Understanding Short Sales : Cleveland Real Estate : Keller Williams Realty

By:
CJ Harrington
Keller Williams Realty
www.cjharrington.com
cjharrington.crs@gmail.com
440.336.0612

Date:
10-23-08

Short sales are the most expensive type of transaction, due to the negotiations involved. As a result, it is normal to ask for more commission and reduce your time invested. So, agents must be more selective with the short sales they choose.
Also, your agent and you will need to understand a few concepts in order to have a short sale transaction with a high closing probability. So, let us get started.
Firstly your agent must make sure; there is no secondary financing, liens, or judgments against the property, unless the second is part of a HELOC. Also, that you did not originally defraud the lender by supplying incorrect information to induce the delivery of the loan in the first place. Next, you as the seller are willing and able to throw a few dollars toward the problem. Finally, you care enough about the transaction to cooperate with the paperwork and showings necessary to complete the short sale. This is important because if you, the seller, do not care about your credit nor care about rectifying the situation in a procedure other than a foreclosure, your motivation might wane in cooperating with the many steps necessary for a short sale.
So, what is a short sale, and how does it benefit both parties?
A short sale is when sellers ask the lender to accept less than what is owed because there is not enough equity left after closing costs on a market value sale. The lender does this in return for avoiding the complete foreclosure process.
So, why is this beneficial to the lender? Well, it has been estimated that when a lending institution does implement foreclosure procedures (takes the foreclosure full term, obtains ownership of the property, prepares the property for market, markets the property and sells it), it may net as little as 40 percent of the original appraisal after all costs are considered. In order to alleviate this problem for the lender and save the credit of our clients, we implemented a short sale. The standard practice is to list the property at a price that will generate a loss to the lender after closing costs.
Also note, the lending institution is only interested in negotiating once an offer is received. By pricing this property at market value or a little bit less than market value, we should be able to obtain that offer and send it to the bank for their consideration.
After this, many things will be required. Firstly, a financial disclosure is required by the lender when considering your request for a short payoff. Remember to include all of your discouraging economic news in this financial statement.
Secondly, we will need a letter of explanation telling why you are requesting this short payoff. These may include your reasons for moving, how long the property has been on the market, the failure stories you have had with prior real estate agents, and any other disturbing circumstances that have prevented you from selling the home.
A third item requested is an authorization, and it works on your behalf toward this short payoff, meaning the bank must know that you have authorized your agent to negotiate the terms of the short payoff.
Finally, you are required to submit employment verification, pay stubs, or two years' worth of federal tax returns and verifications of deposits or bank statements for the last three months.
Also, remember, you are not accepting offers from highest offer buyer, but instead from the buyer who is the most motivated. A motivated buyer in this market means that he or she has agreed to put down a much larger than normal deposit and be pre-qualified by a trusted lender. This is a necessity since a short sale may take 60 to 90 days to close. I hope this brings understanding, and wish you all the best of luck in this difficult market.

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