As a real estate agent, what do you do when your seller is in or near foreclosure? Do you try to find a buyer anyway, or do you ask someone else to help them? What about negotiating with their lender on their behalf? That’s a tough one sometimes, right?
A short sale is often the best way for a homeowner to avoid foreclosure, and the best way for a real estate agent to handle a short sale is to outsource the negotiations to an expert short sale negotiator. But why?
After speaking with many real estate agents about this, I found several objections being thrown at me. I’ll share seven of them with you, and then I’ll show you how to think about them a little differently.
“I don’t have time to track the status of each short sale.” You’re right – you have to stay on top of the process if you’re going to be successful. We have a website, www.realeflow.com, which does that for you. The short sale experts will enter all the details into the software, and all you have to do is check the website for status updates and communicate with the sellers. You already know that the process takes a while, so just reassure the seller that negotiations are moving along even when it doesn’t look like it.
“My short sale packages only get buried in some loss mitigator’s to-do pile.” That can be exactly what happens when you’re working with a loss mitigator who has scores of files on his desk. Loss mitigators prefer working on fully assembled short sale packages, and will put off handling and dealing with disorganized, incomplete or poorly and improperly submitted short sale packages. Move your seller’s file to the top of that pile by using a competent and proven investor or loss mitigation negotiation company who will know what to do.
“It is a breach of fiduciary duty to the seller when I allow a third party to try to profit from this transaction.” The main idea is not to harm the seller. If the resale price is less than the seller owes on the mortgage – and fair market value will guarantee that – the seller won’t be giving up any profit. The third party investor is only being paid for their expertise in convincing the lender to discount the mortgage balance and approve the short sale.
“Homeowners say that they can get more money without a third party involved in the sale.” This may be true with many home sales, but only if the home is worth more than the amount due on their mortgage. If the value of the home has fallen below that amount, and the seller can’t find a buyer who will pay at least the loan’s balance for the property, the lender will not allow the seller to profit from the sale. It will not matter whether the home sells for $10,000 more or less. The lender will always make sure their debt is paid first.
“Involving a third-party investor means that the seller will be hit with a larger deficiency judgment later.” At first glance, this makes sense, but there are many factors that go into the amount of a deficiency judgment in this case. The third-party investor is actually there to counteract the lender’s intentions and mitigate the loss for the seller, which results in decreasing the final amount of a deficiency. Furthermore, by filing a Chapter 7 bankruptcy, the seller can eliminate a deficiency judgment altogether.
“Buyers won’t wait for the short sale approval before closing.” It’s true – most buyers want to move in right away. You won’t find many buyers who will make a good offer and then be patient for several months while the sellers work out their issues. However, the investor may already know someone who wants to buy the property and is willing to wait, in which case you won’t have to find the buyer at all. If you do find a buyer and explain the situation, that buyer may actually consider the professional short sale negotiator as a positive factor in the sale. They will know that the sale is more likely to be approved, so the wait might be worth it.
“If the short sale negotiation fails, the investor will still make money somehow.” After all the time and effort that the professional short sale negotiator has spent on behalf of the seller, very occasionally the lender will still deny the application for a short sale. If they still insist on collecting the deficiency, an ethical investor will minimize the damage and step back, allowing the property to be sold to the end buyer with the higher offer. Simply discuss this scenario with the investor beforehand.
You already know that the real estate business works best when agents concentrate on the areas they’re trained in – commercial, residential, condos, or new construction. Think of problem properties as their own special category. When a seller is in default on their mortgage with an impending foreclosure, you can help the seller most by working with other professionals who have special training in those situations.
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