News, articles, and advice for Maine real estate licensees, loan officers, and all professionals who assist the consumer in the real estate transaction.
| Posted by: | Steve Hammond, Founding Partner, TRELG |
| About Steve | Steve's Post Archive | |
| Posted on: | August 31st, 2008 at 7:23 am |
| Filed under: | Your Real Estate Business |
There are a lot of things that the “textbook experts” don’t know to tell you when they talk about short sales. Having been around a while, I knew the difference between theory and reality. In my search for some inside information, I visited with Doug Solman owner of MH Solutions who has over 200 successful short sales under his belt and Kim Fowler owner of MaineStay Realty who carries more that 20 short sale listings at any one time and has closed $3,500,000 (20 sides) since November ‘06.
Here are three points they made:
1. Pricing
Pricing is critical to short sale success. There is a natural chasm between what the market wants to pay and what the seller owes. So, should you consult the lender regarding the offering price? After all, they will have the final say regarding how much under the loan balance they will approve. Doug says no! The lender has no idea what the marker is and often resists doing what it takes to get the property sold. Kim has a formula that she uses with the seller to get the job done.
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Asking prices on properties over $150, 000 are reduced $10,000 every 12-14 days
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Asking prices on properties $100,000 to $150,000 are reduced $7,500 every 12-14 days
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Asking prices on properties under $100, 000 are reduced $5,000 every 12-14 days
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Work with your seller on the price issue. As an agent, your client is the seller and they are the only onethat you need to consider when suggesting price. we’ll deal with the lender next.
The idea is to be fairly aggressive in getting the property under contract as there is absolutely nothing to negotiate until the lender has some clue as to what they will be receiving. All lenders will entertain a short sale if the numbers make sense, but first they must see what the numbers are. Also, pricing strategies might change depending on where the client is in the foreclosure process; i.e. 6 months away from auction, or 6 weeks away from auction, or 6 days away from auction.
2. BPOs (Broker Price Opinions)
The lender will want someone other that you to advise them on the current market value. They will probably hire a licensee or appraiser for that advice. Some are more qualified than others. Sometimes the lender will try to save money buy paying only for an outside inspection. Not having information on damage, frozen pipes and mold could cause you to put in a huge sales effort for nothing. You must accompany the BPO agent and help them with comps, pricing history, showing history, showing feedback and offer history. You may have to point out defects of the property that might otherwise be overlooked. “Did you happen to see the mold in the closet over here?” “Did you see where the dog chewed this up?” The shingles on the roof are curling on this side of the house, did you notice that?”
3. Motivation and expectation of the buyer
Short Sales are not for the typical buyer who wants an immediate answer to a reasonable offer and a normal occupancy date. There are plenty of buyers who hope to get a “deal” but are unprepared for the red tape, delays and uncertainty that are part of every short sale.
The lender on the short sale is certainly overwhelmed and under staffed with the present volume of
requests for a short sale. There are holdups, lost files, miscommunication between various departments at the lender.
As the agent for the short sale seller you must communicate to the buyer’s agent and help them understand the difficulties that may be experienced during the process so that they can set the buyers expectations in a realistic way. Failing to do so will likely result in frustration for all concerned and a lot of time invested with no sale to show for it.
The facts are:
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Short Sales take a lot of effort, resulting in a long contract period;
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There will be many ups and downs;
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Sometimes after a long wait by the buyer, offers accepted by the seller aren’t approved by the lender;
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Sometimes an accepted offer doesn’t result in a closing because of a change of mind by the bank-yes, their contractual terms allow them to do this.
All things considered, this is not for the “faint of heart”. Short sales are a special breed and not for all buyers or their agents but if you are willing to learn the ropes, they can be profitable for all concerned.
If this subject is interesting to you and you want to learn more, we offer a 3 hour continuing education course on this topic. To see the schedule for this course, (and other courses that we offer), please click here, or go to: http://me.trelg.com/Real-Estate-Continuing-Education.php.
3 Responses to “Short Sales – What they aren’t telling you”
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