Short sales, or pre-foreclosure sales, seem to be all the rage in the media at the moment. First it was the wave of foreclosures, dooming the nation to a third world status and making paupers of the citizenry. If you’ve found this article, chances are you’re looking for a way to stop foreclosure. Truth be told, you can’t stop it. If you can’t pay, you can’t pay and all you can do is cut your losses.
One of the best ways to do this is through what’s known as a short sale. For the uninitiated, a short sale is a real estate sale transaction that is completed for less than the total balance owed on the piece of property. Simply stated, the bank accepts less than the full mortgage amount and allows the borrower to sell the home. The borrower doesn’t receive any proceeds in a standard short sale, but most times they are absolved of the remaining debt.
So how do you get your home sold in a short sale transaction?
1. Contact a qualified real estate professional.
Qualified is the key here. In my work buying distressed assets all across the country, I end up facilitating hundreds, if not thousands of short sales every year. What I can tell you is that a competent, well trained real estate professional is worth their weight in gold. A bad one who is obstinate, or who is worried about their commission instead of your transaction can kill your deal and hurt your chances of avoiding foreclosure. Contact an agent who is a Certified Distressed Property Expert, or CDPE®. This private designation is quickly becoming the industry standard for distressed property training.
2. Have your hardship documented.
Your hardship is the reason you can no longer pay your mortgage. If you can continue to pay your mortgage in full, you should. If you can ride out the storm, it’s better in the long run for your fiscal future to do so. However, if you truly have a hardship like a loss in income, health issue, lay off, etc. you need to have that well documented. Many lenders won’t allow you to complete a short sale if you have a great deal of savings, or some other equity source that can be tapped to allow you to continue making payments. This is something of a last resort to mitigate the damage. So, make sure it’s documented.
3. Be the Bank’s Partner
Your real estate professional should know this, but never try to hide anything from the lender. You have to realize that you both got into this situation and both parties are going to take a loss. You’re going to lose your property and the bank is going to lose a sizable amount of money. The less adversarial the transaction can be the better everyone is. So, while it may feel like you’re getting a bum deal, focusing on moving on will behoove you greatly in your short sale transaction.
4. Clear and Concise
Make sure you and your real estate professional give everything the loss mitigation department at the bank wants. Nothing less, nothing more. You have to remember that your counterpart (or partner) has a ton of these files at the moment. You want yours to be the easiest, no brainer type of short sale transaction they have ever seen. You want them to want to help you, to want to work with you.
5. Price it right & Get Help Early
The two things that can doom a short sale transaction before it really gets a chance to begin is first, pricing it wrong and second, not starting the process early enough. Your real estate professional should be shooting for the highest and best offer they can get for you, their client, and the bank, the interested partner. A lot or Realtors® want to play games with the price, or try to game the bank into thinking there is a spread in your short sale. This is just a waste of time and a good way to get your home foreclosed on. Don’t play games with the bank on pricing.
Getting help early is the other step that can help you avoid a foreclosure. If you wait until the eve of the foreclosure sale, there is usually nothing that can be done. Getting help early enough to get a proper valuation of your property, to get all the paperwork in order and to get a friendly conversation started is going to get your deal done. Don’t wait until tomorrow. Carpe Diem.
Remember, foreclosure is extremely damaging to your credit and life at large. There’s really no reason for as many homes to go to foreclosure as there are. A short sale is a relatively easy transaction for a qualified real estate professional to negotiate since it’s in both the borrower and bank’s best interest. Starting in April there will be even more incentives for lenders and loan servicers to help you with your short sale process. Get started today since many lenders are already starting to conform their short sale guidelines to comply with the HAFA (Home Affordability Foreclosure Avoidance) program.
Disclaimer: While the advice expressed here is based on years of professional real estate experience, the author is not a lawyer. This advice should not be construed as legal advice and anyone who needs legal counsel should always consult a lawyer.