Short Sale Agent: October 2008

What goes in a short sale packet?

Listed below is the paperwork required to successfully negotiate a short sale and will be followed by a brief explanation of all the items:

Authorization to Release
Signed Sales Contract
Hardship Letter
2 months of bank statements
2 months of pay stubs
Previous year tax return (W2, 1099)

If anything is missing, the reason must be included in the hardship letter. For example, if the homeowner is self-employed and doesn't receive W2s, it must say in the hardship letter, "I am self-employed and cannot provide W2s".

Authorization to Release
Since you, as an agent, will be speaking to the lending institution on their behalf, you’ll need authorization. An “Authorization to Release” form is a very simple document that states you, as the agent, will be negotiating on behalf of the homeowners. This form should contain the borrower’s name, their Social Security number, date of birth and other relevant information including the address of the home facing foreclosure. Once complete, this document should be faxed to the bank so that you may now negotiate in lieu of the homeowner.

Hardship Letter
This letter should be very thorough, honest and detailed. Explain what has caused this financial hardship (loss of income, divorce, medical). This is the homeowner chance to convince the bank that they have a valid hardship and cannot afford to continue making the payments.

Listing a Short Sale

In today's housing market, just doing your normal marketing will bring you in contact with homeowners that will benefit by doing a short sale. The key is to ask yourself, can I handle this long and complicated process. If you are willing and able to:

Effectively communicate with the lenders about their requirements for a short sale.
Put a professional and COMPLETE short sale package together in accordance with these requirements.
Advise the seller as to all their rights and ramifications of a short sale.
Negotiate and follow up with the lenders many times over the course of the short sale process. It can easily take 90 days to complete.
Meet the BPO agent and convince them to give a low valuation of the property value.

Then you can approach a homeowner with a short sale plan and list the property as a short sale.

If you cannot or don't want to handle all these aspects of the process then you should consider referring the homeowner to an investor in exchange for a fee or some other arrangement. If you choose to list the home as a short sale there are many ways to make a short sale work with an agent involved. A lot has to do with how experienced an agent is with short sales.

Done Deal Solutions will work with listed properties. In these cases, we simply request that we be allowed to handle all negotiations with the lender directly. The Realtor will be kept informed of the negotiations as they proceed and the listing Realtor will receive their listing commission.

It's a win-win-win situation. Your client get the use of a professional negotiation company with no fees, you as an agent, can concentrate on marketing, and the banks avoid taking back another property as a REO.

What is a Short Sale

A short sale is the sale of a property, with the authorization of the creditors, for less than what is owed on it. Short sales are done all the time. Whether it is the forgiveness of debt owed by a nation or an individual, it simply means that someone is willing to settle for less than what they originally anticipated. It’s part of business. All lenders know that they will not win all the time. Risk and loss of capital is an anticipated cost in the lending industry. Changing economic conditions, conflicts, and Mother Nature are among some of the many causes of unforeseen situations that turn good lending contracts into bad. In the context of foreclosure on secured assets, a short sale occurs when debtors agree to settle their liens for a known amount of money as opposed to taking a chance at auction. Auction prices are often unpredictable and usually greatly discounted. Many lenders are willing to mitigate further risk of loss by making deals before auction. Bad debt is sold by lenders all the time. For instance, there is a huge market for unsecured credit card debt that is sold for pennies on the dollar to collection agencies. That’s self-effectuated short sales. Lenders are more than happy to discuss resolution of aged debt. Their business is to lend capital, not dispose of foreclosed assets.