Keys to Short Sale Success

As a short sale listing agent, I get asked a plethora of questions regarding this difficult and frustrating transaction.  One of the most popular questions is the key to success when listing a short sale.  I wish there was an easy answer.  I wish there was one thing I could tell agents and consumers that would help them get through the short sale successfully.  There is no simple answer to this question.  A successful short sale is dependent on several different variables. 

First, short sales are successful when honesty and competence exist.  A short sale seller needs to know exactly where they stand with their bank.  It is very difficult to sell a short sale listing when it is days away from the foreclosure auction block.  The most desirable short sale candidate will be less than 2 months delinquent.  A short sale seller needs to be honest with themselves and with their REALTOR(R) when discussing their situation.  Digging your head in the sand won’t do anyone any good.  The more honest the seller is, the more accurate the information will be that they will be giving the REALTOR(R).  This process can be embarrassing for a seller.  It is important to remember that your REALTOR(R) is here to help you, not judge you.  REALTORS(R) work with so many numbers they will forget all about yours once the transaction is over; sellers need to be candid about their financial situation.  The seller and the REALTOR(R) have the same goal: a successful closing.  Your REALTOR(R) needs to be honest with you when helping price the home.  Pricing too high can be detrimental and can send a property to the auction block.  Under pricing the home may require that the bank negotiate the terms of the contracts they receive.  Some sellers are not good candidates for short sales.  That’s the truth.  More REALTORS(R) need to be honest with sellers when analyzing the seller’s short sale candidacy.  I can’t say it enough, competency is key to a successful short sale.  The competence rests on your REALTORS(R) ability to find a suitable buyer and navigate through the banks rules and regulations.  Real estate agents need to be trained in short sales and constantly be updated on the short sale process.  If your real estate agent isn’t up-to-date on short sale information, the harder it will be to have a successful transaction.  Your REALTOR(R) needs to have an understanding of Virginia law when it comes to foreclosures.  They also need to be able to direct you to good real estate attorneys and tax advisers.  There are consequences for short selling a home.  The REALTOR(R) needs to be competent enough to explain these consequences and help you find out the specifics for your situation.  

The keys that the banks are looking for are pretty simple.  Banks want to mitigate their losses.  They can only mitigate losses if the short sale contracts they are presented with allow the bank to lose less money than taking the property into foreclosure.  Fannie Mae reports that 3 out of 4 short sale transactions do not close.  So, 3 out of 4 contracts that are presented to banks don’t make economic sense to the banks.  Who is responsible for getting the banks acceptable contracts?  Well, the seller and the listing agent.  Sellers and listing agents need to list short sale properties at market value.  Sellers and listing agents should not be ratifying ridiculously low offers.  Ridiculously high offers are dangerous too.  The home must meet bank criteria for loss mitigation and they must appraise for the buyer to receive a loan.  This is difficult water to tread. 

What it all boils down to is that there is no one way to conduct a short sale.  There are no laws on how banks and consumers have to handle this type of transaction.  We have to apply laws for traditional transactions to this very nontraditional transaction.  Bank employees are also not trained on the real estate laws for each state.  In a time where even our foreclosures are being outsourced, you can not rely on the bank employees to really know what they are talking about.  They have scripts and a short leash that may or may not allow them to help you.  We are relying on inadequately trained employees to make huge financial and economic decisions.  The current way that short sales are being negotiated isn’t working.  However, it’s all we have right now.  Being aware of the basics of short sale approval is a great way to map out your short sale transaction.

Tags: short sale, success