HomeSection.comHomes By Herman

10 Ways To Help Avoid A Short Sale Disaster

March 11th, 2011 categories: Benicia, Foreclosures / Short Sales, Selling, Solano, Vallejo

10 List - Short Sale GraphicAs anyone looking for a home in Solano County right now can tell you, many of the homes on the market right now are short sales (where the seller owes more than the home is worth and can’t complete the sale without their lender(s) agreeing to reduce the amount they owe).

Short sales are far more complicated than a regular sales transaction and can take far take longer, too, due to the time a bank can take to review the seller’s financial situation.

Right now, about 4 out of every 10 homes on the market in Solano County are short sales, including 43% of the homes in Benicia and 47% in Vallejo. And, despite what you may have heard, many short sales do indeed close escrow.

Most  of the short sales we’ve represented clients on over the past few years have successfully closed.Yes, there can be some drama or unexpected twists and turns along the way.

But sadly, many sellers or agents either throw in the towel far too early — either out of frustration or by giving up at the first sign of a short sale decline.

If there’s one thing I’ve learned from representing short sale clients it’s that there’s definitely an art to successfully negotiating a short sale. There’s far more to it than just shuffling papers and waiting for the bank to give its answer.

Over the years I’ve found that there are 10 critical factors that either the listing agent or the seller can directly control.

Some are crucial and can spell instant short sale doom, whiles others give you added leverage and can be difference-makers in whether or not a deal goes through. Without most of these, your chances of short sale success drops considerably.

  1. The home must be priced right. If it’s priced to sell quickly but far below its real market value, you’re just asking for a decline letter. If it’s priced too high, the seller’s bank might like it, but the home will never appraise for the buyer.
  2. The seller must be “on board” and willing to provide all financial documentation the bank will require.
  3. The seller must have a legitimate hardship. Banks aren’t charities, so unless the seller really has a hardship, the bank probably won’t approve the sale.
  4. Is the seller willing to contribute? Many banks try to get the seller to contribute towards the loan shortfall.  There are strategies and arguments that can sometimes convince a open-minded bank to relent when the seller won’t contribute.
  5. The listing agent must make sure all the contractual costs and fees are incorporated into the estimated closing statement, which is what the bank will rely on in determining whether or not to approve the short sale.
  6. The listing agent must know how to package all the short sale documents so that the bank doesn’t decline the sale due to missing documents. Many banks will close the file if missing items aren’t provided on a timely basis.
  7. The listing agent must know how to escalate a file to upper management when a lower-level bank negotiator stymies a deal that should be a no-brainer.
  8. It’s far easier to negotiate with the bank if you know their numbers. You’re going to be far more effective at countering a bank’s demands if you have a general idea of what they’re going to net in a sort sale vs. foreclosure.
  9. Followup is crucial. If the listing agent simply submits the file and then sits back and waits for the bank to call, the file may stay at the bottom of the negotiator’s inbox. And if months have gone by before the bank gets around to looking at the file, there’s a pretty good chance the buyer will have “moved on” by then.
  10. Read the fine print. Many approval letters are conditioned on matters the seller may not be willing or even legally able to agree to. If you wait until you’re ready to close to discover and deal with these, it may be too late.

These 10 items alone certainly won’t guarantee a successful short sale. But they’ll definitely give a much better chance of getting your short sale approved.

If you’re in a situation where you think a short sale might be a viable alternative for you, feel free to contact us and we’ll be happy to discuss your situation in complete confidence.

Anyone considering a short sale should also consult with their tax or legal advisers, since some of the decisions you make could have significant tax or legal consequences.

Recent Real Estate Posts

listings-by-mls-button news-by-email-button search-the-mls-button

This entry was posted on Friday, March 11th, 2011 at 4:35 pm and is filed under Benicia, Foreclosures / Short Sales, Selling, Solano, Vallejo. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply