In a recent blog post, I discussed how banks throw out a short sale file if it is rejected. When an offer comes in on a short sale, it takes 30-60 days for a person at the bank to look at the offer. Then, that person orders an appraisal on the property. After that appraisal comes back, the bank employee reviews the property value and the home seller's personal financial situation.
Based on that, they approve or deny the short sale offer. They do this to avoid approving short sales when either a homeowner can still afford the house or the house is selling for under the appraised value. What do they do if the short sale offer is rejected? Well, they tell the buyer to hit the road and close the file. Everything gets thrown out. The appraisal is thrown out. And all the time that employee spent looking at the seller's finances is thrown out.
So, each buyer has to wait 60-90 days for an answer on their short sale. If that buyer's offer doesn't work, then all that paperwork is thrown out and the property is put back on the market. (Yes, some banks are pre-approving short sales before they come on the market. But, that is the exception, not the rule. Most banks are not pre-approving short sales.) The home is marketed and then the next buyer has to go through the process all over again. So, why does this matter to you?
A short sale helps you avoid the bad mark a foreclosure puts on your credit for the rest of your life. On any future loan applications, you will have to check "yes" next to the question, "Have you ever lost a home to foreclosure?" So even though the foreclosure goes off your credit in seven years, that question stays with you for the rest of your life. That is why most people prefer a short sale. Your agent is going to have to be persistent in order to give you a better chance at a successful short sale. A competent, experienced short sale Realtor that can successfully navigate the system.
They can convince your lender that it is in their best interest to accept the short sale offer. They can also convince them to pre-approve the short sale at a set price. This gives you a better chance at avoiding foreclosure.
The right agent can make the difference between success and failure on your short sale. You risk losing a lot when your agent doesn't understand short sales. The short sale can be denied and the home foreclosed. Then you have to wait five years to buy another house. Or the lender may ask you to repay the loss.
Here are the questions I would ask an agent before hiring them.
Question #1: How many short sales have you listed and sold in the past 6 months? This is important because you want an agent who is up to date on all the potential issues. They should understand the short sale process from start to finish.
Question #2: In the past, what lenders have you negotiated short sales with? It is helpful when the agent you are interviewing has already done short sales with your lender. You know that they will already be familiar with your lender’s policies and procedures. At a minimum, you should look for an agent with experience with Bank of America, Wells Fargo, and Chase. These are the most common short sale lenders.
Question #3: What can you tell me about my lender and how they work? A knowledgeable and experienced agent will usually know the specifics about your lender. They will be able to tell you what to expect in the process. They will know upfront if the lender is likely to ask for a promissory note or deficiency.
Question #4: What is your track record for success and failure on short sales you have handled in the past? Look at the agent’s track record. If they are hard working and diligent, then they will have a strong track record. That is good news for you.