Central Florida Short Sales: January 2008

This is the third part of my series on short sales. As way of disclosure, I am NOT an expert on short sales, I am using this series as a way for me to think through the process and hopefully become better prepared to help some Sellers who may qualify for a short sale.

A short sale can be a very complicated transaction. Not only are we negotiating with the Lender but there is another entity who may be involved as well....the Private Mortgage Insurance (PMI) Company. Most Buyers, that did not put at least 20% down when they purchased their property, were required to purchase PMI for the benefit of the Lender.

PMI protects the Lender for loses usually up to 20% of the loan amount. So, they have a say so in whether or not a short sale is accepted.

I am in the process of negotiating a short sale right now where I am actually negotiating with the PMI Company instead of the Lender. This is a first for me but so far it seems to be going well. The lady I am dealing with has been very helpful and she is the one that is handling the negotiations with the Lender. Have you ever done this before?

I'm very anxious to see how this plays out. Brian Brady wrote a very good post about this a few months ago titled "A Realtor's guide to PMI and Short Sales". Give it quick read.

Anyway, the point of this post is to make you aware of the fact that a short sale is a lot more complicated than just getting the Lender to agree to a price. The Lender is looking at the bottom line. If the short sale does not NET them more than a foreclosure then it ain't happening.

When meeting with potential Sellers you need to find out if they have PMI. If they do, then do the math. Brian is better at that than I am so if you haven't already....go read his post.

OK that's it for today. These are my thoughts. What are yours?

Other posts in the series:

A "short sale" is an option NOT an entitlement!

Becoming a better "short sale" expert. A series by Broker Bryant.

Copyright © 2007 Broker Bryant Real Estate Ramblings | All Rights Reserved

I've been spending a lot of time this week thinking about short sales. My market, Poinciana FL, is going to have a bunch of them this next year so I figure it's time to brush up on my short sale skills to see what I can do to help some folks out.

The first thing I have decided is that I'm going to be very picky with who I work with. My last post touched on that a little. The percentage of getting short sales closed is very, very low. I hear 25% to 30%, if you're lucky.

My goal is to up that number substantially. If I can't close better than 1 in 4, well.....I have better things to do with my time. My target is to close 3 in 4.

So, with that in mind, I will be doing a series of posts sharing my thought process as I try to figure this out. Your suggestions are welcomed.

Here is a rough outline of my thoughts thus far:

• The Seller has to have a legitimate hardship.

• The Seller has to be motivated to work with me and the Lender in providing all the documentation we'll need to get the job done.

• The Seller will need to provide me with full financial information prior to me placing the property on the market i.e. 2 years tax returns, bank statements etc.

• I will need a signed "authorization to release info" letter and a hardship letter at time of listing.

• The Seller will need to sign a disclosure stating that I have suggested they seek legal advice and that they understand the negative ramifications of being granted a short sale.

• And finally, I want to make sure the Seller did NOT purchase the property in a fraudulent manner.

Folks, this last one is very, very important and the one I want to expand upon today. Over the last few years there were many homes purchased using stated income, low doc loans. There were also many homes purchased as "second homes" that were in fact not second homes but properties bought to flip.

Sellers need to understand that even though they didn't have to prove their income when purchasing the home they WILL have to prove it in order to apply for a short sale. If they lied on their initial loan application this can be opening up a big ole' can of worms.

What is the Lender going to say when the Seller provides a tax return for when they bought the property and it doesn't match up with what they "stated" on their application? Have you thought about that? Have you been counseling your potential Sellers about this? If not, you need to start. These folks do NOT qualify for a short sale and could very well be opening themselves up to a fraud investigation by applying for one. They don't need a REALTOR® they need an Attorney.

My point is, a short sale is not for everyone. As REALTORS® we need to do our due diligence prior to taking on a short sale listing. If we can be smart in our approach, to working with short sales, we can surely do better than a 25%-30% closing percentage. I know I plan to.

OK, so that's it for today. Did I give you any food thought? Do you have any suggestions for me? Let's think this through together. I want to do this right so please help if you can.

First post in the series:

A "short sale" is an option, NOT an entitlement!

Copyright © 2007 Broker Bryant Real Estate Ramblings | All Rights Reserved

"Short sale". The new buzz word. We've all heard it:

• "I owe more than my house is worth and I WANT to move. I'll just ask the lender for a short sale."

• "I don't want to live here anymore and I need to do a short sale."

• "I want to take a new job up North but I just bought my house last year. I need to do a short sale."

• "I'm tired of making these payments and want something smaller. I need to do a short sale."

• "I quit making payments because my lender said once I was behind 60 days I could do a short sale."

• "I NEED.........blah, blah, blah!!!!!"

Folks did you notice all of the "I" in these statements? What is wrong with people today? What happened to personal responsibilty?

As REALTORS® we need to start counseling people properly. The folks in these above scenarios DO NOT qualify for a short sale. They need to honor their obligations. As a group we need to quit saturating the market with "short sales" because folks feel they are entitled to one.

A "short sale" is for folks that are experiencing financial difficulties and who cannot afford to keep their house. It is NOT for someone who just feels like moving.

Now having said that, these folks may very well apply for a short sale and it may be granted BUT it is flat out wrong!!

The real estate market is experiencing enough difficulties without REALTORS® automatically playing the "short sale" card just to get a listing. You need to look these folks in the eye and say "Sorry, I can't help you. Short sales are for folks facing legitimate financial difficulties. NOT for folks that just want to move."

A "short sale" is great option for folks who are in dire straights. It is NOT an entitlement. Use it but don't abuse it.

OK.....that's all I have to say about that. For now. What say you?

Copyright © 2007 Broker Bryant Real Estate Ramblings | All Rights Reserved