Ten Tips About Short Sales

 

 

Short sales are thrilling, fulfilling and profitable transactions. In a short sale, the homeowner sells a property for less than what is owed on it. The remainder of the debt is forgiven. This happens because the property is over-mortgaged, the homeowner is insolvent and it’s the lender’s best option.

 

Negotiating short sales definitely requires expertise. The homeowner and the lender are locked up into an unpleasant situation. The homeowner is unable to pay the mortgage. The lender is not getting paid. The job of the short seller is to positively unravel this awkward situation and be rewarded for it.

 

The longer it passes, the worse it gets. With time, the debt increases and the property falls in disrepair. As this trend continues, matters only deteriorate further. Sooner or later, the homeowner will lose the property. Very often, the homeowner still owes on the property after the foreclosure. By the time this happens, the creditor will have a great financial loss. The creditor will have a lesser loss the property if sold at the foreclosure sale. If not, the lender will end up owning the property. If this happens, losses will keep growing until the property is sold. It is the expertise of a short seller that provides an amiable solution to this situation.

 

Short sellers are real estate agents, investors or both. Either way, the set of skills needed for negotiating short sales is basically the same. The difference is in how each make a living. Agents earn commissions. Investors earn by re-sale profit or rental property income.

 

Here are the top ten tips for succeeding in short sales:

 

Be knowledgeable. Nothing beats good training. In real estate, the more you learn, the more you earn. In this business, education pays off. Knowing the short sale business allows to quickly assess foreclosure situations and determine whether or not to be involved.

 

Understand the foreclosure process. The principles of foreclosure are timeless and basically universal. However, foreclosure law varies state to state. Each state has its own foreclosure version. In the least, a short seller must master this.

 

Know the legal boundaries. There is only so much a short seller can do. Crossing legal boundaries can easily result in judicial problems. This is why the short seller must dominate the local, state and federal regulations of this business. In real estate, the law is most often broken by not being aware, rather than by willful intention. However, the law is not forgiving of ignorance.

 

Work only with motivated clients. Pre-disposed clients are open to be helped. It is only fair for the client to ask questions and request references. The short seller’s confidence, knowledge and sincerity should be enough to overcome this. However, it is waste of time to have to convince people.

 

Be helpful, not judgmental. Clients needing a short sale are providing a financial opportunity in exchange for your help. The short seller needs to be grateful to have this chance. Not only that, the moment the short seller passes from being helpful to being judgmental, the business relationship will become strained. Judgmental thoughts negatively affect interactions with clients. Like this, inevitably, attitudes will create problems. Too many problems and the transaction will not close. Incomplete transactions are a waste of time, energy and emotion.

 

Make sure the client understands the benefits of a short sale. A short sale is always better than a foreclosure. However, this is not always evident to the client. The main benefit of a short sale is reduced credit rating damage. Damaged credit through foreclosure will result in the homeowner having to pay high interest rates for years and years. Not only that, if a short sale is not negotiated, in many instances, the homeowner will remain owing on the home despite no longer owning it. Home equity loans or cash-out second mortgages not fully paid by the foreclosure remain the homeowner’s responsibility. Not owing after the foreclosure is definitely a short sale benefit.

 

Clearly explain what needs to be done. Short sales take time, effort, have a protocol and require the client’s full collaboration. Clearly and properly explaining to the client the short sale process delineates expectations, responsibilities and outcome possibilities. Not only that, tough choices may have to be made. An educated client tends to be emotionally and mentally prepared. The payoff of a few minutes invested in educating the client is a smoother transaction.

 

Fully disclose. Tell exactly what, how and why things need to be done. This will keep the client from having any doubts. Doubts lead to discomfort. Discomfort leads to lack of trust. Clients that do not trust soon think that the agent or investor has something to hide. Once this happens, despite the best intentions, matters are questioned. The end result is usually an incomplete transaction. Incomplete transactions are a waste of opportunity.

 

Ensure earnings. Short sales take time, effort and expertise. This needs to be rewarded. To make sense, a short sale transaction needs to be win-win-win. The homeowner avoids foreclosure and its ongoing negative ramifications. The lender recovers more of the loaned principal sooner. It is only fair that the short seller be rewarded for this. Whether the short seller earns through commission, re-sale or rental income, that profit is the result of others benefiting. If others benefit the short seller should benefit too.

 

Get testimonials. Testimonials are a great referral basis. Nothing beats evidence of satisfied clients. Testimonials are proof of competence, experience and honesty. Only satisfied clients write testimonials. What is the key to obtaining testimonials? “Ask and you shall receive”. Happy clients will gladly testify in favor of persons that helped them out of a bad situation. Lenders often provide testimonials too. Asking is for free. The best way to obtain a testimonial is to ask for it immediately after the transaction has been finalized. Better yet, right prior to closing, ask the client if so far they are happy how things are going. If they are, ask them to, after closing, write a little note you to show others. This will pre-commit the client. After that, the longer it passes, the lower the quality and the lesser the likelihood a testimonial will be created.

 

Short sales are very interesting transactions. Plenty of well-trained real estate professionals make a good living with them. Following these ten tips will ensure continued success in this real estate endeavor.