Short Sales are frustrating. This is a fact. After helping hundreds of real estate agents analyze and close their short sale deals, WHB Solutions has always asked why, without our help, they would avoid short sales. Many of the answers that come back were consistent with what all real estate professionals have been experiencing with short sales. The main difference in why they decided to pursue short sales was because they discovered WHB Solutions.

WHB Solutions have created a community of short sale experts and real estate professionals working with short sale transactions. It is due to our collaboration that we have been able to get short sales approved. Lender short sale approval guidelines have been a mystery, but through collaboration, we have narrowed down the lender trends and strategies that work and have clearly documented our best practices with short sales. Our short sale strategies have gotten 90% lender approvals on our short sale transactions.

The following are the top ten reasons why real estate professionals avoid short sales:

1) Bankruptcy – When a homeowner files for bankruptcy, it helps to stop a foreclosure process. A short sale can still be performed, but it requires an approval from the bankruptcy attorney to release the property so a short sale attempt can be made. This is just means extra work for a real estate professional and it may increase the time to close a short sale, but it can still be done.

2) Sellers Misleading – When qualifying a homeowner for a short sale, the homeowner must be cooperative. Many homeowners start the process of a short sale yet to cancel the transaction midstream by deciding to walk away from the home or file bankruptcy. If you feel that a homeowner may not have true intentions of going through a short sale, you should walk away.

3) Multiple Lenders – We have closed short sales with multiple lien holders. For example, we had one file that was in bankruptcy, had two mortgage lenders, and five separate tax liens. It was because of a cooperative homeowner, we were able to get the short sale closed.

4) Lack of Agent Knowledge – Many real estate professionals have not done short sales and based on our experience it takes a dedicated resource handling short sales day in and day out to understand what it takes to get a short sale approved and closed. We provide all information to how a short sale needs to be properly processed for a high chance of approval and this is based on the hundreds of short sale files we have analyzed and closed.

5) Banks Taking too long to respond – As in any business, building relationships is important when working with a lender who takes too long to review a short sale file. WHB Solutions has worked enough short sale deals with lenders that we have actually been asked to send future short sale files to the same negotiator because of our proven experience. Many real estate professionals don’t do a high volume of short sales and are not able to establish any strong relationship with lenders.

6) Client Knowledge on consequences – Many real estate professionals do not know how to explain to their clients the consequences of a short sale and do not push for the homeowner to seek professional help when looking at their best options. It is this fact that causes a homeowner to not even attempt a short sale or stop mid-stream in a short sale process.

7) Lack of Communication – We have learned from the experience of multiple short sale transactions that communication has been a key factor to ensure the success of short sale transaction. Buyers were not updated with progress and end up looking for another home. Frequent touch points with the lender were not made and deals fell through because someone did not do their job and the property was sold at an auction. There are many reasons short sales fail due to lack of communication.

Consistency – Every lender has a different timeline when processing short sales and many real estate professionals have experienced inconsistent results, which causes a low level of confidence when working with short sales. All of our short sale education materials teach best practices that we have used to close our short sales that have been proven to work, regardless of the lien holder.

9) Buyers Walking – This is a major concern for any short sale transaction. Putting in hours of work, yet to have it fall apart because a buyer walks away from a deal is not a good feeling. That is why it is important to continue finding backup buyers and setting the right expectations with the current buyer.

10) Staffing/Resource Issues – It is possible for a real estate professional to single handedly become a short sale expert. But it is our opinion that the best results occur when there is a team in place. Unless short sales are 100% of your sale pipeline, one resource cannot be used to make endless phone calls to a lender to get a single transaction closed. Our short sale training materials is formatted in such a way that a single resource can work through a single short sale transaction to closure. Being a member of our short sale community will also aid to the success of any short sale file.

Full Article Resourse:  www.whbsolutions.com/blog/

Foreclosures are reaching new levels and about to go even higher in 2008. It is becoming imperative that Realtors and real estate investors become learn the art of the short sale and to use it to increase their sales production There is a right way and a wrong way to do approach a short sale.

Learning and implementing the following 5 secrets to short sale success will allow you to gain proficiency in doing and successfully completing short sales. If you are investor you can create equity where none existed. If you are a real estate agent you can sell homes that are upside down even in a bad market.

Secret 1 - Submit a complete package. Do not submit an incomplete package to the lender. If you do it will more than likely be put on the bottom of the pile. Make sure to include all the required information in the order specified my the lender and that every item is completely legible. This is an absolutely critical first step.

Secret 2 - Make a careful estimate of the current market value of the property and structure your offer accordingly The initial offer is critical to getting the short sale off to a good start. As you do more and more short sales you will become familiar with how various lenders work and how they react to offers. Most immediately tell you that you have to raise your offer. If they say this you need to find out why they have come to this conclusion.. Your goal is to have the lender order an internal BPO (Brokers Price Opinion) or a full appraisal of the property. Do not settle for just a drive by appraisal. No need to be nasty but be insistent and keep at it until you get the BPO ordered.

Secret 3 - Make sure that you personally meet the BPO agent This is the most important part of being successful with your short sale. You must personally meet with the agent or appraiser doing the BPO (Brokers Price Opinion or Appraisal). You job is to provide the person doing the BPO any information that can influence the BPO in your favor so that their price that will justify your offer. You should speak the BPO agent and let him know that the seller is in dire straights and is depending on the BPO. You should have a list of repairs done by a contractor and most importantly have a good list of comparable sales showing that the property is worth substantially less than what is the owner owes. All these items are important but meeting with the person doing the BPO is the most important of all. Do not let them get in the property without you being there and be sure to be early for the meeting.

Secret 4 - Don’t take No for an answer The job of the loss mitigator is to get the case settled for as much money as he possibly can. Of course you have to realize that there are certain circumstances that will limit the amount that the lender will take. Some of these are PMI (Private Mortgage Insurance), Fannie Mae, Freddie Mac, FHA and the VA guarantees. These loans are insured by private or governmental agencies and as a result are limited in the amount of discount that they will take. If it is a conventional loan the settlement amount is arbitrary and determined by the end lender or the investor holding the loan. If you are dealing with a servicer rather than a direct lender your negotiations have to be approved by the note owner before a price is agreed upon. Your continued persistence will determine your success in getting prices that allow you to create a profitable transaction..

Secret 5 - Be sure you are prepared to close promptly Once you have finalized your negotiations the bank will expect your to close quickly. Usually within 2 to 4 weeks. If you are unable to close within this period you can have a very difficult time negotiating an extension and may encounter difficulty negotiating with this lender or servicer in the future. This problem does not usually arise if you are the end buyer but if you are planning on “flipping’ the property out to another end buyer you need to be sure that they are ready to close when you finalize the negotiations for the property. One way you can stall this is to slow down your final negotiations until you secure your end buyer. Sometimes this can really work to your benefit when the loss mitigator calls you to see what is holding up your final acceptance of an offer. Many times you can get an additional reduction in the price.

Certainly there is much more involved in doing short sales but these 5 steps are critical in getting a successful resolution to a short sale case. Remember that you have to be persistent and polite but do not take no for an answer. Push on and you will succeed

As much as I would like to see short sales become a thing of the past there is some satisfaction in helping homeowners, who are having financial difficulties, avoid a foreclosure.  The Sacramento real estate market has been one of the hardest hit and unfortunately foreclosures and short sales are going to be with us for the foreseeable future.

Successfully completing a short sale certainly adds to the complexity of normal real estate transaction but the key to success is knowing what you are doing, having a process to handle them and experience in dealing with a variety of lenders.  At MagnumOne Realty we have had the opportunity to successfully complete a number of short sales and have a good handle on how to approach them.  We have developed a package for the homeowner that includes some basic documents we need to determine if the homeowner will be a successful short sale candidate, information our short sale team needs to get started quickly and some informative articles on what a short sale is, how they work, what will most likely be required and a general outline of how long it will take.

Getting started early is a key element in the successful short sale negotiations.  While the house is on the market we contact the lenders, provide them with the necessary authorizations and obtain their most up-to-date short sale requirements.  If they are a lender we have worked with before we talk with our contacts and let them know we would like to work directly with them again.  In addition we start working with the seller to develop a short sale package.  Because of our experience we can look at information provided by the homeowner and see questions the lender may ask and have those addressed so the first package we send is complete. 

Time is often not on our side when working with short sales.  We must have a complete package including an accepted offer prior to the home being foreclosed on.  Depending on when the homeowner hires us to help, this may be several months to weeks.  This means the marketing plan must be aggressive to attract a buyer.  Aggressive pricing will attract buyers but the sales price must be at or close to market as the first thing the lender will do is determine what current value is.   

An important element that too many Realtors are missing is that the home does not belong to the bank and it is the homeowner who negotiates with potential buyers.  This is exactly like any other sale with the only difference being that the contract is subject to lender approval as part of the short sale request.  Once the contract is accepted by the seller, it along with the short sale package and an estimated settlement sheet is sent to the lender.  We do not send multiple offers or send offers that come in later.  The potential buyer must be protected and their offer is the only one the bank will see unless the buyer withdraws.

Each lender is different and over time we have found that lenders change their process so it is important to maintain a steady dialog and use the contacts you have made over time to move the current short sale through the lenders organization.  Many of our Sacramento real estate clients have second and even third mortgages so we have to coordinate with the lenders and often negotiate between them to make sure each will release their lien.  We have found that most lenders are generally cooperative, understand the situation and will work with us to make the sale of the home a win for everyone concerned.  Occasionally we run into an overzealous negotiator who takes a position that won’t work for one or more of the other parties’ involved.  When this happens it often a good strategy to move the negotiation to the supervisor level or even get the homeowner to talk directly with the lender.

An important element in the short sale process that often goes overlooked is communication.  Not only between the short sale team and the lenders but with all the parties concerned.  Short sales take time, lenders are swamped and things you would think could be done quickly may take weeks.   During this time buyers can feel like they won’t get the house, seller’s start to think it would be easier to just let the bank foreclose and agents feel under pressure to get things done.  Frequent updates are vital to keep everyone up-to-date and focused on the sale and lender acceptance.

In conclusion, short sales are not easy for anyone but have a place in the current Sacramento real estate market.  They can be done successfully if the Realtor handling the short sale knows what they are doing, has a process to handle them effectively and has experience in dealing with a variety of lenders.

Short sale success: Sold in about 30 days
Aaron Friedly of Short Sale USA provides us this week with a recent short sale success story: “As real estate professionals and consumers are well aware, short sales have been very prevalent in the marketplace recently. Due to a variety of reasons,…

Read more on Orange County Register