We had another outstanding training on Friday, this time on short sales. Jane Clawson and Sara Rodriguez put on an informative meeting that went over 1.5 hours on how to increase the chances of your short sale getting to settlement.
First thing to know is that although short sale/distressed property inventory is down locally and has been decreasing over the last several weeks, they are going to be a part of our residential landscape for the next 3 to 5 years. So whether you like to deal with them or not, you need to learn how to deal with them appropriately to get the best results for your clients whether they are buying or selling houses.
First things first, set the right expectations for your sellers. In today’s market, short sales are taking a very long time to complete, banks are not necessarily releasing people of their liabilities, they are providing 1099’s at closing, they have been asking for interest free loans for a portion of the balance owed and most importantly, they need to be upfront with you. Are they current with their payments – if not, when was the last time they made a payment. Also, how many loans are on the property, are there any judgments against the property, and are they current on their HOA or condo dues. Just so you don’t have any complications at the last minute, ask them to speak with a reputable bankruptcy attorney to make certain this is or is not an option for them. Speak with the bank about a potential loan mod as well. Lastly, speak with an accountant about potential tax liabilities of the short sale.
In order to give yourself the best shot, fill out the owner’s bank paperwork –not forms you develop or others that you may have picked up at a seminar. The best way to expedite this part of the process is to go to shortsalesuperstars.com. They have every bank’s short sale paperwork readily available or get the paperwork directly from the lender. Every page needs to have the owner’s name and loan number on them – bar none. Have your title company do a preliminary HUD-1 with all charges that apply – past due association fees, well/septic fees, home warranty, agent fees, etc. because bank will push back on fees so it is better to give them the worst case scenario dollars wise upfront and provide them with a title search as well.
Follow up 24 -48 hours after you send it to ensure it was received. The process only begins once the entire package has been received. Ask if they have a complete package.
Harassment works – call two to three times per week. Ask if foreclosure date is set – if so, when. Has a negotiator been assigned? Have they ordered the BPO yet – if not, can you call and order while I am on the phone? Where are we in the process…whatever it is just call regularly. Remember the person on the phone doesn’t think outside the box so work within their guidelines.
The bank is not always the investor so you need to find out who the investor is and who will be making the decisions. Also, all banks handle short sales differently so you need to know the bank and their process – some only answer emails, some only answer phones in the morning, and others the afternoon. Get into their routine and know how to work with them.
Other notes of interest – foreclosures can be stopped with a contract but all hands need to be on deck and work expeditiously to get it done. Short sales can hurt your credit for 2-4 years, bankruptcy and foreclosure are both longer. For more details on the credit situations, go to http://lindaferrari.com/. Remember, the title company represents the transaction and not the seller so title companies will not do seller only closings. Also, it is best to have the seller directly negotiate the outstanding condo, HOA or IRS judgments with the appropriate party as they will have the most leverage. They are less likely to negotiate with an attorney because they will say if they can pay for an attorney, they can pay their bill.
For additional questions or concerns, feel free to call Jane or Sara at 703-448-3556 or me at 703-652-5777. Again, keep up with trends, numbers, and processes and you will get results. Get it? Got it? Good!
Now, go sell something!