North Idaho Janna

As a Coeur d'Alene Realtor involved in Short Sales I wasn't too surprised to find this question in my Email inbox this week:

What does a Realtor do in cases of short sales?  I have been thinking about this for a while and was hoping you might be able to shed some light on the subject.  A little advice would go a long way right now.
Thank you for your help. 

Thank you, Julie

My guess is that Julie was Googling short sales looking for some answers and turned up a post I had just made to my North Idaho Janna Blog, The Joy of Short Sales!  Or perhaps an earlier one, A day in the Life of a Realtor involved in Short Sales.  I thought I would share my response to Julie in case it might help someone else who is wondering about short sales and whether or not it would be an option in their particular circumstance.

Hi Julie,
 
Well, that is a broad question.  I'll try to answer the best I can, but please feel free to send me any SPECIFIC questions you might have.
 
Since I don't know anything about you I am going to assume that you are a homeowner who might be wondering if a short sale would be a good option for you in order to avoid a foreclosure.  That is most often the case in a short sale.
 
As Realtors, first we consult with the homeowner about their situation and can advise as to whether or not a short sale is a viable option.  In a nut shell, the homeowner is usually facing a hardship of some kind - loss of job, divorce, death of a spouse, interest rate adjustment that increases their payment - something that makes it impossible to continue with their current mortgage payments. Homeowners can talk with their lender to see if there are alternatives that might work, like a loan modification that could reduce the payments to something manageable.  When that isn't an option, the lender will usually agree to a short sale because it is better for them than a foreclosure.  With a foreclosure, they will lose much more in carrying costs, legal fees, etc.  For the homeowner, the short sale is much better too, because although it is a ding on your credit, it isn't nearly as bad, and doesn't remain as long, as a foreclosure.
 
Once we have decided that the short sale is the best option, I would assist in getting the short sale packet together and submitted to the lender.  Part of this packet is an authorization you sign that gives them permission to talk with me about your case.  It would also include a hardship letter explaining your situation, pay stubs, tax return, the listing agreement, a market evaluation showing that the value of the property is less than what it would take to clear your mortgage, and whatever else is on the list from the lender. From that point on, you wouldn't need to be in contact AT ALL with them unless you chose to be. 
 
Your home would go on the market with the disclaimer that it is subject to approval by a third party creditor.  When an offer comes in, it is submitted to the lender, and the waiting game begins. We will be assigned to a negotiator. It seems to take FOREVER to get a response. They will order a BPO, or Broker Price Opinion, kind of a mini appraisal.  I do a lot of those for lenders so I am very good at setting the listing price at the right place. The lender will take the valuation from BPO as the fair market value. If there is a second mortgage, they have to negotiate with the 1st mortgage on the amount they will settle for.  If you have mortgage insurance, the insurer will also need to be be part of the negotiations.  It is complicated, and can be drawn out. It's important for you to have a Realtor who understands and has some experience with short sales, negotiations, and keeping everyone calm in a tense situation.  While all of this time is dragging out, with an antsy buyer waiting for a response and a discouraged seller in a tough spot, the Realtor is in communication with the negotiator, providing any documents they ask for and trying to keep everyone calm, and the transaction from disintegrating.  
 
Depending on the offer, the lender can either accept or reject it, or counter, and we just keep on moving forward.  Almost always, a lender will postpone a foreclosure sale date if there is a viable offer they are working.  That's the case with one of my current transactions.  Usually, they won't begin foreclosure proceedings, even if the seller is in default, as long as the property is listed for sale.  That's the case in another one of my current transactions.
 
Then, when we finally get to closing, the lender pays ALL the costs - mortgage payoff, property tax bill, real estate fees, EVERYTHING and you as the seller don't have to pay one cent. There will be a deficiency - the difference between what the lender nets and what was owed.  During negotiations the lender may ask the seller to sign a promissory note for part of it, or just an agreement in general saying that the lender can seek a deficiency judgment in the future if they choose to.  We have not been seeing many of them choose to, because the facts are the sellers are without financial resources or they wouldn't be short selling, and the lender would incur more legal costs to essentially try to get blood out of a turnip.
 
Does that help?  I hope I haven't just confused you more!  If you ever want to just talk, you can come by my office, or I can come to your place, or whatever works for you. No strings attached. I find that many people in this situation get paralyzed with fear and depression, a feeling of hopelessness.  Short sales CAN be a really good solution in many cases.  We are seeing an increasing amount of them right now in our area, and expect to see more and more as the months go by.  The worst thing someone can do is to just do nothing.  Even if a homeowner is already in default, as long as we have at least a month or two before foreclosure, it's not too late. More time is better, but like I said earlier, as long as we get an offer to be working with, they will postpone the foreclosure date even after it's been set. 
 
Hope this helps. Send up a flare if there is anything else I can do for you.
 
Janna
 

Janna Rankin Scharf provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.

No matter how grand or modest your real estate dreams may be, you can turn to me in confidence.  Give me a call today and let me know what I can do to be of service to you!

Janna Rankin Scharf, AB, GRI, CSP, CNS, CLHMS  208.651.9700  NorthIdahoJanna@gmail.com