As most people realize, the economy is cyclical. The value of real estate goes up and down. And, sometimes, there are people who purchase a home with little to no money down; those same people may need to sell when the value goes down and they have zero equity. If that is the case, then the home is sold in a short sale. If you, as a real estate agent, are called out to a home and the listing will be a short sale, here are some tips for you.
Short Sale Listing Hot Tip: Prequalify the Seller and the Property
As a listing agent on a short sale, there are many things that you can do (even before taking the listing) that can make the entire short sale process move more smoothly. Step 1 in working borrowers in default on their mortgage or who owe more on the loan than the home is worth is to pre-qualify the seller and the property
Pre-qualifying the seller is similar to what you might do with a buyer when you assure that s/he is creditworthy. First off, you need to assess the borrower’s personal situation. Is this a borrower with equity, who is having trouble making ends meet? Or, does the borrower have equity but is very close to foreclosure? Or, does the borrower owe more on the home than it is worth?
If the borrower owes more on the home than it is worth, then the borrower would likely need to participate in a short sale.
The next step is to make sure that this individual is going to qualify for a short sale
, that s/he has a verifiable hardship or justifiable cause for selling in a down market. Also, verify that this prospective short sale seller is not interested in other options to avoid foreclosure. (Lots of short sale sellers change their minds and consider other options. So, it is best to rule out those options before taking the listing.)
When speaking with the seller, learn about the number of mortgages, the property taxes, and any debts to the Homeowner’s Association. Also, find out whether the borrower (the seller) is still making mortgage payments.
Next, tell the borrower that in order for any bank to approve a short sale, a certain number of documents will be part of the required short sale package
. Whether the seller lists the property at the appointment or whether the appointment is merely a consultation, it would be best if these documents were available: 2 months pay stubs for all borrowers, 2 months bank statements for all borrowers, 2 years tax returns, and mortgage statements for all loans.
Set your appointment to go to the property and meet the borrowers! In preparation for the appointment, download the additional required short sale package items (such as financial statement and bank authorization) from our website and begin to pre-qualify the property.
In order to pre-qualify the property, order a property profile or a preliminary title report. You will want to be sure that this is a viable short sale—that there are not too many liens against the property and that all of the liens can be reasonably reconveyed.
Use the information that you collect from the title report or the property profile in order to review the foreclosure status. If the borrower (owner) has not paid the mortgage in a long time, changes are that a foreclosure date is looming. Keep the foreclosure date in the forefront of your mind as you work through the short sale transaction.
There are lots of additional steps in the short sale process. But, before you get in too deep, it is vital to prequalify the listing and the seller. Want more tips? Feel free to contact
the team at Short Sale Expeditor.