There is a method to the madness. First a lender must â€œallowâ€ a property to sell for less than what is owed by qualifying the seller (hardship, etc.). Second, for a lender to â€œallowâ€ the property to be sold for less than what is owed, lenders want to see that the property has been listed on the MLS for a period of time and has been â€œmarketed in a similar fashion to non-short sale homesâ€. Again, this is prior to the lender telling the seller that they can short sell their property.
Once the seller is â€œallowedâ€ to sell the property for less that what is owed, it can be marketed at the â€œShort Saleâ€ price and a purchase agreement must negotiated and be submitted to the lender for â€œacceptanceâ€.
Now letâ€™s think about that for a moment: Lenders require the property to be listed on MLS and be â€œmarketed in a similar fashion to non-short sale homesâ€. Obviously, since the lender has not yet â€œallowedâ€ the marketing of the property as a â€œShort Saleâ€, the property must be priced accordingly to pay off the note and the commissions that the listing broker is charging (in the listing agreement). The seller is taking on the responsibility of paying the commissions before the lender â€œallowsâ€ short sale marketing. Therefore, prior to the lender â€œallowingâ€ the property to be marketed as a short sale and be properly priced for the market, the property MUST be placed on the MLS in an overpriced position in case there is a buyer out there that is willing to overpay for the property. Personally, I have not seen many of these buyers in this market!
Now think about it from a listing agent perspective; would an agent put as much effort and marketing expense into a listing that they know is overpriced and headed for â€œShort Saleâ€? Not usually.
So what is the point of utilizing the â€œbest agent in townâ€ if they are not going to give their best effort to sell your overpriced property?
It seems to be in the best interest (monetarily) of the seller to utilize a flat fee listing broker before the lender allows marketing as "Short Sale" since they are responsible for the payment of commissions.
Once the lender allows short sale marketing, it is in the best interest of the lender to set a list price (based upon BPO or appraisal) and require the seller to utilize a flat fee broker to keep as much of the sale proceeds as possible that will go towards the loan payoff.