Organization is important in a short sale transaction.
I can’t juggle. Well, maybe I can if throwing two tennis balls up in the air counts as juggling. So, in a physical sense I can manage the two tennis balls. But, with regard to short sales and the short sale transaction, there is quite a bit more to juggle then just two tennis balls.
First off, you need to be able to coordinate the preparation of the short sale package. You need to assure that the seller has presented you with the latest pay stubs, tax returns and bank statements. You need to assure that the seller has a verifiable hardship and that this hardship has been explained in the seller’s hardship letter.
Next, you need to be able to manage the banks—to juggle the phone calls with lien holders and assure that everything is moving along quickly and efficiently.
You also need to be able to manage the buyer, the buyer’s agent and any prospective back-up buyers. That’s a lot more than many of us are accustomed to managing, and much more than we managed in real estate transactions from the days of yore (read: 2006).
Lastly, we need to be up to date on all of the latest news and government policies with regard to short sales. There’s the Mortgage Debt Relief Act of 2007; there’s HAFA; there are also Fannie Mae and Freddie Mac. In addition, each and every lien holder has its own submission policies and procedures for short sales.
That’s a lot more than two tennis balls, isn’t it?
Short Sale Preparation Homework Assignment
So, here is what you need to do: you need to take a breath, slow down, and make a list. First, make a list of all of the items you will need to collect from your seller. Make a list of all of the documents that you will need your seller to sign. Make a list of all of the questions that you will need to ask your seller and all of the due diligence activities that you will need to complete prior to the listing appointment.
Then, make another list, chart, or communication record for dealing with the banks. And, make a third list for the buyer’s agent. Include in this list all of the items that you may need to include in your counter offer as well as any information that you will need to collect from the buyer for the short sale lender. (For example, the Equator system requires some specific information about the buyer. And, most lien holders would like to see a pre-approval letter from the buyer and/or proof of funds.)
I can pretty much guarantee that if you make these lists (do this homework) that it will help you to master the short sale transaction and make the whole process move along more quickly and efficiently for all parties. It will be just like juggling six tennis balls, and not dropping a single one.
Joe Manausa
September 21, 2010 at 7:18 am
Hey Melissa, this is a great guide. It’s funny, there are many of us who now specialize in short sales who once uttered “I don’t do short sales.” The extra paperwork and bureaucracy was all it took to chase many of us away when short sales were a tiny minority of the housing market.
The key for us is to (as you said) “take a deep breath” and know that you cannot necessarily hurry things along, rather you can keep everything organized and push everybody towards the objective.
Paula Henry
September 21, 2010 at 9:40 am
Melissa – there is so much more transactional work with a short sale. I use Short Sale Commander and have an assistant to manage my short sales. Still, every day, there seems to be a new litany of obstacles. New documents, updated documents and 24 hour deadlines for getting the newest documents required, MI company approval, etc.
This week, I have a bank who says the MI company insists the seller sign a $25,000 promissory note or no short sale. With a $25,000 promissory note, the seller will be paying more to short sale than his current balance.
Sometimes, even the best prepared file can be put on hold or rejected because of bank requirements like this.
Rob McCance
September 21, 2010 at 11:31 am
Melissa,
I’m sure it’s a great article and judging by the quick skim I just did, I have no doubt of that.
But I just hate short sales so much that I can’t read another SS article. People should just ignore short sales until they turn into their slightly less irritating cousin, the foreclosure.
Then, maybe, but still full of BS, depending on which bank.
On the buy side, if you are attempting short sales, it means you have a lot of time on your hands and NON ideal buyers. Buyers with timelines of infinity-to-never are not good business.
On the listing side, seriously, why bother. Who wants to make minimum wage?
Agents everywhere should just ignore short sales. Refuse to show them and refuse to list them. Then when they become foreclosures, we can get re-engaged.
Just my two,
RM
Short Sale Artisan
September 21, 2010 at 12:00 pm
Interesting comments Rob. I wonder, where are you located? Comments like this: “Agents everywhere should just ignore short sales. Refuse to show them and refuse to list them. Then when they become foreclosures, we can get re-engaged.”
I find quite interesting. Short Sales today are here to stay, at least for the next few years in strong numbers. In some markets over half of the inventory qualifiies for short sales. I think for a real estate agent to ignore the overwhelming pressure of the real estate market means you are cutting off 50% or more of your potential business.
That’s not to say short sales aren’t challenging. I agree they are in almost all cases more tedious, and often much more tedious, than a standard sale or even a foreclosure. But that’s why this article is timely; because having a process in place (whether its on a notecard or a full fledged software system) is important. Being efficient in short sales is almost necessary to be succesful in the real estate market today, unless you are in a few isolated pockets of the country where short sales aren’t a huge part of the market.
NAR basically agrees that agents need to be proficient in short sales as well.
Rob McCance
September 21, 2010 at 12:10 pm
Ha ha! A pro-short sale comment from someone called the Short Sale Artisan. I’m surprised your comment cleared moderation with your “name” being Short Sale Artisan.
Anyway…
I’m in the Atlanta metro. We have our share. We also have our share of non distressed.
I only work with well qualified serious clients (mostly buyers) with actual timelines and needs for a home. Short sales won’t work for these clients.
Short sales would not be here “to stay” if they never were invented in the first place and homes just foreclosed as they should.
When payments can be made on a loan, the loan and the collateral should go back to the bank. All this irritating nonense in between can just go away as far as I’m concerned.
Your comment on the NAR, I will make NO comment on other than laughable.
Just one man’s delio, buddy.
Rob McCance
September 21, 2010 at 12:31 pm
“When payments can be made on a loan” should of course read “When payments CAN’T be made on a loan”
But I can’t figure out how to edit an existing post.
Short Sale Artisan
September 21, 2010 at 7:05 pm
I’m surprised you have some pent up animosity. I’ve commented on Melissa’s blog posts fairly often (they are after all pretty good articles).
Short sales were “invented” by the banks as way for them to mitigate losses. For everyone involved in a short sale transaction, the result is usually positive. The homeowner saves some credit; the bank minimizes their loss (vs. foreclosure, and on average save a LOT compared to a foreclosure) multiply that by the quantity of affected volume and you are talking big numbers.
Short sales also turn volume for banks, clearing inventory way faster than foreclosures. Anyway, despite your somewhat antagonistic comments, I think short sales play an important part of the market today and “ignoring” them just reduces your available workload by a lot. If you can make do without it, then I’m happy for you 🙂 but in many areas of the country realtors who aren’t proficient in short sales are, well, no longer realtors.
Re: “When payments can be made on a loan, the loan and the collateral should go back to the bank. All this irritating nonsense in between can just go away as far as I’m concerned.” I think you are missing the point. In a foreclosure the bank has to take ownership of the house and then act as a seller. That is not a position the bank wants to be in. Nor do they want to sit on inventory for that long. It costs them money.
For what its worth, the banks (even the dread BofA) have made some significant strides in working to improve their processes. It’s still far from perfect, but certainly better than it was even six months ago.
-Nick Reuter
Rob McCance
September 22, 2010 at 12:12 am
“I’m surprised you have some pent up animosity.”
There’s none of that here. I gave my opinion of a short sale. I don’t think anyone LIKES a short sale. What’s the big surprise?
“Short sales were “invented” by the banks as way for them to mitigate losses.”
I don’t profess to be a short sale historian but I seriously doubt the banks said, let’s set up a system to take less than the loan amount as a payoff for our loans. We’ll call it a short sale and spread it to the world.
Look, your agenda is super clear. You are hanging at least one of your business ideas on the short sale. That’s cool. Nice site btw.
I don’t want to get into it with you because you are probably very pro ‘this-whole-process,’ and frankly I really don’t care that much about it.
Other than, I think the whole thing is messy, based on a lot of failures, and I don’t care to make it part of MY business.
One thing though – if a bank gets no payments for 12 months, then accepts a short sale for 70% of the loan, how is this so different from getting no payments for 2-3 months, foreclosing, then selling for 70% of the loan amount. The latter being a foreclosure.
Seems to me that unless the short sale is accepted while the loan is current, which believe no bank will do, then at a minimum it’s a wash and in many cases the short sale would cost the bank more. In GA, a non-judicial foreclosure state, the bank can foreclose in 60 days, so the bank only misses two payments.
Again, don’t waste a lot of time educating me. I’m still not going to do short sales.
🙂
Short Sale Artisan
September 22, 2010 at 9:12 am
No problem 🙂
I’ll be the first to say they aren’t for everyone. I was just pointing out that it’s not just me. There are def. a lot of real estate agents whose success hinges on their ability to do a short sale, and do it in the most efficient manner possible and the market is overloaded with them today. I don’t think that’s going to last forever (obviously) but probably will for a few years.
I’ll keep my ear to the ground to see if your boycott idea catches wind! 😉
-Nick
Homes In Pasadena
October 6, 2010 at 9:35 am
Great tips. I have found that no matter how well you ‘think’ you are prepared and how much you plan ahead, something always pops up. Each bank/situation always requires at least more one item that you did not plan for.
With a short sale I always take a deep breath and make sure I have plenty of ‘patience’. And like Joe comments above, “push everybody towards the objective”.
Thanks for the article – Steven