negotiator working for the seller, can make as short sale simpler, less stressfull and actually get it to close.

I have a blog with some tips, suggestions and secrets i have learned over the last 3 years of this short sal emania. Please check them out.

http://www.trulia.com/blog/scott_godzyk/2010/06/how_to_get_a_short_sale_approved
By John Johnson,  Thu Jul 22 2010, 16:13
RF72: Really appreciate the comments!
As regards the foreclosure of which you are speaking, I am assuming that you are saying that the company in question (Tishman Speyer) could have afforded to continue to pay the interest on the loan WITHOUT going into foreclosure and/or bankruptcy, but decided, for purely self-serving reasons, to instead default on its obligations in order to improve its financial standings (by wiping out debt owed).
If that is the case, then they indeed (in my view) should have had to declare bankruptcy to remove their obligation to repay the loan (the same as should be the case with individuals who "strategically" default on their individual properties without going through a bankruptcy or being subject to a deficiency judgement). That is, everyone (individuals and companies alike - i.e., both the goose and the gander) should, most certainly, be treated consistently in this regard.
Consider that bankruptcy proceedings have been specifically designed, over a large number of years, to be fair both to the creditors AND the person or company going through the process. Critical assets to an individual are protected from creditors in a bankruptcy proceeding - like, for example, a certain amount of equity in an individual's private residence, car, retirement savings, and items necessary for the person to pursue his trade. But other "extra" assets that a person or company may have (such as significant equity in other property, stock holding, bank accounts, etc.) would (and rightfully should, in my view) be used to distribute amongst all the creditors in a fair and predictable manner. This process, tried and proven over time, would seem to be the best means for someone in over their heads to get a fresh clean start, without without unfairly putting all the burden on the creditor(s).
If one were to strengthen the laws in my state (California) to require a bankruptcy process in order to wipe out deficiency debt resulting from a foreclosure, then the next time we get into a real-estate down cycle (which is, of course, an unavoidable periodic event), everyone will suffer far less as there will be less blatant speculation, fewer foreclosures (due to the elimination of "strategic" foreclosures), fewer creditors failing, and thus fewer impacts on the economy (jobs, etc) caused by the associated ripple effect (like the really awful one we are all experiencing right now).
Believe it or not, right now a speculative individual can STILL (even after all this carnage) buy a house with only 3% down using a Freddie Mac/Fannie Mae FHA loan AND, if the market goes up, make a fortune on the profits while, at the same time, being subject to loss only of his/her 3% down payment if the market goes down. This is akin to going into a casino, having the house stake you for $100,000, betting (say) the whole amount on "red" on the roulette wheel and: (1) If red comes up, taking the $100,000 in winnings and giving the original $100,000 back to the casino or (2) if black comes up, simply walking out the door without consequence (except, of course, that the amounts in question are even larger!). The individual has, thus, a win big OR no-significant-loss scenario. As long as this condition exists, there will be those who unscrupulous persons and/or companies that will line up to take advantage, at the expense of all the rest of us.
Further comments appreciated, of course!
By Nicaury Miller,  Thu Jul 22 2010, 20:17
Excellent information. My client was current on payments and the bank will not allow her to sale the house. she had to ruin her credit. Trust me recovery is not yet here.
By Anita,  Thu Jul 22 2010, 21:50
I am going to be the first to detail 2 short sale closures in the past 6 months. Five yrs ago, I purchased 2 triplexes in the same area. Paid 300K with 100K down on each, leaving a mortgage debt of 200K. Due to the usual, non payment of rent, water bills, work needed on property, tenants moving in and out, I was not having enough money to pay the $2300 monthly payments. So short saled with a realtor who I think is very experienced. She worked with a short sale company which cost me an additional out of pocket $500. I believe their job was to advertise the deal on their short sale web site and not exactly sure of what else came with the package. Stopped paying the mortgage on both properties end of Oct. Good news, was able to collect approx. $14,000 to put away from rent being paid and not paying my mortgage. I believe she asked $70K for them. They immediately were under contract for approx. 82 and 92 K. Then the realtor spent the next months attempting to negotiate with Chase/2 different negotiators. One property, the one in the worst condition and no tenants at this point, finally closed in Feb/March, so that's 4/5 months. The other was finally resolved end of May/7 months. It was quite an ordeal and according to my realtor that it all was dependant on her to keep the buyers still interested in the property and her job to contact the negotiator who she claimed she bugged on a daily basis. I think $1000 was put down on both props but different buyers. So now it's all over thankfully. So I have a deficiency of $230,000 approx. It scares me as I am wondering what about that deficiency. Will they ever come back after it? Also concerned about the tax consequences. My DIL who is my accountant says that it depends on my finances at that time. I can prove that I am now in a negative financial situation with my debts, mortgage on my own house and other rentals and bills. So I believe there will not be a tax consequence for next year. Yes I am hopeful of that. If anyone wants to contact me about any of this, I am a retired schoolteacher living in Florida and have plenty of time to respond. I cannot educate anyone, can only relate my experiences as this whole process is/was beyond my ken. But feel free to contact me at Anitamich@aol.com.
By Michael Stock,  Fri Jul 23 2010, 05:08
Excellent Information here. Thanks
By Bonodino,  Fri Jul 23 2010, 07:32
I realize that my comments are not contributing to the immediate needs of most of us in this horrific situation, I do however, find them relevant and worthy of not only mention, but accountability. While many valid arguments are represented here, I feel that a large percentage of responsibility lies with the lending institutions and the administration that facilitated these most unrealistic transactions in the first place! In addition, huge amounts of tax payer dollars have been granted to banks in an effort to keep them solvent; that reports of their decisions to continue dispensing regular," business as usual", huge bonuses to their corporate executives continues, "on our dime" now, is criminal! Add to this, the freedom enjoyed by continuing to impose interest rates on revolving credit that are unrealistically high and not in keeping with the current financial climate, it is not at all difficult to determine that the banks are being given "free reign" to rob U.S. citizens and perpetuate this depressed economic nightmare!
In the short-term, no pun intended, short sales seem to have a realistic place in the real estate market; the down side to this is their negative effect on property values; their effect on CMA's is devastating. I feel that a long-term approach would be to impose restrictions on banks and force them to maintain rates on revolving credit at a level more commensurate with current trends. I find the knowledge that my tax dollars are being handed out to big business, while many average Americans are losing jobs, homes and having their lives turned upside down, most infuriating! Both my partner and I have worked very hard to maintain excellent credit scores (high 700's - low 800's); we now find ourselves nearing retirement age and having to discontinue payments on certain mortgages, revolving credit, etc., as a basic survival strategy;. it is most distressing and shameful for us to be reduced to this level.
By Bonodino,  Fri Jul 23 2010, 07:36
I realize that my comments are not contributing to the immediate needs of most of us in this horrific situation, I do however, find them relevant and worthy of not only mention, but accountability. While many valid arguments are represented here, I feel that a large percentage of responsibility lies with the lending institutions and the administration that facilitated these most unrealistic transactions in the first place! In addition, huge amounts of tax payer dollars have been granted to banks in an effort to keep them solvent; that reports of their decisions to continue dispensing regular," business as usual", huge bonuses to their corporate executives continues, "on our dime" now, is criminal! Add to this, the freedom enjoyed by continuing to impose interest rates on revolving credit that are unrealistically high and not in keeping with the current financial climate, it is not at all difficult to determine that the banks are being given "free reign" to rob U.S. citizens and perpetuate this depressed economic nightmare!
In the short-term, no pun intended, short sales seem to have a realistic place in the real estate market; the down side to this is their negative effect on property values; their effect on CMA's is devastating. I feel that a long-term approach would be to impose restrictions on banks and force them to maintain rates on revolving credit at a level more commensurate with current trends. I find the knowledge that my tax dollars are being handed out to big business, while many average Americans are losing jobs, homes and having their lives turned upside down, most infuriating! Both my partner and I have worked very hard to maintain excellent credit scores (high 700's - low 800's); we now find ourselves nearing retirement age and having to discontinue payments on certain mortgages, revolving credit, etc., as a basic survival strategy;. it is most distressing and shameful for us to be reduced to this level.
By Bob Passadino,  Fri Jul 23 2010, 09:10
I blame the government for allowing the banks to sell homes at ridiculously low values. The banks shouldn't have been allowed to sell a home for more than a 10 or 15% reduction of their true value in the first place. This still would have been a good deal and if all properties were under this edict properties would still have sold. I have been involved in Short Sales where in one case the seller paid $265,000 for the home and two years later the bank accepted $130,000 for the home with a net of $117,000. Do you really believe the neighbors next door want to, or should, continue paying their mortgage payments? Why shouldn't they walk away? It is through no fault of their own that their property has lost half of it's value.The process we have today is killing real estate values, destroying neighborhoods, and depleting personnel wealth. That is except for the personnel wealth of investors who know how to milk the system. I also believe the government is continuing to allow banks to do this so that homes will become affordable to everyone. They have turned the American Dream program into the American Scream program.
By George Rogan,  Fri Jul 23 2010, 12:36
George

We have bought two 'short sales' as investments within the past 9 months and have renovated both and have sold both - both sold 'as' FHA loans.

So it sometimes does work for some buyers.
By George Rogan,  Fri Jul 23 2010, 12:38
We have bought, fised up, and resold two short sales (as investments) within the past 9 months. Both resold as FHA loans.
By Johanny Manning,  Fri Jul 23 2010, 17:53
Great article! I too have represented both buyers and sellers through short sales and though they are complicated, they can also be very rewarding! I'm currently holding an 80% success rate, but that means 20% have failed. We, realtors, should never forget to mention both!
By Prairie Rose,  Sat Jul 24 2010, 09:21
I made an offer on a short sale (Twin Cities, Minnesota metro area) back on April 26 and 10 days later the bank accepted it. New World Record. So it can happen. I wound up canceling the purchase agreement two weeks later, though, when I got the association documents and saw the entire project had been foreclosed upon back in mid-2008 and the "association" was being run by a local bank vice president. Too dicey for me. Never found out the bank with whom I was dealing, unfortunately. Very interesting process.
By Dawn Mitchell,  Sat Jul 24 2010, 09:47
The consensus is... we hate short sales. Banks have no regulations, they can do whatever, whenever and however they want; approve a short sale, then days before closing it goes through foreclosure (this has never happened to me, but I've heard stories). They have no true incentive to short sale a house, which still baffles most of us. I have been doing short sales for 3 years and have successfully closed 90-95%, but it's hard work. I've represented sellers who refuse to sign promissory notes; I've had buyers, who after months of waiting get bumped by a higher offer with no opportunity to raise their offer, now I'm the bad guy. I've had buyers who have waited so long the appraisal came back $10k lower than our offer and the bank accepted it, now I'm the hero. For investors, they can be an excellent opportunity to flip, if something better doesn't come along . Another problem is... no rules for realtors, as well. The RE-44 Short Sale Addendum makes it possible to cancel a contract at any time, no questions.... When doing a short sale for either a buyer or a seller you must ask questions, all realtors handle their short sale listings differently, some banks are better to work with than others. Be very thorough when explaining the process to your buyers, make sure they understand and can commit, can they handle 90 days of being in the dark, not knowing whether they will get a house. They need a back-up plan! If banks could concentrate more on loan modification, reducing the principal; keep existing homeowners in their homes we may have a chance. If not, there is no end in sight.....
By Janet M. Nation,  Sun Jul 25 2010, 05:39
Tara you are right on the money with your comments. I've been working short sales since 2007 and I've experienced it all or so it seems. The main thing is that both listing and/or selling agents educate their clients on what could possibly happen before entering a short sale transaction. I think most agents neglect to do this mostly because they are not well educated or experience themselves on short sales. It can be a nightmare but it is what it is you either have the stomach for it or not.
By Sm,  Mon Jul 26 2010, 11:32
For all the comments from Realtors..I have one comment..YOU and perhaps ONLY YOU, thanks to the National Association of Realtors have more power to implement change then any buyer/seller, or politician.

We recently put an offer in on a short sale. It was through HomeSteps..Fannie Mae!! They (taxpayers) are paying the listing agent 2% to sit on their tush and do nothing..not even take pictures..not put the correct sq ft and other important data in the MLS. Then, Fannie (taxpayer) is paying an asset manager 3K to play hardball! We offered full price, had approval letters, our loan was in place, no contingencies, and guess what they countered with a ridiculous: 1. We had to pay $50 per pay per diem for every day the loan didn't close, we also had to agree in writing to pay any additional repairs to the home above and beyond the full price offer. The home only accessed for 7K more than the full price offer we submitted. Here in the great state of ID assessed is full market value.

I spoke personally to the asset manager who informed me he was a licensed Realtor and had been in the business for 15 years. I asked him if he would sign this deal as proposed.. ANSWER: NO! He claimed he had an obligation to protect the bank. EXCUSE ME..the BANK is US the TAXPAYER when it comes to Fannie or Freddie. Everyone else is simply an investor..and every investment has it's risks. They bet that housing would remain strong forever and they lost. Why should the taxpayer eat their losses..we've already paid Fannie & Freddie in excess of 400billion dollars!

REALTORS UNITE! At least have the cojones to NAIL Fannie and Freddie! State laws won't get it..must come from Barney Flippin Frank & CO! The two GSE's should be made to have standard procedures when dealing with short sales. HOW ABOUT some consumer protection laws here folks! I've written to my Senator Mike Crapo..what have you all done? The reason the banks are in control is because you Realtors and Congress is allowing them to take control.

Angry Buyer

P.S. This makes the 3rd short sale we've tried to get through. One had mold issues, the other "seasonal water issues". WHY..because the banks did not winterize the homes and the pipes broke and flooded the crawl space! And then along came Fannie and sat down beside it!
By Tommy Lee,  Mon Jul 26 2010, 16:10
I like your mythbusters. Funny thing is I have seen one short sale that worked as smooth and problem free and as fast as a regular sale. But, admittedly, it almost never happens.
By Christopher Mesunas,  Wed Jul 28 2010, 17:55
Great insight!! The market seems ready for a shft in short sale activity due to changes in the tax laws and goverenment policy changes at the current time. This process should not be ruled out for most consumers.

Christopher Mesunas
By Ronald Monk Boyer,  Thu Jul 29 2010, 05:33
"Short Sales should be named "Long Sales" There's no rhyme or reason on how logical bank negotiators and their investors think when it comes to the short sale process!

Monk Boyer
By Dee,  Thu Jul 29 2010, 16:22
RT Matthew Miner - It's hard for me to believe your stating it is better to have seller go thru foreclosure versus a short sale. Washington State must have flipside laws. It is much better for seller's credit rating where foreclosure haunts them forever preventing any credibility. ~Dee
By Dawn Richardson,  Thu Jul 29 2010, 16:45
While so many people think the best bargains are short sales and foreclosures this brings light to a topic I discuss daily with clients. Short sales are a waiting game and there is nothing short about the process when it can take up to a year!
By Dallas Homes for Sale,  Fri Jul 30 2010, 22:19
If the buyers have passion and time then they should go for short sales, it is not good for everyone, especially first time home buyers. Most of the buyers cannot handle the pressure at all.
By Spirit Messingham,  Sat Jul 31 2010, 17:06
Good article but the information I am afraid is outdated, more than 1 out of 4 owe more on their house than it is worth.
By Cinnamon Boffa,  Thu Aug 5 2010, 16:35
Here is another myth; All house qualify for a short sale. Listing agent needs to qualify the house and the sellers to make sure the house has a possibility of being a short sale. If we eliminate the homes that don't have a good chance of being a short sale we will eliminate a lot of waste and perhaps the good short sales will go through and a faster pace.
By Cal Williams , Realtor,  Fri Aug 6 2010, 12:06
Good article, but some info needs updated, as mentioned above. this is a very hot topic andthere are changes all the time that take forever to trickle down to the consumer..
By Dao Alderman,  Wed Aug 11 2010, 10:49
Every comment posted here is truth for the short sale situation one way or other, but the one really cost my attention is the comment from Stephanie Weiss. The situation of lender doesn't approve for the short sale offer contract at the compatible market price then turns around foreclosure on the owners' property and try to sale the house at much lower price. Is there reason for that, or just the mistaken from the lender's negotiator.
By Kristen Riggs,  Wed Aug 11 2010, 17:49
Words of the Wise! Short Sales must negotiate with every party who has a lien on the property... in this case if a third position is trying to hold out for more the first postion could reach a deadline in which they may need to foreclose. Ultimately the BPO begins the deciding factor by determining Value... there is only a small range away from this value that most negotiators can accept... It is vital to have an accurate BPO or the whole transaction could fall apart
By Roland Lorans,  Thu Aug 12 2010, 18:20
great blog
By Mike Moss,  Sat Aug 14 2010, 18:21
Great thread. As attorneys, we represent both homeowners and realtors in short sale transactions. I can not imagine going through this process without legal representation. I would strongly encourage everyone in this process to seek competent - and local- legal representation. http://www.americanpropertylaw.com
By Mark Bradley,  Sat Aug 14 2010, 19:59
Right on Tara,

I wasted thousands and months of time trying to make shortsales worth. I have a great video on my blog that explains the bank owned asset lifecycle. Sure you can make a short sale work but you must make it through these 5 steps.

I have broken down the steps to completing just one short sale deal to 5 major steps. And believe me that was hard because there are about a gazillion steps to each of these 5 steps.

Step 1

You must find people who have the type of property you want to invest in, who are in foreclosure.

This means you need to learn marketing from door to door, cold calling homeowners in distress, direct mail, pay per click, flyers, networking and the list goes on. You must get good at marketing and this takes time, money, and expertise.

Picture Sherlock Holmes with his magnifying glass tiring to fine the right criminal. Searching like a needle in a haystack for the right person with the right property.

This is the first step in investing in short sales. If you fail here everything else is secondary. Meaning no money for you.

Step 2

They must respond to you and not a competitor.

You must be the one! The one they trust out and above all the other short sale investors who went to a seminar and bought a foreclosure course.

You must cut through the clutter and get the right message to make this work. If they don’t respond you’ve got nothing. Get tripped up here and no money in your checking account.

Step 3

They must be down with working with you.

The ball is in their court. They must work with you for the long run and not bail on you. One of 100 things can go wrong here.


All you have is the limited ability to work on as many deals as humanly possible to increase your odds of finding “The One” If “The One” flakes here all your time, money, and effort is wasted. Strike three, you must start over from step one.
They may finely get a job, they may re negotiate the loan, a competitor may come along that they like better than you. Nothing is guaranteed even if the home owner has agreed to work with you.

Step 4

The bank, lender, creditors, and other lien holders must work with you.

You must get this cooperation for the duration of the short sale process.

These 2nd lien holders know are getting shafted! These people are less than thrilled. They will be losing money on their own bad deals with the home owner.

So many deals get killed at this step. Much pain and no gain if you get knocked down on step 4.

Step 5

Congratulations if you are persistent and good enough to reach the step. But you’re not out of the woods yet because the distressed homeowners are emotional frozen.

Like a deer in the headlights and a cornered animal they are Unpredictable.

Plus, they may file bankruptcy which can add 6 months to 1 year to the foreclosure process. Or the distraught homeowner do a deed in lieu of foreclosure and just turn the keys in and split.

Regardless, you must successfully complete each if these 5 major steps to close one short sale deal. That’s just one deal.

Even if you get real good at short sales think of all the road blocks, obstacles, pitfalls and problems you have to overcome for one darn deal?

Mark Bradley
http://ultimatebulkreo.com/
By Bob310,  Mon Aug 16 2010, 18:26
I can contest to this article first hand. My wife and I have been in a short-sale precess as buyers for the past 4months.

The house was listed at 530,000 and it's estimated value was around 590,000 so we offered 580,000. Seller accepted it, then was accepted to get reviewed by the first bank.

The first bank hired an appraiser whom came back with an estimated value at 675,000. The seller's agent hired a local appraiser and came back with an estimate at 590,000.

About 2 weeks later, the bank just countered our offer for an additional $50,000 and said they had a foreclosure date set in 2 days.

Needless to say, we are completely frustrated because their counter offer is $40,000 more than the local appraisal....and since the foreclosure date is so close it seems as if they are purposely trying to get the property into foreclosure. I did some research, and found that it could cost the bank upwards of $50,000 just to go thru the foreclosure process....which is the difference between our offer and their counter.

Like the article says, there is no "normal" short sale.

-bob
By Locksmith,  Wed Aug 18 2010, 00:42
That's really interesting. Every salesperson should know this.
By Christian Cazares,  Wed Aug 18 2010, 13:08
I love this info, thanks
By John Abshire,  Wed Aug 18 2010, 20:32
It has been my experience that short sale properties can be very challenging as well as frustrating. It goes without saying that patience is required by all parties involved except of course for the banks where patience is not required becuase it is all just a days work. I do appreciate you post and exposing some of the myths about short sales. Sometimes the best we can hope for I suppsoe is to gain more knowledge and experience each day. Thanks again for the post!
By Tom Domijan,  Thu Aug 19 2010, 06:47
Great article Tara! As an investor, short sales can be very lucrative business. Unlike the term, a short sale can take anywhere from one month up to two years to process. There are no guarantees that a short sale will work. Investors have an average success rate around 30 percent (these are properties in which the homeowners are willing to do a short sale). In general, the investor uses the rule 100/10/3/1. They make 100 contacts, 10 homeowners respond, 3 agree to do a short sale and 1 is successful. This is why we offer a two day class for investors. For someone who wants to get a property at a discount without proper education, I suggest they work with a real estate agent and always buy title insurance to ensure you are a clean title!
By Guy Cathy Ray,  Fri Aug 20 2010, 15:04
The most important thing in a short sale transaction is to ask questions and get answers! The listing agent needs to know as much about the particular details of the transaction as possible. If the seller is not forthcoming about the bottom line, there will probably be surprises down the line. And as a buyer agent it is your responsiblity to get every detail possible about the sale and the seller. In a short sale everything is pertinant to decide how to advise your clients on a myriad number of questions. If the listing agent is not forthcoming or knowlegeable, it will probably be a long ride.
By Alicia Chmielewski,  Fri Aug 20 2010, 16:23
Great post. I especially love myth #1. I think everyone keeps dreaming of a "normal" short sale from offer, to approval, to closing; however, what we consider "normal" is only in or imaginations. I've never had 2 short sales that were the same.
By Mark Brace, (616) 447-7025,  Sat Aug 21 2010, 09:05
Thanks for good post. It seems like whenever I'm working with buyers I spend half the time talking with them about all the ifs and whats that can happen with Short Sales. I just wish some banks moved faster on these.
By Melissa Improta,  Sun Aug 22 2010, 18:14
Banks may be legally owed the money but that doesn't mean that saying no to a short sale is logical. If the end result is less money in the bank's or investor's pocket by allowing the home to go to foreclosure (and I have certainly seen this happen more than once) then it is illogical for the bank to reject a fair offer from a buyer at market value or even slightly below market value, just because they want more. Wanting it doesn't mean they will get it. And after a few years worth of short sales and foreclosures, I would think that would have been figured out by now.
By Kevin McLaughlin,  Mon Aug 23 2010, 10:28
Good post - Remember that our fiduciary responsibility is to our clients; not the lien holder. Always confirm the lien holder's requests with the parties to the transaction - The Seller and the Buyer (thru their respective agents)
Kevin McLaughlin, Broker
http://www.BerkshireWestRealty.com
By Joe Houghton,  Thu Aug 26 2010, 12:13
Great article! I agree completely that there is nothing typical, standard or normal when it comes to getting a short sale approved. I appreciate the dialogue and wish agents wouldn't mislead their clients as much as they do. It is more important now than ever that you have an agent that you know and trust working for you.
By Larry Tollen,  Sun Aug 29 2010, 03:59
You failed to discuss the difference between Recourse and non-Recourse states. I live in a Recourse state and the short amount gets entered as a deficiency judgment for 10 years and can be renewed at no cost for additional 10 year periods indefinitely. In North Carolina I would never suggest a short sale to a distressed Seller as it does nothing for them. They should sit down with a lawyer and their financial adviser and figure out whether bankruptcy or foreclosure makes more sense. You should add a 6th Busted Myth- Shortsales make sense regardless of where you live.
By Desari Jabbar,  Wed Sep 1 2010, 09:27
Unfortunately, until the banks speed up and streamline the short sale process, most agents don't want to deal with short sales. Most of us have just had too many negative experiences.
By J,  Fri Sep 3 2010, 09:32
A short sale option may turn into a seller's worst nightmare if it is a recourse loan, especially for folks holding investment properties. The option is not a one-size-fit-all as I am finding many home owners don't qualify. Over half of the home owners I consulted with who actually called and spoke with their attorney and tax consultant confirmed that a short sale option was the least beneficial based on their circumstances. Of the many potential short sale clients I consulted with only four qualifed and I was able to get short sale approval from the banks within three weeks.

I tread very carefully when consulting with sellers related to distress properties options. I would not want to be in a position with a home owner to move forward with a short sale option, it fails and the property goes into foreclosure, and the seller later discovers there were better options available. The word "lawsuit" comes to mind. There is no replacement for experience in this area of real estate. Representing a clients best interest goes well beyond what is currently being taught in real estate classes. I have yet to see offered real estate classes teaching agents the potential liabilities and legalities related to distressed options and their role as an agent. I continue to contact legal professionals with distress property deals. Every deal is different and they all seem to have a technical "catch". Good luck everyone and be safe.
By Robert Newsom,  Sun Sep 5 2010, 09:47
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By Ann Wilkins,  Mon Sep 6 2010, 23:35
Tara - in your myth #2 you are assuming that everyone CAN qualify for a short sale, Just because a home owner is under water and wants to sell their home, doesn't mean they can do a short sale - it is my understanding that there MUST be a hardship. I was in a B of A seminar where they said a job transfer in not a hardship and being underwater just makes you a disgruntled home owner. In those situations where people still have jobs and substantial savings and no hardship, they can not get a short sales approved. If they want to get out from under the mortgage, their only option is the strategic walk away.
By Michael Novia,  Thu Sep 9 2010, 16:06
Short sales seem to be a deal at first, but in San Francisco they are often priced low and then receive multiple offers. Add the long closing period and uncertainty and maybe it's not the deal you thought it would be. Buyers are for the most part in the drivers seat anyway and can negotiate a great deal on a normal sale or even on an REO and don't really need to go the short sale route.

Tons of great info in this post, thanks.
By Steven M. Charles,  Tue Sep 14 2010, 08:24
I have been servicing mortgage for boutique investors for 11 years and doing short sale negotiations for 5+ years. The secret to getting a short sale approved is getting a lenders/investors view of the the transaction. This is a "Non-Traditional" sale. agents need to stop trying to force a square short sale transaction into round traditional sale hole! You are 100% right in the myths... But I will say that in the 200+ educational seminars on Distressed properties I have given nationwide, The evidence to support better agent/consumer education is the most obvious. This industry is in for 10 years of short sales, REO, Va Comp sales... Agents need to get better educated so they can educate their sellers and buyers!!!
By Scott P. Elwell - REALTOR®,  Thu Sep 16 2010, 05:08
I have seen many clients loose out on short sales, but those few that are able to buy the properties are extremely happy.
By Lisa Allen, CDPE, SFR, CDRS,  Fri Sep 24 2010, 08:26
Short Sales are usually great deals and are in better condition than foreclosures. If the buyer is willing to wait...go for it!
By Scott McIntosh,  Fri Sep 24 2010, 09:42
Great Blog bost! Lots of good info.
By Kevin Olson and Jessica Laude,  Thu Sep 30 2010, 22:16
Great post, timely information! Now can you do one on short sale truths - verified? Are there any?
By Doug Reynolds,  Sun Oct 3 2010, 15:34
Thanks Tara, Great article. I wonder when will be the end of shortsales. So funny how seven years ago realtors didn't have to deal with these shortsales and now you are lucky if your buyers decide to go for a regular deal.
By Mike Moss,  Tue Oct 5 2010, 08:57
As an attorney, I have a strong point of view on the subject of Realtors doing short sales. In my state (Utah) there have been some law suits filed against Realtors for "practicing law without a license". These allegations stemmed from transactions where Realtors negotiated with banks on behalf of their clients. I would strongly recommend that everyone in a short sale insist on legal representation in the process. I have recently posted a free tool to help decide if it makes financial sense to stay or leave an upside down property. This tool can be linked from my site at http://www.americanpropertylaw.com, or directly at http://www.myshortsalecalculator.com.
By Mike Moss,  Tue Oct 5 2010, 08:59
As an attorney, I have a strong point of view on the subject of Realtors doing short sales. In my state (Utah) there have been some law suits filed against Realtors for "practicing law without a license". These allegations stemmed from transactions where Realtors negotiated with banks on behalf of their clients. I would strongly recommend that everyone in a short sale insist on legal representation in the process. I have recently posted a free tool to help decide if it makes financial sense to stay or leave an upside down property. This tool can be linked from my site at http://www.americanpropertylaw.com, or directly at http://www.myshortsalecalculator.com.
By Kieran M. Jackson,  Tue Oct 5 2010, 20:06
Very good read. As most of the local market seems to be short sales here in Cleveland... I'm grinding my teeth up for a stocky short sale oriented business!

Much success to all agents, and their clients, with the short sale process.
By Linda D'ambrosi,  Wed Oct 6 2010, 21:20
All of the comments were absolutely brilliant. Buyers seem to think that they can steal properties if they are in the short sale position. Just as mentioned above the end result is what the bank will accept. There are no guarantees in a short sale and the process is painfully lengthy and very upsetting for First Time Home buyers, however they still gravitate towards them. School your buyers as best you can on the short sale process more than once during the transaction and always reaffirm that there are NO GUARANTEES and not to fall in love with the property until the bitter end.
By Mike Personius,  Fri Oct 8 2010, 13:18
All of the advice in this article should logically lead a short sale seller or buyer to the conclusion that they will be best served by working with an agent who is a demonstrated EXPERT in short sales. Don't settle for an agent who is willing to "try" a short sale with you. Especially with so much riding on it. Ask a lot of questions, and make sure your agent can prove their experience. It may save you months of frustration, and tens of thousands of dollars.
Mike Personius
http://DallasShortSaleBlog.com
Keller Williams Realty
By Thunderbird,  Sat Oct 9 2010, 06:38
I just put an offer in on a short sale 9/4/2010. The townhouse sold for $535k in 2005. Has been on the market for two years at various prices and finally to $379k for 90 days and no buyer. We just offered $350k and the bank has until 12/23/2010 to respond. If they don't I am walking. The bank will be under water $100k after commissions and such. I look at this just like any other transaction, the guy with money controls the process. Simple take it or leave it and go to the next guy. Don't let the lenders intimidate you and don't get attched to the purchase.
By Vincent Villafranca, REALTOR,  Sun Oct 10 2010, 16:07
Great post, I do occasionally need to be reminded on the basics of short sales etc. Any info on the subject is always welcome.
By John Walin,  Mon Oct 11 2010, 13:12
Tara
Thanks for the topic. I advise my clients to seriously consider bank owned REO's instead of short sales. Even with the REO freeze, these homes have deed in lieu of foreclosure and the bank holds the original paper. Please read my blog comparing short sales and REO's by clicking on my name and comment as you feel appropriate. Thanks!
By John Walin,  Tue Oct 12 2010, 17:07
great title, terrific response and postings interest. Good job! I am trying to improve my trulia standing to VIP and this is an excellent example of titling a blog to get reads and comments.
By Randy Dodd,  Wed Oct 13 2010, 19:32
real good post with good info. Read them or ones like them in the past but always good to see again.
By Chad Barris,  Mon Oct 18 2010, 08:48
Great info, good for both agents and buyers. Thanks for sharing
By Micki O'Toole,  Thu Oct 21 2010, 14:02
Tara,
Good overall summary. I like short sales both from a buyer stand point and a listing stand point. Our team has a 95% success rate with closing short sales. While some banks have streamlined the process, it's still a time consuming endeavor and not one to be entered into lightly. Bottom line is sellers need to work with an agent who is EXPERIENCED with the process in order. Buyers need to be patient and work with an agent who will stay on top of the process to make sure nothing gets over looked (like back HOA fees!)

Great blog post!
Micki
By Mana,  Fri Oct 22 2010, 19:18
good to explain the selling and selling experience
http://www.craigslistaustin.net
By Cinnamon Boffa,  Sun Oct 24 2010, 17:24
Short sales rules change for each bank is different. But if you can find the ones that are HAFA approved they are well worth everyones time, the banks get back to you quickly and the seller walks away without any debt coming back to them.
By Sara Mehrpouyan CDPE,  Sun Oct 24 2010, 19:29
Nice post. Thank you. :)

Sara Mehrpouyan, CDPE
Rodeo Realty
Specializing in Short Sale & Foreclosures in Los Angeles
http://www.Short-Sale-Vs-Foreclosure-Help.com
http://www.DistressedHomeOptions.com
By Vedana Freitas,  Wed Oct 27 2010, 19:44
My fellow professionals -

What have you found to be the best resource for short sale information - specifically for California? "Cliff Notes" would be great - especially to effectively explain/simplify the concept to clients who inquire.

Thank you in advance!

Vedana Freitas
RE/MAX Synergy
Hollister, CA
Real Estate
By J. Mario Preza, CRB, CDPE,  Tue Dec 14 2010, 09:33
You are absolutely right about the misnomer! I had an experience with a short sale taking a record (for me) of seven months of wait and see, all the while the buyer had to update his loan application because as time passed, so did the deadline for their pre-approval. There are pros and cons to any aspect of our present-day real estate market conditions, but, as they say, when in Rome do as the Romans. So, if the brunt of houses on the market are there because of the upside down nature of the house, then so be it. For those agents who have the mentality of not wanting to do short sales, you'll need to come up with some alternatives, but the market gets smaller when you go against the majority. Thanks for the insights, and Happy Holidays!
By Voices Member,  Fri Dec 24 2010, 05:58
Here is another myth, Banks have streamlined their approach to short sales and clear them quicker then ever.
I have found this not to be the case. I have coached a few less experienced agents to a successful out come, but I have had 2 in the last year of my own (transaction) go belly up before closing. Wasted months and no happy ending. To all the buyers out there who start their search with the words "were looking for a short sale or foreclosure" please do a little research to understand why the task is much more difficult then a "normal" sale.
By Voices Member,  Sun Jan 2 2011, 18:25
There are additional issues to be addressed :

1. Sometime the lender pre-approves the terms of Short Sale. The property seller may wish to inquire with their Lenders. Always try to be on good terms with lender's designated contact. Do not get into unnecessary arguments with them. Seller will need their cooperation!. Make sure all your pertinent documents are made available upon request.

2. If the Short Sale is not pre-approved all of the considerations apply, plus the seller's proof of financial condition, e.g. loss of income, non-existent savings, or any other financial hardship, etc.

3. Buyers of Short Sales properties need to be financially able to pay for the purchase, e.g. Pre-approval of the required loan amounts from a reputable Lender. Any financial transaction either with Seller, Seller's Agent on any third party should disclosed to all interested parties in the deal. In other words, all the dealings in this transaction are supposed to be up-and-up!
By Voices Member,  Sun Jan 2 2011, 18:28
Contact me at : tekcommerce@sbcglobal.net for clarification.
By Tni LeBlanc, JD, MA, Broker,  Thu Jan 6 2011, 21:46
Great blog as usual Tara! I especially appreciate your clarification for pre-foreclosures in myth #3. Although it is commonly used to mean short sale, buyers and sellers should understand that a short sale does not have to be in any stage of foreclosure. In fact, those short sales can be great for buyers because they don't have an auction date hanging over the transaction! Tni
By 64monkey,  Thu Apr 14 2011, 07:54
Great article! It's always good to see smart Realtors doing their part to educate others! I recently wrote a blog on a similar topic and our views good be more aligned.

John Oertel
http://www.chicagoshortsalegroup.com
By Cutepinky113,  Tue May 3 2011, 19:52
how long after the bank aproves an offer on the short sale of a house ,does the owner have to be out of the house, if they have children i have children getting divorced neeed to know
By Cillian1,  Wed May 25 2011, 12:18
When are we going to collaborate on demanding a Congressional Hearing on banks scamming underwater homeowners while raking in subsidies from the Federal Government (taxpayer money). Banks get massive subsidies from the Federal Government to modify loans they are not modifying. Low income folks STILL get cheap loans thru Homepath and other programs. Any bets on the percentage of these loans that will default in the near future btw? When you short sell your credit is ruined for several years; doesn't matter that you had a score over 800 with perfect payment history otherwise. If you foreclose you're looking at 7-10 years to repair your credit. I challenge everyone to document the number of modifications you are aware of (include details) and compare with those that have been refused modification. Reason? Banks make more on short sales, foreclosures, etc., thru subsidies and write offs. The incentives are ALL on the side of the banks who got us into this mess in the first place. Exactly what is each banks percentage record on loan modifications? They're not interested in reducing principle beacuse they say the property has to change hands for them to write-off and/or get Fed subsidies. In other words, they have everything to gain and nothing to lose by foreclosing or short sale. We're not all deadbeats who overbought or didn't have skin in the game, many of us put down large downpayments and/or 'invested' in considerable renovations and upgrades and WE lost it ALL! Homeowners end up being the ONLY losers. The only bank I've heard about who modified (and I've only heard of two in the last year) is Wells Fargo, the second was a homeowner who didn't even live in the home and continued to receive rental income throughout. Grand Jury anyone?
By Cillian1,  Wed May 25 2011, 12:53
One more thing, banks have 850K foreclosures right now with another ONE MILLION coming down the pike. There should be... needs to be.... NATIONAL outrage!!!
By Denise,  Mon Jun 27 2011, 22:44
Hi, great post . If anyone know a good short sale........ whatever please, let me know. I'm trying to buy in south Fl and most all the homes. I like is comming up: short sale or pre- short sale or approval short sale. I have put in over six offers since 2010 and I'm still no answer!. I knew b4 going in it would be a l o n g process. Thanks, in advance for any advice. Ms waiting.
By Mr Credit,  Mon Aug 8 2011, 09:02
Tara, well done. I think there's one HUGE Myth to add to this list... Many people think they should wait to file for Bankruptcy until after the Short Sale is complete. This has caused a number of people unnecessary stress. There are 2 reasons why You MUST file a Bankruptcy before the completion of Your Short Sale.

#1 - If You Short Sale first, then You might not qualify for a Chapter 7, which only takes 3 months and You could be forced to file Chapter 13, which takes 3 years. Even if You're not making the Mortgage payment, You are still liable for that payment, which helps You qualify for the quicker, easier Bankruptcy Chapter.

#2 - By filing the Bankruptcy 1st, You eliminate all personal liability associated with all the properties You have. There will be no way for the Banks or IRS to pursue You for any money owed at all. However, if You do the Short Sale first, that might not be the Case.

Senate Bill 458 waives the deficient balance liability on a 2nd lien, but doesn't deal with tax consequences at all. Many people missed that.

I personally believe that SB 458 makes Bankruptcy an even more powerful tool to getting a Short Sale done. As it stands, if a 2nd lien holder has Recourse, then why would they want to allow the Short Sale through if SB 458 tell them they cannot pursue the Homeowner afterward? They would prefer to Veto the Short Sale and let it go to foreclosure where they would still be able to sue the Homeowner. However, if You file Bankruptcy FIRST, then the 2nd lien holder cannot pursue the Homeowner whether they do a Short Sale OR Foreclose. So, the 2nd lien holder in that case, would prefer to allow the Short Sale and get SOME money vs. getting nothing if the home forecloses.

-Mr Credit
http://san-diego-real-estate-news.com
By Wwotr1,  Mon Aug 29 2011, 09:32
My Wife and I did a Short Sale on our House in Northern California, in a “Job Related” Move to Southern California.
We hired a Real Estate Agent in November 2010.
In January 2011 we had an all Cash offer on our House.
We closed the Deal/Signed papers in February and in June we received a letter from our Lender stating that “The Loan Had Been Satisfied”.
It was still an emotional Roller Coaster, but we were blessed to work with an Agent who specialized in Short sales , who took us through the procedure “Step-by-Step”.
By Wwotr1,  Mon Aug 29 2011, 09:34
My Wife and I did a Short Sale on our House in Northern California, in a “Job Related” Move to Southern California.
We hired a Real Estate Agent in November 2010.
In January 2011 we had an all Cash offer on our House.
We closed the Deal/Signed papers in February and in June we received a letter from our Lender stating that “The Loan Had Been Satisfied”.
It was still an emotional Roller Coaster, but we were blessed to work with an Agent who specialized in Short sales , who took us through the procedure “Step-by-Step”.
By Voices Member,  Thu Sep 27 2012, 11:45
Thanks for the article. My husband and I need to do a short sale in california, which is new to the both of us. We want to come across as professional and confident as we can and not get scammed over. Thanks again for the advice, I'll make sure my husband reads over this as well. http://www.wabroker.com
By Patti Kane,  Sun Jun 2 2013, 13:18
I had a short sale last year and my Realtor recommend http://www.cfs-mortgage.com/flex for a home loan. I am very happy to be able to purchase again.
CFS Mortgage assists homeowners who have recently been through a foreclosure, short sale or have recently emerged from bankruptcy.

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