Short Story on Short Sales

Following is an article I wrote about one of my favorite short sale agents in my office, Marisa Laurel Smith. Together, we have helped several clients with their short sale needs. We both hold the SFR designation (Short Sale and Foreclosure Resource).

Marisa Laurel Smith, SFR, has been a Realtor in the Santa Barbara area since 2005. When she started in real estate, there were few distressed properties on the market, but that has changed in the past few years.

Marisa Laurel Smith.

Now, about 30 percent of sales in South Santa Barbara County are considered distressed - short sales (so called because the property sells for less than the amount owed to the bank, thus the bank comes up "short"; foreclosures; and REOs ("real estate owned" - property already foreclosed and owned by the bank).

In 2006, Smith realized that homeowners and the real estate community needed agents with expertise in bank short-sale procedures. She is now a Short Sale and Foreclosure Resource for the National Association of Realtors.

Through her long experience with short sales, she has established essential contacts with many different banking systems, from large ones such as Bank of America to small ones such as MorEquity. Networking and negotiating are among the most important skills she has developed.

This article will highlight some of the issues that sellers face when trying to complete a short sale. Future articles will look at short sales from the perspective of buyers, Realtors and neighboring property owners.

When handling a short sale, a listing agent has five main goals: (1) help the seller accept a sincere and realistic offer; (2) get the bank(s) that hold or service the note(s) to agree; (3) ensure that the seller is not required to contribute financially to the deal; (4) make sure the bank does not levy a deficiency judgment(s) on the seller; and (5) avoid a foreclosure.

Smith has represented dozens of short-sale clients, so she knows the transaction can be a difficult one. The loss of a private home is painful, especially for sellers who are unemployed or in poor health. Many sellers come to her after an application for a loan modification has failed. Others may be current on their payments, but decide they can no longer continue down the path of homeownership.

In any case, speed is of the essence, and so is moral support. Short sale can be a bewildering process. Every lender has its own rules and requirements, and Smith knows them backwards and forwards. Part counselor to sellers, part tough negotiator with the banks, she has the experience and knowledge needed to guide homeowners through the short-sale maze.

Should you walk away from your property? The general consensus is that a short sale is better for your credit than a foreclosure. We can't be absolutely certain that this is the case; the FICO score (credit score) is derived from a patented formula that constantly changes. But we do know that foreclosures are very damaging. Lenders do not regard foreclosure as a mutually agreed-upon settlement. By opting for short sale, sellers can usually qualify for a new home loan much more quickly than if they were to undergo foreclosure.

For information on options available or a confidential consultation, Smith can be reached at 805.637.8893 or santabarbarashortsale@gmail.com . Kathleen Can be reached at 805.570.3366 or k@kathleenbarnato.com