The most important question when evaluating a short sale1 year ago
The most important question when evaluating a potential short sale.
The short sale business is an ever changing industry in which no one can predict what the next day will bring. There are so many different aspects and parties involved that it can be impossible to stay on top of everything. Through my experiences as the acquisitions manager at Eagle Homebuyers, LLC, I have found one key to short sales that triumphs over the rest. Now, this isn’t a groundbreaking negotiating strategy or theory, however, if you use this strategy in evaluating potential short sales, it will save you times, money, and most likely hair.
The number one factor when evaluating a potential short sale is the motivation factor and cooperation of the homeowner. This business has too many different obstacles and pitfalls to try and convince an unwilling, uncooperative homeowner to let you list and sell their property. The homeowner must be on your team, and is a major player in completing a successful short sale. They play a major part in 4 areas.
Gathering and updating paperwork – If it takes homeowner 3 months and 14 phone calls for you to get the short sale package, then how long is it going to take them the 2nd time you have to update all the financials 2 months later? Also, in many cases, banks need the updated information within 24 to 48 hours or the short sale package will expire. Make sure when you are explaining a short sale the client knows that you will need their help and they will have to get a few things done throughout the process, very quickly.
Showing the property – In this market, with all the competition and the reputation short sales have for being a tedious process, you may only have 5-10 true buyers look at your property. If you have to chase the homeowner for 3 days before getting access to the property, you may have lost your buyer. Furthermore, as an investor, many times we are dealing with cash buyers who will have already bought another property by the time you set up the showing. Also, you have a BPO, winterizing plumber, and other parties involved in the process who need to get in and out on short notice. It is very important to get these things done as quick as possible.
Solving Liens and title issues – During a short sale the bank and title company will find liens and/or encumbrances which must be taken care of quickly. Dealing with utility companies, as I found out on my last short sale, can be loads of fun..jk. The property had a lien with the oil company. After speaking back and forth (and calling her over and over again) I finally explained to the lawyer at the oil company that we would be paying off the amount owed at closing and I would forward her the verification as soon as we received an approval on the offer. Well, after we finally received the approval, she tells me that the lien has already gone in execution, and furthermore, she NOW cannot talk to me about it and can only speak to the homeowner. Now I have to get the homeowner to call the lawyer who never can be reached and try to explain the situation back and forth between the homeowner, myself, my boss, our lawyer, and the bank. Keep in mind that situations like this will come up and the homeowner will have to help you solve the issue quickly.
Initiating the short sale – In some cases, homeowners have to contact the bank and initiate the short sale themselves. This involves phone calls, being on hold for a couple hours in some cases, talking about short sales (which they know nothing about), and now with the new Bank of America equator system, handling many aspects of the short sale themselves. All of this can be quite the headache for a homeowner who is getting foreclosed on and is having a hard time keeping their life together. Once again, make sure the homeowner knows that many banks have different methods and sometimes they will be required to perform tasks in order to expedite the short sale.
So as you can see, although a short sale seems to be gathering some paperwork and faxing in an offer, it is much more than that. Between new systems, time demands, banks, lawyers, and buyers, it can be a nightmare if you don’t have a willing and helpful homeowner. The next time you evaluate a short sale, keep in mind THE HOMEOWNER is now on your team, do you want to depend on them when the clock is ticking?