Is Your Short Sale Listing Meant to Be?
Remember high school? Remember Prince Hamlet? Remember the famous soliloquy he delivers about the fact that his situation is so wretched that he may be better off elsewhere? While high school was a long time ago for many of us, you may remember Prince Hamlet and you may be playing that soliloquy over many times if you take “the wrong” short sale listing.
You see, while it is wonderful to use this challenging and unique real estate market in order to become a master listing agent and take more listings than ever before, there is a certain kind of short sale listing that is just not meant to be.
In my opinion (and this blog post expresses only MY opinion), there are three types of short sale listings that are just not an effective use of an agent’s time, and are not even worth the value of the printed paper contract.
The first type of short sale listing that is just not meant to be includes an uncooperative seller. Any seller who is not willing to provide the listing agent with all of the required documentation to submit to the bank as part of the short sale package would be considered uncooperative. A seller needs to be fully invested in the process and must understand that many lending institutions will not even consider a short sale without a complete package of seller documentation.
Uncooperative seller = listing not meant to be. Why list a short sale that the bank is not even going to consider?
The second type of short sale listing that is just not meant to be is one that has an auction date that is too close for comfort. When a seller calls you to list a property on Monday and casually mentions that the auction date is scheduled for Friday of the very same week, you will probably not have enough time to do your job. In order to postpone an auction, most banks require a complete short sale package (including a purchase contract) and this would be hard to put together in just a few days. Additionally, certain mortgage lenders will not even entertain a short sale so close to the auction date.
Auction date too close for comfort = listing not meant to be. Why set yourself up for failure and set your seller up for further disappointment?
The third type of short sale listing that is just not meant to be is the one with too many liens against the property and/or the seller. I cannot underscore enough how important it is to run a preliminary title report and have the title company run the seller’s names in order to ascertain the types of outstanding liens against the property and/or the seller. If the only liens that come up are the mortgage liens and property tax liens, than all is well. However, if there are other liens such as child support liens, abstracts of judgment, and IRS tax liens, than this is going to be a tough short sale to close—unless the seller is willing to clear all of the non-institutional liens prior to closing.
Too many non-institutional liens = listing not meant to be. Why waste three months negotiating a short sale only to learn at the eleventh hour that is it not going to close—due to the non-institutional liens?
Working short sales has many benefits. Not only is it a great niche in this real estate market but it is also a great way to help sellers and obtain referrals for life. But, no matter what, you need to do your homework!
Do not take short sale listings that are not meant to be, otherwise you may feel like Prince Hamlet and wonder whether it is all worth it.
Great advice here!
[...] Taking a Short Sale Listing: ‘To Be or Not to Be?’ – I couldn’t agree with you more Melissa. Before I even take a short sale listing I make the [...]
Melissa,
What about a 4th category — Sellers who haven’t demonstrated the appropriate “hardship” required for the bank to consider a short sale? I’m hearing more stories about people who bought homes at the peak in 2005 and are now trying to sell their house short only because they’re underwater and they don’t want to make payments anymore. They’re employed, and their credit is fine — never missed a payment.
From my understanding, the banks won’t even look at this situation. So it’s another “short sale” to avoid. Your thoughts?
CG
Chuck: I agree with you. This post could have so many categories! A non-hardship might be a great one to avoid. With so many real hardships out there right now, it should be a little easier to say ‘no’.
Melissa,
Great Article. I wrote about the the process from the selling side bit.ly/3pMVrK
There are too many agents just taking these listing without doing the evaluations. Yesterday on Trulia an agent advised a person inquiring about short selling their home “Just put the home on the market way below area values and you’ll get multiple offers” This stuff drives me nuts. What few take time to pay attention too is that the lender has or is going to send out for 2-3 BPOs and either an interior appraisal or drive by appraisal. The lender knows market value and will not agree to a short sale with a purchase price significantly below market value.
Ted: You will get no argument from me on this one!
I agree with Chuck D. That may be the #1 reason to avoid the listing. I have a cut n paste with about 6 or 8 questions, when emailing a SS listing agent. This is the first question, along with 2 trusts or one, who are the lenders, will you change the status to UC within 48 hours, and keep it UC, (I make the offer contingent on it), among other questions.
I usually get no response, or, “already UC”, even though it is still listed.
There are ways to know if a SS LA can get it done. First, if there is only 1 photo, and the listing itself is insufficiently completed, that is a bad sign. No return call or email. The most important, and I do this prior to even inquirering, is to look up the track record in the MLS. Go back 1 year, if they have 6 solds, and 30 expireds and withdrawns. Run, run away. IMHO, of course.
Someone recently suggested the MLS tactic to me in a previous blog post comment. Was it you? It is certainly a great way to pre-qualify an agent. You would not want to get your buyer or your seller into a 5 month deal that isn’t going to close. Now, that would be very unfortunate!
Chuck G makes an excellent post, but the fourth category should be:
Sellers who’s primary or secondary liens are held by Bank of America – truly the epitome of “just not meant to be.” I have an agent on month seven of working a short sale with BOA holding the SECOND lien (and a very small one at that). Nightmare.
Navy Chief, Navy Pride
I’m hearing through the grapevine that things at BofA are *slowly* but *surely* improving. I know they recently made some hires in their short sale division to try and streamline and improve their processes. It seems like the “backlash” is very slowly receding.
Bank of America is improving a little bit. But, I could NOT say that they are turning over approvals like dice at a craps game.
Quite honestly and frankly, I am VERY tired of agents taking short sale listings who have no idea how to work a short sale, especially from the lien holder’s perspective. I have seen way too many sellers receive the complete disservice of an under educated listing agent who is overeager to help, but under qualified to do so. Let the short sale specialists do their jobs.
Another great article Melissa. I think you are absolutely correct. Perhaps another good one to add to the list is the one where the case to the bank for accepting the short sale just doesn’t have enough “breathing room”.
In other words, a situation where the bank won’t be saving enough or their benefit isn’t significant enough (vs. foreclosing) to make it clear to them to accept the short sale offer. Then you can be stuck in a situation trying to convince the bank the short sale is the best way to proceed; when the facts around the circumstance should stand alone to make that case all by themselves.
Great points!
Great information provided in these posts.
We should all be diligent in researching SS listings as well as the agents that espouse to be “Short Sale Experts”. We can save our buyers many headaches and lost opportunities.
I find it unusual that a listing agent would allow the buyers agent to contact the lender and negotiate on behalf of seller. Strange but true……
Hi Melissa!
Thank you and I believe you asre correct. I had one that I worked on for a long time that was turned down because the lender didn’t believe the hardship letter.
KIERAN lOUGHMAN