Knowing is best in a Short Sale Situation

Know the Facts
With all the misinformation swirling around the troubled mortgage markets and real estate industry, the average homeowner and home buyer are sure to be confused, anxious and fearful of their next move. Well, take some comfort from the current situation as there are options for every circumstance. The real problem is finding someone to help you sift and sort through the appropriate options and work with the lenders involved.

And, it all starts with the foundation of facts. then we build the options from these to fit the circumstances of the homeowners and buyers.

Take the facts as they are:

• In Central Florida alone, there are over 24,000 listed properties in the MLS (Multiple Listings Service) available to willing, able and ready buyers.
• Foreclosure proceedings are at a record pace in Florida.
• Mortgage lenders are financially troubled by the volume of past-due loans (pre-foreclosures), foreclosure proceedings and REO (Real Estate Owned) they now find they need to deal with.
• Mortgage lenders have changed and tightened up credit requirements for most of the loan programs available.
• The federal government is offering help to targeted homeowners and lenders to alleviate many of the troubled loans.
• Mortgage interest rates are still low relative to rates just five years ago.
  With the saturation of available properties in the market, we are in a very heavy buyers market and properties are being discounted by up to 30% (a bit more in certain circumstances).
• Mortgage lenders do NOT wish to have the real estate /homes (thus becoming REO), but would rather have the owner make payments as agreed (or modified) to make when the loan originated.

Short Sale
The facts above lead many to utter the words “Short Sale” very quickly as the answer to the situation of both Buyers and Sellers. This is the term most misunderstood and misused in the current market.

The REALTORS boards and MLS have come up with procedures to minimize the misuse and misrepresentation of a “Short Sale”. The unfortunate part is that not all REALTORS are equal to the task. Many will offer the use of a “Short Sale Listing” to “help” the home seller. But without doing all the work necessary to establish a short sale, it is nothing but a misleading listing with a CYA (cover your Assets) label imposed by the REALTOR & MLS rules.

The label of a short sale with the proper disclosure that the listed asking price may not satisfy the outstanding debt and is subject to a third party approval is just the tip of the iceberg that can be the “Short Sale Listing”. What lies beneath is the big, hairy, icy mess of getting the property sold.

The basis of a short sale is that the lender knows.
A short sale will never work if the lender does not know. They need to know the financial circumstances of the owner /borrower (not just the fact that they are past due on their payments or will be very soon). They need to know the market conditions of their collateral-home (relative to the loan balance, whether it is still owner-occupied or leased). And they need to know that they are willing to take a discounted sales price for the home in order to avoid the long and costly foreclosure process. Absent of the right knowledge by the lender, the offering of a short sale listing is a pure waste of time. And, it kills many transactions.
It wastes time for the homeseller, the possible homebuyer (and many times there are more than one), and it wastes the time of the real estate professionals involved in writing contract offers and counter offers.

Know thy Short Sale Terms
There are far too many listing agents and brokerages which offer short sale listings without the knowledge and permission of the lender to do so. If you decide to get involved with one of these listings, note that it will not be an easy process, nor a quick one, and certainly not a probable one. Think 3-4 months.

Doing What is RIGHT
This is not to say that buyers and sellers can’t have success without engaging the lenders early in a possible short sale situation. But many more options open themselves to the seller if they do including being able to stay in the home. And, yes, doing what is right by the client may mean the listing agent doesn’t get the listing. But after all, isn’t helping the client the real answer anyway?