Sellers Need To Be Committed To Selling Their Homes In A Short Sale.
Sellers Need To Be Committed To Selling Their House In A Short Sale
Handling a short sale transaction is a very complicated matter. There is an exuberant amount of work needed to be done by the listing agent and not a lot of time to do it. So before an agent starts they should ask themselves a series of questions to see if they have the stomach for such a treacherous transaction.
There is a lot of room for error along the long winding road before you get to the closing table. It’s a good idea to have a check list to use as you go along. First the listing agent has to make sure that the listing is placed into MLS correctly by stating that the sale of the house is contingent upon third party approval and that commission amounts are not guaranteed. Thus letting the other agent know that the final decision maker is not the seller but the bank and the bank will decide what commissions are to be paid. Next the listing agent has to get all the documentation ready to send to the bank including: listing contracts, contract for sale and purchase, a preliminary HUD 1 from a title company and a letter form the seller granting the listing agent authority to deal directly with the bank. Next the agent needs to stay on top of the seller to get all of the documents necessary for the bank to go forward such as: a hardship letter, copies of paycheck stubs, copies of tax returns, copies of bank statements and possibly an itemized budget. Then the agent has to make sure that the bank receives all of this information and begin the negotiating process with the bank explaining why they should accept such an offer.
As if this isn’t enough to do the listing agents have to do all the regular things necessary for a transaction to get to closing such as: co-ordinate the appraisal, co-ordinate the termite inspection, co-ordinate the home inspection, stay on top of the buyer’s mortgage broker in order to get a clear to close and finally co-ordinate the closing with the title company and review the HUD 1 making sure there are no errors.
The last thing the listing agent needs is for the seller to jump ship, and that is exactly what happened to me last month. After all of the work was done and the bank finally approved the short sale, the seller told me that they were advised by their attorney not to proceed and to let the house go to foreclosure instead. Their game plan was pretty clear at this point. Evidently the attorney was steering the sellers towards foreclosure and a bankruptcy. Thus guarantying himself of a paycheck and extinguishing the chances for a closing.
I wonder if everything was explained to the sellers. Did their attorney tell the sellers that their credit was about to take a massive hit, and that it would stay there for 7 to 10 years if they let the house foreclose and then claim bankruptcy? Did the attorney explain that the seller’s credit would still be affected with a short sale but to a much lesser extent? Did the attorney explain that a short sale is not reported as a foreclosure and that this type of bad credit is repairable? I guess I’ll never know since the sellers were instructed not to discuss the matter with anyone.
So before you jump into the short sale market beware of the aggravation and the consequences. Make sure that the seller is on board and they truly understand what is expected, not only from them but from you the listing agent. The person who is going to try to solve the seller’s dilemma of how to sell a house that is worth less than the amount of the mortgage.