Realtors Get Help for Homeowner Short Sales
.
Realtor® Short Sale FAQ
.
I have a “pre-foreclosure” listing that isn’t selling and the homeowner can’t lower the price since they have no equity. How can a short sale help?
This situation has really become an issue in 2009. As you know, there is a large number of homes on the market and fewer buyers. Add to the mix stagnant to falling home prices over the past couple of years, the popularity of 100% (no money down) mortgages and “option” mortgages with negative amortizations, and you have a situation in which many homeowners simply cannot sell their home.
Many agents are telling homeowners that they must lower their asking price in order to entice buyers in this environment; but often times the suggested listing price is BELOW their mortgage balance. The homeowner would actually need to bring cash to the closing in order to sell their home – cash they often don’t have.
This situation is multiplied when the home is in foreclosure. When a homeowner receives a foreclosure notice, the first 2 things they typically try are refinance and selling. With falling prices, a homeowner in foreclosure often has no equity to go along with his now damaged credit. This makes refinancing very difficult if not impossible. As the foreclosure clock ticks, they will often turn to a Real Estate Agent to sell their home.
In this scenario, the homeowner will want to sell for at least the balance of their mortgage(s) regardless of the current market. Not wanting to turn down a listing, you accept it and cross your fingers knowing full well the house probably won’t sell. After a few months, the sheriff sale is looming and you urge the homeowner to lower his price, but he can’t. He simply doesn’t have the cash to pay for the mortgage shortfall at closing. So he says don’t lower the price and the listing stagnates. Your time is being wasted as it becomes less likely that the property will sell at all; and you and the homeowner are stuck waiting for the inevitable eviction or bankruptcy.
That is, UNLESS, you consider the last, best option – recommending a short sale. If you are not familiar with the basics of short sales, please read the Homeowner Short Sale FAQ.
I am familiar with short sales, but how would I get involved with one?
In today’s housing market, just doing your normal marketing will bring you in contact with homeowners in a situation like the one above. The key is to ask yourself, can I handle this complicated process. If you are willing and able to:
1. Effectively communicate with the lenders about their requirements for a short sale.
2. Put a professional and COMPLETE short sale package together in accordance with these requirements.
3. Advise the seller as to all their rights and ramifications of a short sale.
4. Be able to follow up many times and negotiate with the lenders on behalf of the buyer and to convince the lenders of the lower valuation.
Then you can approach a homeowner with a short sale plan and just list the property as a potential short sale.
If you cannot or don’t want to handle all these aspects of the process then you should consider referring the homeowner to an investor in exchange for a referral fee or some other arrangement.
If you choose to list the home as a short sale there are many ways to make a short sale work with an agent involved. A lot has to do with how experienced an agent is with short sales.
We WILL WORK WITH Realtor listed properties. In these cases, we simply request that we be allowed to handle all negotiations with the lender directly. The Realtor will be kept informed of the negotiations as they proceed and the listing Realtor will receive a 3% listing commission.
What are the keys to recognizing a potential short sale situation?
The keys to a potential short sale:
1. Homeowner in foreclosure or in default AND is unable to catch up with the payments
2. Homeowner has a financial hardship.
3. Homeowner can’t lower the price because of no equity
Short sales are not a simple answer and are not always the best answer. There are many options to consider such as forbearance, loan modification, deed in lieu, etc. in addition to a short sale. You must understand the homeowner’s financial situation and their desire to stay in the home or not.
To see if a property you have listed is a potential Short Sale, you can fill out our questionnaire HERE using your name instead of the homeowner. There is no obligation and we don’t ask for a property address.
When is the right time to list a foreclosure property as a short sale?
Quite frankly, as soon as possible. If a foreclosure has been filed, you must act soon. The ideal situation, in Michigan, is to get the short sale done BEFORE the sheriff sale for 2 big reasons. First, this prevents the credit damage that occurs upon auction of the property. Second, by the time a lender “buys” the property back at the sheriff sale, much of their fixed costs of the foreclosure process have been spent, so there is less opportunity to show them the benefits of a short sale and they are less likely to agree to a short sale.
If the sheriff sale date has already passed on a Michigan property, there is still time to do a short sale, though, and it should be tried. If your homeowner was not sufficiently motivated to lower their price to avoid the sheriff sale, then they need more help to get out from under this property. At this point, they have to wave the white flag and try a short sale because it becomes more difficult to sell a property through MLS that has been sold at auction.
In this situation, refer them to a short sale specialist now. Contact our short sale specialist today at 734-786-9874 or e-mail Jaqui at Jaqui@MiForeclosureRelief.com
I have listed a short sale in the MLS but investors aren’t calling?
That is a legitimate problem because literally every professional short sale investor we are aware of will not get involved when there is an exclusive listing agreement with an agent. Often the numbers are just too tight. It is hard enough convincing the bank to discount the mortgage without having to tell them another 3-6% has top be paid out to someone else. The likelihood of an approval goes down while the cost and difficulty goes up.
Also, to be frank, most Realtors simply don’t have the time or the experience to be able to negotiate with a lender on behalf of a buyer/investor and therefore investors don’t want to be involved with a Realtor. Property Solutions of Michigan is different. We work with agents and Realtors, but these deals can be complex and the agent must be willing to learn and realize that they must work on behalf of the buyer in order to help the seller.
What is Property Solutions of Michigan’s “buying process” when looking for short sale properties?
We work fairly quickly and decisively. Initially, we screen MLS listings and foreclosure filings to find candidates for short sales. Either we contact the homeowners or the listing agent to ask for some additional information. There are a few important questions that need to be answered to determine our initial interest. Typically these involve the foreclosure status of the property, the mortgage balances of the property and other liens on the property.
If our evaluation is positive, we often will make a preliminary offer on the property immediately to give the seller and the agent an idea of the ballpark we will be in. If this offer is accepted by the seller (as most are), then we send out one of our local project managers to do a walk through inspection of the property to firm up the offer price prior to the offer being submitted to any lender.
Our offers are generally in cash and we are willing to close very quickly with no contingencies. These terms are very attractive to lenders.
After our initial inspection, if the seller still agrees to proceed, the short sale package is generally prepared by the Realtor and submitted to the lenders. Sometimes a lender will reject an offer immediately but usually they will order a “BPO” (Broker’s Price Opinion) to be done on the property. This is done in the first couple of weeks and then the lender compares those numbers to the offer. Often, you know within a few weeks if an offer is likely to be accepted or not. Then it can take another 3-4 weeks to close the transaction.
What are my responsibilities to help you complete the short sale?
Typically, when starting a short sale we ask for a copy of the full MLS listing and your analysis of the property’s AS IS market value (any comps you did, photos, etc). We often ask for the Realtor’s assistance in getting the Borrowers Authorization form signed by the Homeowner and help in getting additional paperwork from the homeowner.
Exactly what goes in a short sale package?
The first thing to do is find what the specific lender requires to consider a short sale. Typically the package includes seller bank and tax statements, seller w-2’s, a seller hardship letter, signed PA, and buyer qualifications; but each lender is different.
In addition, you can include any information you want that may help the lender accept the buyer’s valuation for the home.
I have a potential client who may need to do a short sale, but we have no listing agreement yet. Can I get paid for a referral or can I get the resale listing?
Yes. Property Solutions of Michigan will pay a referral fee of 1% of any successful short sale deal that is referred to us or we will be happy to negotiate a listing agreement on a case by case basis. (But not both)
The homeowners of a listing just got served with foreclosure papers, what do I tell them?
Well, that is a complicated question. They will certainly need the advice of legal professionals. Of course, a short sale should not be your first reaction, however, as you educate them on what is coming next, it may be something you want to mention.
Most importantly, just don’t let them avoid the situation or ignore it. They must be proactive to get the best possible result.
The homeowners are in bankruptcy and want to sell their house, can you help them?
Maybe. It depends on what type of bankruptcy and whether the house is listed in the bankruptcy. In these case, it adds another person (the bankruptcy trustee) who has to approve a short sale.
Often, a lender will not even discuss a short sale with us until a bankruptcy has been discharged or at least the “stay” has been lifted from the property.
I have a listing that I have “advertised” in the MLS as a “short sale”. How do I know you just won’t go around me and approach the client directly?
You don’t know that, and quite frankly, it is perfectly within our rights to do so and many investors will do this. It is very easy to do because the foreclosure data is so readily available. If an investor were to come across a homeowner who has listed their home with an agent, they typically just ask the homeowner to cancel the listing agreement before the investor would work with them. This agent would end up with no commission on the deal.
However, in situations where the agent has listed the short sale as such and that is how we initially found the property, Property Solutions of Michigan does respect the agent’s right to the listing and as long as you are willing to allow us control of the negotiations with the lender, we will pay your full listing commission.
I don’t trust you to treat my client fairly. Lots of scam artists have contacted them since foreclosure was filed.
That is a very reasonable attitude. The foreclosure arena is full of unethical people trying to take advantage of homeowners in distress and you don’t know that we are not one of them.
First of all, you can check the BBB for any reports on us, but that is probably of little consolation. Secondly, we are very willing to keep you involved in the deal to protect your clients’ interests. If you prefer, we will keep you in the loop every step of the way and you can be sure your client is being treated fairly.
In reality, 99% of the scams in foreclosures involve one of 3 things: upfront fees, taking a deed before closing, or stealing equity by tricking a homeowner into selling too low. We are never involved in any of these areas.
At no point do we EVER ask for any money from an agent or a homeowner. Our full profit is predicated on the discount we can negotiate with the lender. Our profit only comes when we resell the property.
At no point before closing do we EVER ask for a deed from the homeowner. “Getting the deed” is common in short a sale transaction to ensure the homeowner doesn’t back out of the deal but we DO NOT believe in doing this. We never ask for the deed in advance. We simply sign a purchase agreement and we trust it will be honored. You should tell your clients never to sign over a deed until the closing table.
Finally, in a short sale there simply is no equity so it should not be a concern that equity is being stolen.
Again, you are always welcome to be involved in the process the entire time to assist your client and make sure we do things the correct way. We have nothing to hide whatsoever. At any point, the purchase agreement can be canceled and we have no recourse.
How do I tell the homeowner to contact you to ask about a short sale?
Simply refer them to this website, Property Solutions of Michigan to learn more about the process and fill out our no obligation questionnaire; or have them e-mail us with details of their situation. Always have them tell us who referred them, but also, we will always ask them if someone referred them to us.
