New to Short Sales - Posted by Andre

Real Estate Investing
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Posted by Eric Woolhiser on April 20, 2006 at 15:43:32:

By my MLS board’s rules, pocket listings are allowed with disclosure and approval of the seller. My MLS is pedantic about it, in that we have the seller sign a form of the board’s making and we have to fax it into the board.

We can also have delayed listings, where we have the seller in an exclusive right to sell agreement, and a second agreement to enter the listing into MLS at a later date.

I often do delayed listings, as I do extensive photography work and virtual tours. I want it all to be complete before the market knows about the listing. I think it hurts market time to have a listing on the market for a couple of days while the REALTOR® finds the time to put in the pictures a couple of days later.

Also, our agents are not allowed to cancel listings. We have to get a cancelation form signed by both the seller and the broker, and it is faxed into MLS.

But why is it better for the seller to accept the lowest price in a short sale?

Well, you have to look at the transaction in total from the day that the seller bought it to the day the seller sells it.

Many people have re-financed their homes to bury credit card and other consumer debt. The credit report shows paid in full when the mortgage is discharged. If a consumer had burried 20K of credit cards into the house and later gets 40K of debt forgiveness, then he comes out ahead.

Why else to sellers often get a 1099 for the ammount of the forgiven debt?

What I will say, is that the seller should insist that the short sale package includes a promise from the bank that they will not later seek a deficiency judgement. If that can’t be acheived, then yes, the seller should try to get the highest price he can for the home, becuase post transaction he will be carrying negative equity. i.e. a judgement that has to be paid.

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New to Short Sales - Posted by Andre

Posted by Andre on April 17, 2006 at 20:18:19:

Does anyone have any advice on dealing with lending institutions or the people who are in forclosure

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Re: New to Short Sales - Posted by Eric Woolhiser

Posted by Eric Woolhiser on April 19, 2006 at 07:57:08:

Well if there is no equity, and a short sale is indicated the first step is to gain the confidence of the seller. You can’t negotiate with the bank until that’s done in the first place.

The seller has to be resigned to the fact that there is no equity in the house at all. The option you are providing for them is that they will not have to bring money to the closing in order to sell their house.

Explain that since it’s the bank that takes it on the chin, the lower that the seller agrees to sell the house the better. It means more debt relief for the seller and more profit for the buyer.

Review the notes on the house with the seller, I’ve had sellers hand me the whole closing package, and they didn’t want me to make copies.

I’m a REALTOR®, and I’ve originated loans. I’ve decided to go after short sales as my niche market. It’s very much like originating a loan except backwards. You document income and assets, you get a cry letter and instead of proving to the bank that the borrower is worthy of a loan, you try to prove that something has happend where the borrower can no longer maintain the loan.

A normal REALTOR® works to help people into the American Dream, and a short sale REALTOR® gets people out of the American Nightmare.

You might want to hook up with a REALTOR® who is working short sales. I can’t swallow every deal I get, so it helps to have investors that are ready to buy. This way, I can still double end the deal without going to MLS.

If you’re looking for a short sale compentent REALTOR® in the area, I can help you find one.

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Re: New to Short Sales - Posted by Natalie-VA

Posted by Natalie-VA on April 19, 2006 at 16:28:37:

Eric,

I think the short sale niche is a great one for RE agents. I wish more knew how to handle them.

If you’re representing the Seller in the deal, don’t you think it’s in their best interest to put the house on the MLS instead of going straight to an investor?

I’m not saying your way isn’t effective; I would just be concerned that someone would question your motives and who you’re really representing.

–Natalie

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Re: New to Short Sales - Posted by Eric Woolhiser

Posted by Eric Woolhiser on April 20, 2006 at 13:12:07:

Yes, I can understand the question. Am I representing the investor or the seller?

To answer that question I think we first have to realize that since the seller has no equity, it benefits the seller to sell the property as low as possible.

One of the unique things about the short sale process is that the buyer and seller have more in common with each other than a normal arm’s length MLS transaction.

Both the buyer and the seller benefit from a lower price. It’s the bank that takes it on the chin.

I will still be marketing the property at FMV because the showing activity will be good data for the bank. While they would undoubtably get a BPO from another agent, my showing activity is real data.

I will certianly make my investor clients aware that I have a short sale in my inventory, but I would probably act as a disclosed dual agent.

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Re: New to Short Sales - Posted by Natalie-VA

Posted by Natalie-VA on April 20, 2006 at 15:22:51:

Eric,

Thanks for the clarifications. I don’t see any benefit to the seller for selling the property as low as possible. I realize that the lender is the one taking it in the shorts, but I wonder if the seller’s credit report will show how much the lender had to eat in the end. I have no clue…just bouncing around ideas.

In my area, if you have an “exclusive right to sell” listing with the seller, you MUST put it on the MLS. To do otherwise would be considered a pocket listing which isn’t allowed. I guess in your case, either the MLS doesn’t have those rules, or you don’t have a listing agreement.

–Natalie