In many instances in our market, we are finding that homes are worth equal too or less than their value of four years ago. This has caused an extreme increase in foreclosed properties and given rise to a formerly lesser used practice of the “short sale.” A short sale is not a new option by any means, I recall a period of short sale mania in Southern California in the late 80’s. It is however, become so prevalent on a national level that it is on the tip of every real estate agents tongue. In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.With the current unfortunate market conditions, some real estate agents with little or no experience otherwise have begun the unsavory practice of taking a three hour class and promilgating themselves as Short Sale Experts or worse with no experience in closing this complicated type of transaction, conducting seminars, or simpy adding a page to their web site that suggests there are certain things that must be done in order to facilitate a short sale. Be very careful. The fact of the matter is that, from the point of this writing, there is not Standardization among lenders as to how they deal with Loss Midigation. In our current book of business we have two short sales pending. The process from start to finish with two separate lenders couldn’t be more different. One lender asked for more documentation from the seller than was required to obtain the loan in the first place. They also had a certified appraisal performed on the property. The other lender asked for one document to be signed and hade a Price opinion conducted, period. There are no rules for this across the board, each of the thousands of lenders are as individual in their process as the people requesting a short sale.
The best thing to do when considering the right Realtor is ask, “how many short sales have you closed in your real estate career.” and, more importantly, ask for references!
Cathy Barris and JD Dakoske
