5 Insider Tips for Buying or Selling a Short Sale

As published in The New-Press Sept 18.2010

By D. Michael Burke

The real estate market in Southwest Florida has shown a steady upward trend for about a year now, largely thanks to the competitive prices that buyers are enjoying. The number of closed sales is up, inventory and new listings are down, and prices have even shown signs of beginning to rise as well.

Economists are also predicting, however, that another wave of foreclosures and short sales will hit the market. This can be good news for both buyers and sellers: Buyers can still count on getting a good deal, and sellers can count on said buyers hanging around.

More to the point, though, this means that we aren’t done navigating the sometimes-stormy waters of short sales. To help buyers and sellers through the process, I collaborated with Jackie Nary, the short sale specialist in my office, to put together a short list of insider tips. Regardless of which side of the short sale you are on, here are five things every buyer and seller must know.

1) Hire an agent with short sale experience.

"Hiring an agent with a lot of short sale experience is crucial," Jackie says. Your agent is there to guide you through the process: to tell you what to expect, to guide you in making or accepting an offer, to know what must be done and when, and to keep in touch with the other party’s agent so that both buyer and seller area always up to date.

The seller’s agent, however, is of paramount importance. "This person needs to have lots of experience in the short sale world, have a great success rate, and be persistent in getting things done," Jackie says. "The success or failure of your short sale lies in the hands of the seller’s agent."

2) Expect the process to take time.

You probably already know that a short sale takes longer than a traditional sale, but do you know how much longer?

"Make yourself very comfortable if you are buying a short sale," Jackie says. "I have had them completed in as little as two months, and as long as a year and a half." While it is true that lenders are getting faster at approving short sales, it can be hard to anticipate how long it will take in your particular case. Buyers and sellers alike are better off planning for the worst-case scenario until they are proved otherwise.

For buyers, this means you should not be in any rush to move, and if possible, you should have the flexibility to move quickly once the sale is approved. For sellers, however, the implications are more serious: A successful short sale will require planning ahead if you are to avoid foreclosure.

"The closer a homeowner is to foreclosure, the harder it is to get the short sale completed and beat the clock," Jackie says. "Sellers need to understand the wheels of foreclosure continue to turn even though you are in a short sale situation."

3) Be ready to provide the bank with everything they need.

Sellers take note: The success of your short sale will depend on how well you present your case to the lender. This means having everything ready to go when it is needed, including your hardship letter, pay stubs, bank statements, investment accounts, the past two years of your tax returns, and a profit and loss statement if you are self-employed.

With most of this information, all that is needed is for you to gather the required documents. The hardship letter, on the other hand, leaves room for a little finesse, and accordingly, should be given more time and attention. "If the seller were writing an essay and the winner was to get $250,000, I am sure they would write a great essay," Jackie points out. "Their hardship letter needs to be at least that good, as it could be worth that amount or even more."

4) Maintain good communication.

Since a short sale can take a long time, it is especially important for the seller’s and buyer’s agents to maintain good communication throughout the process. Especially for the seller’s agent, dropping the ball is almost a sure way to lose a buyer. A buyer wants to know how things are progressing and whether the seller is getting any closer to getting approval for the sale.

As Jackie points out, you have already invested a lot of time and effort into marketing your home and negotiating a contract, and letting them lose interest and walk away would mean that you would have to start all over again. "Once you have a buyer, you want to hold on to them. Letting them know you are making progress is one way to do this."

5) Consult a professional if needed.

Finally, many buyers and sellers make the mistake of thinking that just because their agent is experienced with short sales, means they can give advice in subjects outside their area of expertise. "Sellers need to understand that their agent is not a CPA or a lawyer," Jackie says. If you need someone to advise you on the tax implications of a successful short sale, or if you want legal representation during the short sale process, be sure to consult with a professional who can give you the guidance you need.

Successfully navigating a short sale may seem overwhelming, but an experienced agent acts as your guide throughout the process. An agent who knows the ins and outs of short sales will make sure your offer is appropriate and your paperwork is submitted on time, and will keep tabs on the lender while they review the short sale.

If you are planning on buying or selling a short sale, it is important that you hire an agent with a track record for successfully completing many short sales – or an agent whose own experience with short sales is strengthened by having an expert on their team. For further questions, I invite you to contact Jackie Nary, who handles the short sales in my office, or myself.

Contributed by D. Michael Burke, P.A. Keller Williams Elite Realty
Michael@CoconutPointRealEstate.com / www.CoconutPointRealEstate.com