Put the â€œShortâ€ Back in Short Sale
By Linda Yates, Director of Education, Foreclosure.com
Protracted, complicated and costly.
The list of adjectives that real estate agents use to describe the short sale process is long and lengthy, but certainly not distinguished. In fact, it is almost always described as anything but â€œshort.â€
The short sale is a real estate technique that has been around for years; however, today it is rarely successful because of the headaches that it creates, dragging transactions on for months on end and delivering reduced commissions when closing time finally rolls around.
Why does a short sale seemingly take so long?
For starters, the process requires significant coordination and cooperation from several parties, including the buyer, seller, listing agent(s) and lender. Anytime there are so many moving parts things can get a little tricky â€¦ and lengthy.
In addition, a lender is essentially deciding whether or not to sell the property for less than (or "short" of) the amount it loaned the original borrower. It therefore needs time to crunch the numbers to ensure the deal is right for them in the long-term, which could be complicated if, for example, there is more than one "owner" of the financial instrument.
And letâ€™s not forget that lenders today are being inundated with multiple offers on thousands of different properties, which can create a logjam of paperwork as they try and sort through it all.
So does it really benefit you to pursue a short sale?
The short answer is a resounding â€œYesâ€ because times are changing -- there are numerous ways in which you can vault your offers to the top of the stacks and do quite well with short sales. All it takes is the knowledge to know how to coordinate these deals properly and be aware of the ways in which to get them done fast.
Consider the following two tips that will make your short sale experience a better (and hopefully more lucrative) one:
First, the obvious: Your short sale packages must be pristine.
Everything must be in order and complete from the moment you submit them to the lenders on behalf of your buyers and sellers. Keep in mind that all lenders are different and, consequently, often have different submission requirements. No two short sales are alike. So know, learn and follow the various submission requirements to a tee the first time (and every time) to ensure optimum results.
Second and not so obvious: Your short sale efforts should always include a forensic document audit.
This is the real key to success with short sales because it can get your packages moved to the front of the line virtually overnight. This process starts with enlisting the help of a legal professional to complete a review of the sellersâ€™ mortgage documents for potential fraud, including possible TILA, RESPA and other consumer rights violations.
It's a huge difference maker.
Recent studies from the Credit Law Group indicate that more than 80 percent of mortgages that were originated since 1999 have some type of consumer rights violations in them. Identifying these violations can create leverage in negotiations, alerting lender legal departments to expedite your files.
- In other words, the audit can be used to threaten the possibility of your client pursuing legal action, which most lenders would prefer to avoid at all costs -- they already have enough on their plates. The prospect of litigation is simply not a viable option if violations are detected because the lender knows it will likely be cost prohibitive.
- And if it does go to court, monetary damages could be awarded based on the severity of the violations, which can be applied to the short sale package to drive down the principal amount of the mortgage.
- Last but not least, no deficiency judgment will likely be filed in a case that undergoes an audit because these can be negotiated away. The reality is that the likelihood of a bank collecting on these is slim to none, meaning that the seller(s) are assured of the best possible outcome.
It's a win-win all around for you and your client.
Clearly, negotiating the murky waters of a short sale requires current knowledge and the support of a team of professionals who all possess the skill sets and goals to get the sale through efficiently and effectively.
It is important to first educate yourself about lenders, including their short sale processes and package requirements. Next, team up with a legal eagle who can help you audit mortgages to strengthen your negotiation position. Do this and it will make the process short, easy and profitable â€¦ as its name suggests.