Here are just a few tips and techniques to help agents navigate the challenges we face when our market is replete with sellers who are in various stages of distress. What you are not going to get in this article is a certification or designation.
I am saddened to see how many so called "experts" are out there offering classes, of a few hours or a few days, and when participants are done, they are "certified" as short sale or foreclosure experts. They are no such thing. What these agents are learning is what would be contained in the Cliff Notes of the Cliff Notes were they available on the topic! What we need to do is to help sellers understand their options and where to go for the right help. As my friend and colleague, Allan Dalton, Top5inrealestate.com (former president of Realtor.com) would say, "… agents and brokers are air traffic controllers and not pilots…" in the process! And, keep in mind that it is the sellers who are distressed and not the properties! In most instances, we help distressed sellers to move their perfectly fine properties.
Keep the following in mind: We got into this mess because: bad lending decisions were made, people were greedy, we used our houses as piggy-banks, we spent more than we made and there was the perfect-storm brewing elsewhere in the world.2.5M foreclosures 2008 and perhaps 3M 2009 Short Sale: Outstanding lien(s) on the property equals more than the sale value of the home. REO or Asset Recovery: A property taken back by the lien holder(s) through a foreclosure and owned by bank.Sheriff's Sale: Bank sells property at a public sale (auction).Cash for Keys: Paying owner or tenant to vacate and leave the home in good order.Deed-in-Lieu: Rather than foreclosing on the owner(s), the bank takes back the deed, and the sellers are out of the home with no other liabilities: Not a popular solution at this time as banks don't need nor do they want more inventory. Don't tell someone they may be eligible for a short-sale unless you know that they have a legitimate hardship that may qualify. Just being short of $$$ is not equal to a hardship under the banks definition, examples: death, job loss, serious illness, absolute necessity to move to care for an ailing relative, etc.Never tell the client that you can speak with the bank on their behalf. That requires written consent by all parties on the deed and then verification by the bank.The client must get a skilled short-sale attorney involved at the earliest possible stage.You can be held liable for all false or misleading statements you make to a client/bank. If you place yourself in the position of knowing how to handle short-sales, be sure that you do!Don't accept bids from buyers who need to purchase a home in a few months. Short-sales may take up to 6 months to complete! Buyers will back out due to frustration over bank delays. That could cause an unnecessary foreclosure.Have the seller or the seller's attorney get the bank's short sale requirements ASAP. Nothing can be done before they/you know what the requirements are.Alert your sellers that they should gather all of their financial papers (bank statements, stock certificates, other investments/assets, bank statements, etc.) for the past 3 months.Be sure you comply with MLS rules regarding alerting co-broker's that this is a POSSIBLE short-sale. Commission split and amount is subject to third party approval. NAR has a suggested policy statement on how to handle this with MLS rules.All offers should be presented with an estimated HUD statement attached. Without that, replies will be greatly delayed. The selling agent/attorney prepares it. If the buyer is not 100% pre-approved, don't even bother.Homes with more than one lien can be much more difficult to process through a short-sale. Beware: this is the attorney's job to navigate.If the home is not the seller's primary residence, there could be tax consequences associated with a short-sale. Only primary residences were exempted in the Bush Mortgage Relief Act.Brokers and agents who handle short-sales must be sure that they are covered by their E&O policies. Many E&O providers have created guidelines for companies who allow agents to become involved with the short-sale market. There is a great deal of liability associated with this complicated process.These are just a few of the issues agents must know; the best advice to give your seller: bring in the right attorney at the start. Agents and brokers, take a class on short-sales/foreclosures from a knowledgeable person with a real track record!
Author: Marylyn B. Schwartz
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