To help members get the hang of short sales, we're publishing a series of articles with Practical Tips on Short Sales over the next several weeks. We've partnered with members Russ Bouknight and Paul Surles, two agents well-schooled in short sales, to give all our members the lowdown on what you need to know in this growing niche. Russ and Paul will answer one question on short sales each week.
This week's questions:
Q. Short sales typically take longer to close than a normal transaction. Can buyers simply walk away if they get tired of waiting? A short sale contract is still a contract, right?
A. Russ: KCRAR has a short sale addendum that both buyers and sellers sign. In that addendum, there is a blank that the buyer fills in with how long they will wait to get an approval from the lender. So if the listing agent is short-sale savvy, he/she will advise the seller not to work with a buyer unwilling to give the time needed. Prior to the signing of the addendum, the listing agent should have contacted the seller’s lender to find out the approximate amount of time the lender is taking in their short sale decision process. (Note: In accordance with most short sale purchase contracts, the buyer may withdraw from the sale by providing written notice to the seller if the short sale has not been approved by the lenders by that specific date.)
Communication is also the key to keeping the buyer waiting and untested. As a listing agent, I have a practice of checking on my short sale applications every 48 to 72 hours and e-mailing updates to the buyer’s agent.
I also put all of my short sales in back-up status until receiving final approval from the seller’s lender and usually receive a back-up offer in case the first buyer does not follow through. It is incumbent upon the listing agent to keep communication flowing, and in my experience, very few buyers walk away.
Q. What challenges do multiple lenders present in a short sale and how should multiple lenders be handled?
A. Paul: Upon taking a listing, REALTORS® should ensure that the seller would likely qualify for a short sale. This is usually done when the seller completes the income and expense worksheet for the lender. Some sellers might not realize or have forgotten that they actually have a junior lien, such as a second mortgage. It's a good question to ask up front, so when the listing agent submits the short sale packet, it's sent to both lenders for approval.
When there are junior lenders, more time can be expected because these lenders most commonly demand unsecured promissory notes at low-interest rates from the seller. It's also common for them to ask for more money than usual from the first lender. Some of the major lenders have agreements with each other to make this stage of the process progress more efficiently. For those that do not, the listing agent should be prepared to be the "middle-person" to dedicate more time navigating through this process between the two lenders.
About Russ and Paul:
Russ has worked in real estate since 2002 and has achieved between $3.5 million and $8 million in sales volume per year ever since. In the past two years, he's listed approximately 95 short sales.
Paul works with Realty Resource, LLC and has been the listing agent or has partnered with other listing agents to educate sellers about their options to avoid foreclosure over the last two years. He’s sold both investment property and personal residences as short sales.
Watch for more on short sales next week! If you've got a short sales question for Russ or Paul, e-mail Kelli Bamforth, Communications Manager, at kellib@kcrar.com or call 913-266-5907.
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