Most of us are overleveraged here in Sacramento - owing more on the home than what the home is worth. That's why if you can't afford your payments, selling the house "short" may be your only way out if you want to settle your mortgages, avoid foreclosure and save your credit.
The best part is...
A Short Sale is FREE to you!
What's the catch?
Basically, your lender pays for the real estate agent commissions.
Typically the commissions are paid by the sellers from the equity in the property. Well, you don't have any equity, otherwise you wouldn't be doing a short sale, right? And we as short sale specialists cannot afford to work for free either. So the bank allows the commissions to be paid out of their proceeds.
The issues is, the lender is already losing money so they will typically reduce our commissions. That doesn't seem too fair since short sales take MUCH more work than a typical transaction.
So What Exactly Does a Short Sale Real Estate Agent Do?
Realtors specializing in short sales do some of the hardest work in real estate:
- Collect all the documentation for the short sale package. This includes filling out a bunch of forms, financial statements, and help you write the Hardship Letter. We put all the info into a nice short sale package and send to the bank to get the ball rolling.
- Determine value by running comps (Comparable Market Analisys) to see what properties are selling for in your area. Your home's current value has nothing to do with your mortgage balance and everything to do with how much buyers are willing to pay.
- List your house on the MLS as a "short sale" and market your property: through signs, ads, internet, existing client database, etc.
- Manage phone calls from agents and buyers. Short sale listings generate a lot more calls from buyers' agents wondering where the short sale is at in the process.
- Some buyers agents don't even show short sales, because their buyers don't want to wait for the approval process. It's true, short sales do take longer. However, if you're working with an experienced short sale agent the process goes much smoother/faster. The banks are starting to approve short sales faster too.
- Lower the price incrementally until we get an offer. If we don't get some offers right away we will typically lower the price by $10,000 or more per week. We can't lower the price too fast. As professional Realtors we must look out for all parties' interests. That includes getting the bank as much money as possible to minimize their loss. It's a balancing act because of the foreclosure deadline. If the foreclosure auction date is approaching we drop the price more aggessively to get an offer and get an extension.
- Screen out offers to make sure we get a strong buyer. It can takes weeks for the bank to review the offer and if they reject a low-ball offer or the buyer's loan falls through we're right back where we started. Sometimes we can keep the same contact at the bank and resume where we started with a new offer. However, many of the bigger lenders like Countrywide will start the process all over again with a new offer. Frustrating!
- Negotiate with the bank and wait for approval. This is the most time consuming part. After submitting the offer the lender will take anywhere from a couple of days to a couple of months to give us approval. Often they will respond with a counter offer or flat out reject it. We work with the buyer's agent to raise or modify the offer (if they're still in the game). After 1st gives us green light we have negotiate with the second lender and any other lien holders.
- Manage the closing. After we get approvals from all the lenders, the short sale becomes like a standard transaction. However, a number of things may go wrong here. Managing the escrow process is key since we have already put so much work in getting approval.
On short sales the banks will typically reduce the commission from 6% down to 5% or even 4%. (Split between the buyer and seller agencies.) Also sometimes last-minute problems come up and because the lenders take so long to respond we will sometimes kick-in our commission to make the deal close.
With all that and the work required, no wonder so many agents hate doing short sales!
However, since short sales is our specialty we don't mind the challenges. Having done hundreds of short sale transactions has given us the experience and confidence to handle whatever comes up.
At the end of the day, the satisfaction of rescuing overleveraged homeowners is what keeps us going.
2 comments:
Yes they say the average transaction take 150 calls. Yes thats right between home inspections pest reports, title companies and agents the average transaction takes 150 calls. Now add the bank calls which in our office is two or three times a week. It is dissappointing to get our pay checks cut. Though here in our office its about taking care of our clients and in the end we get taken care.. Lots of Referrals!! Keep taking good care of the client.
That's a lot of great information. Another thing to keep in mind is that once you have an approval from the bank it will have an expiration date. If your transaction is going to close late you should notify the listing agent as soon as possible because the bank charges a per diem which is usually a few hundred dollars for each day late it closes. The listing agent can try to get an extension from the bank so you won't have to pay the fee for closing late.
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