Don’t take it lightly – Choosing the right real estate agent for a short sale transaction is a very important decision! If you are pursuing a short sale, selecting the right agent is even more critical than a traditional real estate transaction. Short sales require specific knowledge and expertise that not all real estate agents possess. In a short sale transaction your real estate agent is responsible for providing all of the correct required documentation and negotiating with your lender(s) on your behalf for the best possible outcome.
Short Sales began to be relevant in Colorado in 2005 – The market began to change in Colorado in 2005. We were among the first states to experience an increasingly large number of homeowners who were in trouble on their mortgages and could not sell the property for what they owed. The most experienced among realtors who really specialize in short sales began to learn the process at that time. It was a difficult process very different from conventional real estate transactions, and most realtors didn’t want to have anything to do with it. Many were wise enough to realize they were not cut out for the tedious aspects of dealing with the banks, potential lien situations, and buyers who did not understand why they had to wait several months on an approval to close. New language had to be developed specific to short sales because of the unique qualities of the short sale transaction to make sure everyone was informed and protected properly.
There is no substitute for real experience – Don’t’ be overly impressed by great websites for marketing to capture your interest and certifications that can be obtained online or by spending a few hours in a classroom. Some realtors are very good at marketing but when it comes down to it may not have the real experience required to obtain the best possible outcome for the homeowner in a short sale transaction. Most of the realtors portraying themselves as short sale experts just decided to jump on the bandwagon in the last 2 or 3 years because there was not enough “normal” real estate business to sustain them. They went to a class for a few hours to learn the basics, added a designation to their business card and website, and they are mixing a few short sales in with their regular real estate business. There are realtors who have been specializing in the short sale and foreclosure prevention aspect of real estate since the time it became an issue in our market and have successfully closed numerous short sale transaction with all of the major lenders and many of the smaller ones. These realtors know exactly what to expect from each lender, what specific forms they require, how they operate depending on whether they are the first or second lien holder, what additional documents are required for each type of loan and short sale program, and the process and anticipated deadlines for each one. HUD guidelines for an FHA short sale (called a pre-foreclosure sale) is different than that of a conventional loan. The Making Home Affordable Foreclosure Alternative (HAFA) program is different than Bank of America’s Coop short sale program, or a standard short sale. Truly seasoned short sale agents know that how one deals with liens on the property, overdue HOA payments or water/sewer bills varies with each type of program, investor, and servicer. Is there mortgage insurance involved? That complicates the process exponentially. Has there been a partial claim previously on the FHA loan you now need to short sale? Do you qualify for HAFA or one of the other pre-approval programs or do you need an offer on the property before you can submit the short sale package?
A truly experienced short sale realtor will be able to answer all of these questions and whatever else you throw at them. If you are interviewing a potential short sale realtor and they cannot provide quick and confident answers to these type questions, end the conversation and move on. Your financial future, credit rating, and future liability for thousands of dollars if the deficiency isn’t properly dealt with in the negotiation process is way too important to put it in the hands of someone who is taking on a short sale they don’t really have the experience to handle properly, with their fingers crossed behind their back, hoping to make a commission if they are successful. You cannot afford to be the guinea pig that the inexperienced agent is learning on. Everyone has to learn somehow but an agent who lacks the proper experience should be operating under the oversight of an experienced short sale specialist realtor or not at all.
Here Are a Few Things To Ask About When Interviewing a Potential Short Sale Realtor:
Testimonials or References – An experienced short sale realtor should be able to provide several testimonials or references from happy past short sale clients. A realtor who cannot provide this either has not done enough short sales or has not done a good enough job to have satisfied clients willing to provide a testimonial or reference for them.
Liabilities and Concerns – Ask a potential short sale realtor what liabilities and concerns they see for your particular situation. Every situation is unique but the agent should be able to speak to those issues and how they may or may not pertain to you.
Up Front Fees – It is illegal in Colorado to charge an upfront fee for a short sale transaction. This should be a major red flag. A realtor should be paid the same way on a short sale transaction as any other real estate transaction, with a commission for the real estate transaction at a successful closing of the short sale. That’s why we call it a success fee. The good news here for a homeowner in a short sale is the fact that the realtor’s commission is paid by their lender and not out of the pocket of distressed homeowner who likely is already having financial difficulties. This is one of the many benefits to the homeowner in a short sale.
Guarantees – Be leery of any agent who guarantees specific results for your short sale. While a good short sale realtor who knows what they are doing can achieve a high percentage of success, the short sale process is much too complicated with many variables out of any one individual’s control to guarantee anything.
Legal and Tax Implications – Realtors are not attorneys or tax advisors, however an experienced short sale realtor should be keeping up on the basics in all areas that are affected by short sales and foreclosures, and be able to discuss the generalities of these issues giving you an idea of what to expect as well as guidance for where to get the official answers to your questions.
Experience – Ask how long they have been doing short sales and more importantly, how many short sales have they successfully closed? Out of the short sales they have taken on, what is the percentage that they were able to actually close successfully?
I closed my first short sale in November 2004 and have been specializing in short sale transactions for over 8 years. In that time I have successfully closed over 200 short sales. When I transacted my first several short sales I had the guidance of a title closer who had previous experience with short sales and a seasoned realtor who had been through a similar foreclosure market with extensive short sale experience. Yes I had to learn too, but it wasn’t flying by the seat of my pants at the poor homeowner’s expense. The most frustrating thing to me in all the years I have been working to assist struggling homeowners to avoid foreclosure is the fact that 7 out of 10 still go to foreclosure auction without any outside assistance or intervention. It is so unnecessary and so financially destructive to the lives of people I most likely could have helped avoid the devastation. Please feel free to contact me any time for a free consultation about your particular situation. We can do that over the phone or in person, whatever you prefer. The main thing is that you not wait to begin the process of exploring your options now. Don’t wait and hope. You don’t have to make a decision now, but it is imperative that you take action now. It won’t cost you a thing to take action now but it may cost you dearly to wait.