Short Sales-Is there a Pot of Gold at the End of the Process?

There seems to be a lot of discussion recently about the validity of short sales in the MLS and whether those listings are imaginary listings clogging up the MLS and detracting buyers from "real" listings.

Short sales aren't new. We had them in the 80's and the 90's in Northern Virginia. What is new is that the banks are allowing the current owners to walk away from the settlement table without having to pony up a dime of their savings or be on the hook for any amount of what they owe on the property. This is amazing and may have led to more people throwing up their hands and saying let the lender have it than try and work out a way to stay.

The short sale listings that we have today are a strange no man's land somewhere between a seller-owned listing and a foreclosure. The lenders are overwhelmed and the administrative staff don't know how to deal with the questions. The homes aren't far enough along in the process to foreclose on or the lender doesn't want to go to the expense of foreclosure and everyone pushes it back on agents to help bail them out. And some agents thinking that there is money to be made go ahead and throw the listings on the MLS and hope for the best.

These are the same agents who will scream FOUL when an offer comes in and the lender doesn't respond in a "timely manner." They will blame the lender and say they can't get anyone to respond to their calls. After awhile the potential buyers give up and walk away. My suspicion is that few of these agents took the time to educate themselves on what it takes for the lender to accept a short sale contract in the first place.

So how do we as an industry deal with this new strange entity? The first is education. Almost every association in our area is offering courses on the short sale process. Most large brokerages are also offering training sessions on how to deal with short sales. Get educated! It is the first thing you need to do before you attempt to write and offer or take a short sale listing.

Second don't take a listing unless you have the short sale package from the lender and it has been completed by your seller. Make sure they have done everything that is required in the package from the lender (each one is different) and make sure your seller has signed the authorization for you to talk with the lender directly. Get as many contact names and numbers at the lender as possible. If you don't get a response from the first one then go to the second one and so on. If you haven't done this then forget it. Don't list the home in the MLS. You aren't even close to ready to deal with an offer.

If you have done the first two pieces then you are ready to establish a value for the property. We do CMA's every day. Short sales are no different. You are looking at the same criteria just paying closer attention to the foreclosure prices and other short sales in the neighborhood versus the traditional sales. Now with a completed short sale package, contact points at the lender and a reasonable value you can market the listing in the MLS.

Is this ideal? Absolutely not but it is certainly better than a large portion of short sale listings that we run up against in the MLS.

Should there be another way? Absolutely but short of letting a house go to foreclosure the lenders don't seem to be willing to step up to the plate and agree to a definitive answer to a seller who has fallen on hard times. So as agent's we need to be proactive and do all we can to make sure that before the house goes on the market that we have a house that we can honestly sell and that has all of the required paperwork completed.

Take the time and effort to educate yourself and your short sale listings will make it to closing. The pot of gold at the end of the rainbow will be yours...it's called a commission check!