The 5 Steps to Listing a Successful Short Sale

Agents often tell us that they refuse to list short sales.

Many have tried, unsuccessfully, to negotiate short sale transactions in the past and swore off trying again. Others don’t want to invest the time to learn what they believe is a “niche” specialty. Some are agents who have successfully closed short sales, but it was such a painful process, they have avoided taking on another.

Unfortunately, if you are one of these agents, you are missing out on the greatest opportunity available in today’s market.

• Currently, 1 in 7 homeowners are not paying their mortgage.
• The national unemployment rate is over 9%.
• The number of short sales has more than tripled since 2008.

The short sale market is no longer a niche. Any agent who wants to survive and thrive today must master the short sale process.

The challenge most agents have with short sales is they start the process once they have a purchase and sale contract. This will cause you a tremendous amount of stress, frustration and heartache!

The following system has helped tens of thousands of Certified Distressed Property Expert (CDPE) designated agents:

• Complete 4x as many transactions as the average real estate agent
• Reduce their short sale processing time by up to 50%
• Close more than 7 short sale transactions in the last 12 months

Step 1: Complete 80% of the Paperwork at the First Meeting

In a short sale situation, it is critical that you review and get the seller to sign the following forms:

Signature Authorization – Recommended for all transactions (distressed or not), this should be sent to the mortgage company immediately after the listing appointment.

Short Sale Disclosure – In a short sale situation, this is mandatory.

Hold Harmless – In a short sale situation, this is also mandatory.

Homeowner Property Checklist – Remember, the property has to sell. Include suggestions for getting the property prepared on the Homeowner Property Checklist.

Homeowner Document Checklist – Before you leave your clients’ property, you need to leave them with a list of documents they will need to have ready for you. The documents need to be current, meaning if you list in January and don’t have an offer to negotiate until April, you will need documents for the time period immediately preceding the offer, not the listing (February and March).

Homeowner Financial Worksheet – This form is what lenders use to determine whether or not your seller can pay their mortgage, so be sure that it is complete and that it shows a deficit.

Listing Addendum – Do not list a distressed property for less than seven months, and specify scheduled price changes in your listing agreement.

Hardship Letter – This explains to the lender what has happened to cause your client to be unable to continue making mortgage payments.

Note: All of these forms are available online for CDPEs in the Member Resources area.

Step 2: Short Sale Pricing Strategy

Pricing a short sale, and the subsequent pricing reductions, are the most important factors in getting a contract and having your short sale approved. The reality is, the short sale probably needs to be the lowest comparable property in the neighborhood in order for a buyer and buyer’s agent to cooperate. Additionally, in the case of a short sale, the buyer’s agent needs to be enticed to not only show the property, but to cooperate with the process.

If you are a CDPE-designated agent, we recommend you use the CDPE Listing Price Worksheet included in your Member Resources. You can also create your own form. You will need to consider:

1. Fair market value
2. Time left before foreclosure or pre-foreclosure
3. Days on market
4. Property condition
5. Amount owed on the property

Step 3: Take Pictures, Two Sets

When you are at your initial appointment with a short sale seller, you need to take photos the same way you would with any other listing, only you need to take two sets.

The first set of pictures are the ones you would normally take for marketing: front of the house, back yard, kitchen, living area, bathrooms, etc. The second set should include specific pictures of any damage the property has or repairs that it needs. These should be as detailed as possible. Use the CDPE Photo Log, or take notes, to help you remember the damage you have photographed.

Step 4: Damage and Repairs, Record the Details

As you take pictures of the property, complete the CDPE Repairs and Damage Form, or record the information on your own. This will be very valuable to you later when it comes to negotiating with the bank. You also don’t want to have to make repeated, unnecessary trips to the property, so we want you to accomplish as much as possible on the first visit. Go room by room and note everything.

Step 5: Initial Title/Lien Search

We recommend you have an initial title search done on every distressed (or otherwise) property you list. For a short sale, this is especially important, because if you have liens, fines, code violations or other clouds on the title, you need to see if they can be removed or negotiated immediately. In many cases, you should not pursue a sale.

Lien Negotiation
If there are any liens found after your title search, you should immediately call the person or company with the lien to see if they will negotiate a reduction with you. Remember, in a foreclosure situation, lienholders against a property usually get absolutely nothing after a foreclosure. There is a very good chance that you can negotiate so that the lienholder gets something rather than nothing. If you do negotiate a reduction in lien, get a letter from the lienholder for the amount they are willing to accept. You will need this for the title company at closing.

Another tactic is to have the homeowner sign a note for a portion of the lien so that it can be removed from the property and placed on your client personally. In all cases with a short sale, you and your client need to do whatever possible to reduce all liens prior to package submission.

IRS or Federal Tax Liens
Federal tax liens are all at once recorded against an individual and any properties he or she owns. If your seller has a federal tax lien recorded against him or her, this lien jumps ahead of all other liens that are on the property. However, it may not have to be paid off in order for a short sale to go through. Your client can work with an IRS agent or investigator (if a client has tax liens, chances are they have a personal contact) to try to get a “subordination of lien” so that the government will allow the short sale to go through. The IRS processors will want to see that the property is being sold with no gain to the seller and that it is an arm’s length transaction. The IRS will require a detailed letter of explanation, along with a preliminary HUD statement that shows no proceeds to the seller in order to give approval. This is a process that your client should start immediately when you list the property.

These subordinations are usually handled by a special department and not by your client’s investigator. Make certain that your client begins this process immediately and is in the process of getting an authorization to subordinate as quickly as possible. This way he or she knows exactly where to send a draft to HUD immediately when you receive an offer.

Visit the IRS website at http://www.irs.gov to find information on:

• Notices of federal tax lien
• Releasing a lien
• Payoff amounts
• Applying for a discharge of a federal tax lien
• Making the IRS lien secondary
• Withdrawing liens
• Lien enquiries
• Appealing the filing of a lien

Now that you have completed these five steps, you are ready to list the property. But listing is just the first phase. The CDPE Designation course will teach you everything you need to know to list, submit a proposal, negotiate, and close short sale transactions.

Eighty percent of homeowners in distress say their first call would be to a real estate agent Will you know what to do when a homeowner calls you looking for help?

Stop missing out, and start profiting from the opportunities in your market to help homeowners avoid foreclosure!

Become A CDPE