If you have a client facing foreclosure and you want to help – make sure you know how to master the art of a short sale.
According to Real Estate Wiki, a Short Sale is a legal, lender-approved solution assisting financially strapped homeowners to get out from under their mortgage commitment quickly. A Short Sale can be accomplished by negotiating with your bank or lending institution to accept a purchase price for your property to a third party buyer for less than what you currently owe on your mortgage balance.
Every lending organization has its own set of procedures and requirements and you are going to have to extract them and find a way to get them fulfilled. But there is a common catalyst involved in the short sale formula and without it you aren’t going to get the seller, lender and buyer merged into a successful sale. The counteroffer. In almost no other case is the price more critical than in the short sale.
As a result, how you go about getting there is key to your success. You are going to have to play the lender’s game and work with their guidelines. It is going to become a bit of a waiting game until the lender accepts the reality of both the situation and the market. As a result the first thing you need to do is prepare your client for the wait.
How to price the house to ensure you get a counteroffer from the lender – that’s the issue. There are different schools of thought ranging from pricing it unrealistically low in hopes of generating multiple offers to “par” or “level” pricing; pricing it just below current market comparables. The key is to price it within striking range of the appraisal or BPO (Broker Price Opinion).
Most lenders will require one or the other and if your offer is well below that value the lender may well balk. Remember that your objective is to generate an offer that will initiate the short sale process without wasting a lot of valuable time. If your offering price is reasonably close to the value established by appraisal or BPO you stand a much better chance of getting a counteroffer from the lender. If you are too far apart (a real lowball offer) you may never get the lender to commit to an acceptable price – even verbally, which in itself is a positive step. On the other hand you want to be close enough to be able to handle a price bump during the counteroffer. As important as the initial offer is – without the lender’s counter you haven’t gained any ground.
Suffice it to say here that your job is to make sure the appraiser or broker clearly understand that this is a short sale and that means you have to be the contact person in the middle … not the seller. Facilitating and negotiating a short sale isn’t an easy process and it’s certainly not a “really fast” transaction.
The short sale isn’t for the feint of heart but in today’s market it can be the life saver before foreclosure. Learn how to master the short sale at www.cspdesignation.com
