As we all know, it seems things change daily in the world of short sales. Along the way, I have learned a few hard lessons that I thought I would share with the public. I was thrown into the deep end of short sales kicking and screaming the whole way. Now almost two years later, I’m so glad I have learned to navigate the waters.

A few things I consider when talking to and working with a new short sale client:

1. People often ask if they will get out of the transaction owing nothing and with no credit defects. I can not in good faith tell my client that he/she will walk away with no consequences. I always advise them to talk to an attorney if they have questions about settlement. While we would love for them to show a “settled debt” on the credit report, chances are the bank will reserve the right to pursue their money if they so choose. However, it is better to have them pursue an unsecured debt than the entire foreclosure amount. The settlement letter is presented BEFORE closing so they always have a chance to decide whether
or not to follow through with the deal. In my mind, short selling is always the lesser of the two evils.

2. I also never advise my seller to stop paying the mortgage. Many times they will ask if they can stop making payments but I always tell them to pay if at all possible or to at least try to send the lender a partial payment. Once the buyer stops paying, the bank can move ahead with foreclosure proceedings. I don’t want to have to deal with the stress of having to pull it off the auction block at the last minute. One of my clients made all efforts to pay and the bank rewarded him with a no interest loan on the leftover amount and deferred payments for 6 months. He owed 500k+ and Short sold for 390k, note was for 50k. He was more than happy to have a 50k debt as opposed to a 500k debt.

3. Time is of the essence!! Some banks require the short sale package and offer to be in at least two weeks before foreclosure date is set. Anything less than that is risking the auction block. I have had a solid contract in to the bank 5 days before foreclosure and the bank refused to even LOOK at the package/contract. It is a very helpless feeling to know you could sell the property but your client didn’t get the paperwork back in time. The package HAS to be back within 24/48 hours with no fooling around.

4. I am always honest and communicate with all parties. I have a series of forms that go with all short sale contracts. I let all parties know that the process could take more than 90 days. If a buyer doesn’t have 90 days to wait on the process, they should stay away from a short sale. I have very few deals terminate due to good communication.

5. Sellers need to get INVOLVED in their own short sale. They should always make call to their lender or bank requesting a one time postponement of foreclosure. They should inform them that they want to short sell. No one should waste time with loan modification which is nothing but a fancy word for re-finance (most likely won’t qualify). Mention the HAFA short sale program and tell them you want to find out if you qualify.

These are just a few things one needs to know when considering a short sale transaction.