Short Sale Avengers

What is a Short Sale?

If the value of a property – less the costs of selling the property – falls below what the homeowner owes the mortgage company, the property is said to be “short”. If the homeowner wishes to sell, but does not have the cash to cover this shortage at closing, then the property could still close providing the mortgage company, or companies, are willing to negotiate a “Short Sale”.

Short sale scenarios have become quite common today, but successful negotiations to close them have not. In fact, only 20% of the short sales submitted to lenders for approval (by Realtors) actually close, while those submitted by a Realtor holding the CDPE designation close over 80% of the time!

Short sale transactions are very time-consuming and challenging. They require extensive up-front preparation with the seller, myriads of paperwork, detailed analysis, diligent follow-up and effective negotiation. When successful, the rewards can be huge – to the seller, the buyer and the lender!

The Process in a Short Sale

The goal in a short sale is to accomplish a successful closing, while creating a win-win for all parties involved. This begins with an accurate assessment of the seller’s circumstances to determine whether a short sale is probable; and if it is, the property can then be placed on the market for sale.

The property should be listed at fair market value and adjusted as needed in order to attract an offer. Once the buyer is found and an offer successfully negotiated with the seller, the purchase agreement is forwarded to the lender along with a substantial amount of financial documentation that supports the seller’s hardship, as well as market data that supports the sales price of the property.

It is the Realtor’s job to present the detailed documentation to the lender, point out the advantages to the lender of accepting the short sale and facilitate additional negotiations on price and terms among the various parties until an agreement is reached. Effectively and accurately completing this process is absolutely critical. If any of these requirements are not met, or are incomplete, the file is generally not processed or is denied.

Oftentimes a seller has more than one mortgage against the property. When this is the case, the negotiations, complexity and documentation increases almost exponentially.

Not only does the lender(s) need to be persuaded to accept the short sale, but so does the investor(s) that invested in the mortgage note(s). A great real estate agent familiar with only sales and marketing, but not the complexity of a short sale transaction, is not likely to close a short sale on behalf of a homeowner seeking mortgage relief and avoidance of foreclosure.

In addition to the negotiations with the lender(s) and investor(s), skill and effective communication is required by the Realtor to keep the transaction together during the time it takes to complete these negotiations, as buyers get frustrated waiting for the lender(s) and/or investor(s) to provide a response to their offer on the property.

With numerous negotiations taking place simultaneously, it is easy to understand why so few short sales actually close.

Today, less than 1% of Realtors nationally possess the CDPE training, skill and knowledge to successfully negotiate a short sale. In fact, as of April 2009, less than 4000 Realtors out of the 1.1 million in the U.S. had obtained the CDPE certification to enhance their ability to successfully negotiate and close a short sale.

Learn more about Short Sales.