Recently it has become apparent to me that many agents do not understand short sales. They don’t understand how they are different or even why they should be different. It is necessary to point out that the most imperative thing for a short sale to succeed, besides a qualified candidate, is a cooperative seller.
Well by the title you can assume that I am not here to teach agents how to do short sales. We hold many free classes for this specific purpose. So what I really want to introduce today is the seller’s role in a short sale.
Just because you are an agent or an investor does not mean you should stop reading. As an investor you need to be able to flag whether or not you are dealing with a short sale candidate. Investors that succeed are the investors that market directly to the seller in a financial hardship. That means that you or your staffs are the first to speak with the seller.
If you work with an agent that processes your short sales or you work with a company like Oyezz that does the short sale from start to finish; you need to set up the seller’s expectations. But how can you do that if you are unclear on what the seller’s role is?
First of all you need to ask how much they owe. If you have the address and have the approximate house value then you know if they are underwater or not. If they are underwater they also need to be in a financial hardship. This is what most agents do not understand. You must have both. Now that you know you are dealing with a short sale, what do you tell the seller? You need to be reassuring but honest. It will be a process which requires complete transparency of their financial situation down to where they spend their money. John loves to tell people that it does not matter if you spend all your money on toothpaste, the bank just wants to know that you cannot afford your mortgage.
There are several things you must communicate to the seller. Every month the servicer of the loan will request updated pay stubs and bank account statements. The seller should get in the habit of saving their pay stubs and bank account statements as they receive them. Besides the fact that they will have to present all of their financials to you or the processor of the short sale, they will also have to be extremely cooperative with the showings of the house. This is not your typical real estate transaction; the houses are not necessarily pretty or presentable. You must prepare the seller to allow multiple showings in a day.
Sometimes they can feel overwhelmed with the amount of people that want to see the house. Many people in the industry incorrectly believe that short sale means they will be buying a house at a huge discount. Because of this agents urge their clients to see the house immediately. But that is not necessarily true. Yes, the bank is taking a shorter payoff on the house but every effort is made to sell the house at its true value. Agents that do understand short sales know the importance of seeing the house early. Offers go to the bank on a first come first serve basis and so it becomes a race to put in an offer. This can be hard for the seller because they will have to be open to the sometimes overwhelming response. We always advise that the seller leave the home. This allows investors and potential buyers to speak freely and make a decision.
Keeping the seller informed is necessary to ensure cooperation from all parties. Some sellers believe that they will get daily updates from us. We may speak with the bank every other day but it is not necessarily something that involves the seller. The first few weeks could be calls to the bank to see if they will allow us to do a short sale or if they have received the paperwork. The seller might then receive a call stating that we have been allowed to start a short sale and that we will call back when we have an offer. If nothing has happened with the servicer for several weeks we would likely call every week tell you we will call again when we hear something new.
What happens after we have an offer? For the seller not much changes after an offer is received. As I mentioned earlier we send the first offer to the bank. We continue to collect back up offers in case the first buyer walks. For the seller it may be a phone call that says ‘we have a buyer and we have submitted it electronically to the bank’ or ‘the bank is asking for a different amount we are submitting a new offer’. Finally when a bank accepts the offer the seller would receive notification and a closing date. The seller should be aware from the start of the process that they must move out by the closing date. For seller’s who’s credit is suffering because of missed payments, the apartment search should start early.
I hope this recap is useful for those having a hard time getting a seller on board.
The seller’s cooperation or lack of is detrimental to the success of a short sale. The best thing you can do is build the seller’s expectation as early as possible. Please feel free to contact us for more information!