It turns my stomach when I talk to sellers that sold their home as a short sale only to find out after it is a bit too late that their Realtor did not know how to protect their best interest. The biggest issue I see is when the deficiency of the loan is not released and the seller is held liable for the balance. This is not acceptable in my book.
Recently I received an email from a nice woman about their sale and having this exact problem. I'll skip the conversation about the specifics and just say that it is absolutely possible to sell your home for less than is owed and have the bank(s) forgive the balance of the loan. Of course there are requirements such as a valid hardship and supporting facts. Not every seller will get this approved but many will.
To date all of our owners have had their deficiencies removed. Why? Are we so brilliant and such keen negotiators that we are the only people capable of this? Not in the lease. We understand the process, we are patient and almost more important we understand that the bank is NOT the enemy here. Spending time gathering the information the banks need to justify such a release is very important. We all have to remember the banks are taking a horrific hit out there. Sure some may deserve it if they were using predatory practices but most are fighting to stay afloat just like you and I are trying to keep our families afloat in a difficult time.
So please take the time to truly qualify your Realtor prior to placing your home on the market. Protect yourself and ask these qualifying questions.
- How long have you been doing short sales?
- How many short sales have you personally represented from the seller side?
- How many of those went to closing?
- What percentage of the successful sales were two loans with different banks?
- Have you successfully helped those sellers negotiate away their deficiency balance(s)?
- Can I call or email any of your recent sellers, including those that were unable to sell?
- Explain the process to me?
- How long after we get an offer will it take to close?
- How often do you follow up with the bank? You want them to say weekly or at lease every 2 weeks.
- How often do you update the Buyer's agent? This one is HUGE! If your agent does not actively update the buyer's agent there is a very big chance they will get nervous feeling that your agent has no experience and may void the offer after waiting 2 months.
- Does the Realtor and or his/her team do the actual negotiations with the bank(s) or have they hired an outside company to do this? I have mixed feelings on this one. I believe your Realtor has a much bigger stake in the sale than the outside servicers. The outside servicers are often working in volume, don't know you or your situation and cannot properly voice the urgency. Your Realtor and their team can bring up specifics of your hardship and help sway the banks in your favor. But don't automatically disqualify a Realtor if they outsource. Ask them more question about the outsourcing and their numbers and approach.
Something everyone should know; most banks say no initially. If they don't say no they often come back with terms that your buyer will not be able to work with. There is nothing to panic about and if your agent does then you are doomed. The banks are doing their job to protect your bottom line. It is up to your Realtor to do theirs and justify your contract.
A great tool we use and feel free to ask your Realtor if they have one, is a wonderful spreadsheet we present to the bank with the offer. It compares the contract offer to the cost of a foreclosure for the same home. It is extremely eye opening and when the banks see you know the numbers they stand up and listen. Now you can truly negotiate your sale and move on to a better place.
Back to the deficiency for one moment. I wanted to say that typically when the bank sends over their letter approving the short sale this is where your Realtor needs to read it carefully. If it is not clear what will happen with the deficiency they should immediately get back on the phone and request an updated letter making it clear the deficiency will be removed along with the lien. If the banks states they will not remove it then the Realtor must jump back into negotiating mode and do their best to get it cleared for you. I can tell you that half of our letters from the banks are unclear and we have to follow up. On some occasions they say they will not and that is when our experience, knowledge and patience pays off best. To date we have been able to come to an agreement each time with the banks to have it removed for our clients.
As always feel free to email or call with any questions related to short sales. Remember we are in Northern Virginia and for that reason we are unable to speak about the home sale process outside of our licensed area. But we can help you interview and locate a qualified short sale agent in your area if you need help.
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