Skip to content
Welcome! Are you part of the community? Sign up now.
x

Posted almost 9 years ago

Get cracking on short sales

Normal 1429795047 Patiencebirdegg

It’s going to cost you $500

When I first did a short sale in 2008, I had to give up part of my commission in order to close the deal. The bank refused to budge, the buyer refused to budge and the seller had no money and no time. The listing agent didn’t negotiate in-house and gave up control of the deal to a third party negotiator. The automated pricing matrix kicked in and dropped the list price. The bank refused to honor it. The deal ended up on the bottom of a pile of paperwork and sat on someone’s desk for months. Frantic calls went to voice mail boxes that were too full to accept additional messages. The bank was so backed up, it couldn’t clear its own inbox.

The experience left a bad taste that lingered for years. I vowed never to be sucked into a fruitless short sale again.

Nice niche

2015 is a different real estate market.  Inventory is short in the Elgin area and multiple offers are getting more common for regular sales. Investors shy away from short sales for good reason.  Short sales frequently attach nearly impossible standards to process their deals. We’ve routinely handled listings with a bankruptcy, two mortgages, a notice of foreclosure, and a wonky title before the real fun begins. Throw in an auction date or an FHA loan and one loose string can unravel the best laid plans.

It's no wonder that few licensed agents seek out the extra trouble of the notorious short sale. There is nothing short about them. It’s a niche that requires tenacity, people skills, marketing, administrative checklists a mile long and unlimited patience. Each bank has its own documents, requirements, loss mitigation departments and rules to process a short sale. If there are two mortgages, double the workload. The average short sale package to kick off a request has 50 pages. And banks like to have documents with wet signatures, black ink only, in PDF format, faxed AND emailed. If you’ve closed a short sale, thank your admin folks for sticking to it.

Now let’s consider that on the listing agent is dealing with touchy banks plus aggravated homeowners. Besides housing issues and money issues, the sellers may have health issues, or have lost their jobs, be going through a divorce or much worse. Buyer's agents know that even the steepest discounts on the best properties can sour a buyer enough for them to lose patience and move on to something with far less drama.

But what fun is an easy, simple deal? It would mean a boring blog post.

Streamlined short sales

But I am here to tell you, readers of BiggerPockets forums, I've seen the bright side. Consider that there are fewer short sales in today’s inventory. I can almost guarantee there will not be multiple offers on the table, so, the competition is lower. If you can put up with 90+ days to process, the discounts on a short sale are still viable for some investors and many are in good condition.  One turnkey investor buys distressed short sales and then rents them back out to the homeowner.  A high risk endeavor, but every investor is unique in their RE deals.

I’ve come a long way since negotiating that deal a few years ago. In 2015, short sales have matured. Spoiler Alert: short sales are still a huge pain. But they don’t have to be for a buyer. My biggest fear of all that work and no reward is finally fading. Why? Banks are now actively engaged with proper systems in place to push deals through. They know how to crank them out more efficiently.

Who's ready to take a dip in short sales? 

What has your experience been with short sales?  Did your deal turn out great or been a nightmare?  Let me know!



Comments (7)

  1. great post


  2. Nice info, we were just looking at one but the owner is too lazy to even fill out any paperwork, they are emotionally DONE with the property.  We are looking at buying, at a discount, the nonperforming note.


    1. Hi Kelly,

      Thanks for posting your insights!  Glad to hear you're considering more options.  The mountains of paperwork in a short sale are certainly a force to be reckoned with and it does take a lot of tenacity to pull it all together.  I'd love to hear how it turns out.  


  3. Awesome info! Short sales are still prevailent in Las Vegas. I need basic guidance like this to get started. I have always looked elsewhere for investment properties but the deals I see on short sales are tempting me to jump onboard. Thanks for sharing!


  4. I've never done a short sale.  Could you break down some of the preliminary steps?  

    Thanks in advance.


    1. Barry,

      Here's a very brief outline:
      1- Identify a potential candidate, using a preforeclosure, lis pendis or other distressed property database resource

      2-Do your due diligence on the lead, checking for # of mortgages, amount on each one, any liens, bankruptcy, upcoming auction date, sheriff's sale, etc.  If FSBO, be sure to have an experienced team on your side.  If listed with an agent, verify experience level of agent (do they coordinate the deal themselves or outsource it?)  

      3-Punch in your numbers to see if the deal makes sense, if so, make an offer.

      4-Wait for banks' response.  The seller can accept the offer, but the bank must approve it.  This goes double for two mortgages.  Allow ample time for bank's loss mitigation department to review your file.  

      5-Once you get the bank's OK, the sale  often proceeds as  regular As-Is sale but with much more documentation required.  A Short Sale Offer Packet will need to be delivered to the bank with the appropriate documents.  Such SSOP's include bank statements, pay stubs, hardship letter, tax returns, authorization to release, bank specific applications and more.

      This is just the outline to the process.  Short sales are never short in length or complications!

      Best,

      Jennifer


      1. Thanks so much Jennifer.  This information is very useful.  You're awesome!