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Todd - I'm waiting right now for an out of state seller to send me all of the documentation I need before I'll even consider putting his property on the market as a short sale.  You're playing with fire on both ends of that candle with both the sellers and the buyers if you don't have all your ducks in a row right  from the beginning.

Well said and wise advice. Any new agent reading this needs to heed this advice.

Todd, great point. You have to maintain the leverage with the seller and get all the proper paperwork.

Great advice Todd. This does save a lot of time and helps speed up the short sale process.

Oh yes, great adice thans for the time to post today.  PS Maybe they should call the "long sales" not short sales. Ha!

Patricia Aulson/Portsmouth NH Real Estate

Great advice, pretty basic, and something that I just makes sense.  Preventative measures prevent brain damage down the road...

Todd, I have a listing right now that the Seller has told me that they will no longer be making house payments. I've never intentionally listed a "short sale" and don't really know what I need to get from them. Any suggestions?

Todd,

Doesn't there still need to be an offer before getting sales approval?

Richard

Todd - Getting the paperwork up front saves a lot of headaches later on and makes it easier to see if the seller qualifies for a short sale.

Todd, Three little words for the agents you describe in this post, foolish, foolish, foolish!!!

I make sure the seller has completed their short sale packet and sent it to the lender(s) and they have received it all and I have everything I need before the listing goes on MLS. I don't want to hold it up when I get a buyer any longer than I have too and risk losing them.

I recommend that Realtors work with a proffesionalshort sale negotiations company and not try to take the work on themselves.  Realtors can spend their time best by doing what they do best marketing themselves and their properties.  Leave the short sale work to specialists, don't waste your time on work your not getting paid any extra for.

Agents should always gather a COMPLETE and eatiled short sale file before listing the property.  Do not wait for an offer to submit to the lender.  When I hear an agent claim they are an expert at short sales, yet tell me the lender will not accept a short sale without an offer I want to roll my eys.  By the time you get an offer, you should be half way through the short sale.

www.shorts_sale_expert.activerain.com

Boy, this hits home for some of the agents in the Memphis, Tennessee area.  They promise that they are EXPERTS at short sales and have no idea.  As a matter of fact, some of them think that if their are two mortgages, you just wipe one away and don't even bother knowing anything about them.  What ever happened to being rfesponsible for misrepresentation................especially in a short sale situation.  Thanks for this reminder and having this though shared with us all.  This is how I get my sellers to cooperate, however, it is always helpful as a reminder to stand fast.

[Connie sez: . . . Seller has told me that they will no longer be making house payments.  . .  don't really know what I need to get from them. Any suggestions?]

Sellers have to demonstrate a valid hardship, few or no additional assets and possibly even the extra cash to contribute to a second. Qualifying for short sale consideration from the lender is not a slam dunk and not all sellers can do it.

If you feel they are going to qualify, first, get them to authorize you as a contact with the lender. Lender will have an authorization letter form usually.

Then ask the lender what items will complete the hardship package. They will usually provide you with a checklist.

Also, before you take that listing, ask the seller to contact their tax person and find out what the tax implications are.

A few times recently, I've had buyer-clients submit an offer on a property, only to find via the listing agent that the seller's CPA has advised they shouldn't do the deal. That conversation should have taken place FIRST.

 http://tinyurl.com/ShortSaleWebinar  is a great online lecture on this topic.

Todd, important and valuable info!  Thanks!

Getting the short sale packet first has been part of my routine for a long time. Once it's complete and we know that we have a serious short seller, then we move forward.

I have experience with short sales and I agree with you on the prep part. It is a must.

Todd - you are absolutely right - agents must have all of the information completed by the seller up front or you may never get it.  I learned the hard way, but it only had to happen once!

Hi Todd - I have closed many short sales and you are exactly correct.  Some agents are so eager to get the offer even before all the paperwork is done that by the time they actually get the offer into the bank(s) it's been 30 days or more......Be prepared!!!   Geanne

Hi Todd... this is definitely solid advice.  Short Sales come with their own set of issues and challenges.  Setting the right expectations and ground rules with sellers is definitely one of those issues.

A bit of patience when it comes to short sales goes a long way. In this slower market, there is a tendency to want to seize any opportunity that might produce income. Short Sales are challenging and it makes good sense to dot the i and cross the T as you recommend. Mahalo

sound advice, that I wish everyone would follow.  I'm so tired of listed properties that don't have a chance in H of actually closing, confusing and paralyzing real buyers.

Hi Todd,

I have done several short sales. I agree, the best advice for new agents or agents new to Short Sales is to take the the listing after the seller has completed their hardship packet with the lender.  Reminding the seller that the house will go on the market as soon as you get all their Short Sale information back is very good advice.  This speeds up the process for the seller, lender, buyer and realtors and keeps the transaction flowing.

Donna - This is even more importand on an out of state seller, you can't go knock on their front door and tell them you aren't going to leave until you have it.

Heather - There are many learning how to do short sales since the market shift, but remember if you aren't prepared for them, they will suck your bank account dry!

Gary - If you don't it is like pulling teeth, your own! Darn painful and you aren't sure you are going to get it before you die!

Mike - I try to have all the paperwork to the bank before I even have an offer, every once in awhile I'm lucky and a buyer shows up day one, but we all know that is rare in todays market.

Patricia - No kidding, they are long and hard, but I've been getting a few accepted rather quickly in the last couple weeks, but we will see if they close on time... Two weeks to close date... Fingers Crossed!

Janna - Most agents are just too eager and that make them dangerous to their own pocket book and sometimes to their own ethics.

Connie - Tell them that if they don't have all the paperwork needed for the short sale to you in three days that you will drop the listing!

Richard - NO, not anymore, the banks are willing to start the process prior to having a buyer because some banks are actually realizing that they are the problem in the system.

Christine - Exactly, if they don't qualify, you walk away!

Paul - The problem is they don't know it until it happens to them.

Sherry - That already happens enough, why should we be part of the problem by not doing what we need to do to be prepared.

Frank - I think so many don't like giving up part of their commission to a third party, but if you don't know what you are doing, I think it is better to give up that small amount and get the sale done rather than lose it to trial and error.

Joseph - Exactly!

Rita - They wish they could just wipe the 2nd one, the seconds are learning they can gum up the works just because they can in order to try to get more money.

Candice - If they don't qualify, you simple walk and don't look back.

Lana - I promise the seller doesn't care after they have a buyer, they think it is all over at that point.

Geanne - Oh geez, on those no wonder the buyers walk!

Steve - You have to or you will never get paid for all your hard work!

Ronnie - It certainly is not an easy process and their are a lot more hurdles to jump, but if you can make it to the finish line the referrals that seem to come with the sale are amazing.

Ray - I feel so sorry for the buyers that get locked in to those deals and made the mistake of putting earnest money in to escrow.

Cassie - That is exactly why I taught this class, because it is not like a normal sale at all!

Thanks for this GREAT advice!

Rebecca - Hope it helps!

Great point about the paper work.  It takes the lender(s) long enough to get their response together.  However, I think another equally important point is perhaps there are just some listings that are just not worth taking.  I'm in the middle of one now that if I had known one or two things I would not have taken the listing.  My newest short sale listing is going into foreclosure now largely because my seller has spoken to the second mortgage holder and let them know they were moving out of the house.  The second mortgage holder has notified the first mortgage holder and the foreclosure proceedings have started.  Most likely the second mortgage holder will put in a competitive bid at the foreclosure sale and buy the house from the first mortgage holder who will then be made 'whole'.  The second mortgage holder will then sell the property and get more money than they would have in a short sale.

I think you hit the nail on the head - - agent's should not list or be near short sale properties without having adequate experience and training.  This is a great opportunity for an office to groom agents to become mentors and leaders. 

We are dealing with people's livelihood here.  The short sale is the next to last straw for most (foreclosure is the last).  They are putting there home, their finances and their futures in your hands!  If you can't do your job properly, they have everything to lose - you only lose the listing.  Which is worse?

Many E&O carriers are beginning to have some risk-adjusted premiums for their brokerage clientele.  This is a good thing.  This will cause our Realtor community to step up to the plate and offer courses like the Loss Mitigation Specialist certification, and offer training to our agents in this growing area of business.

Of course, "fish stink from the head".  If the broker in charge isn't supervising his agents, or he himself is not knowledgable about short sales and REO protocol, then the education and training needs to start at the top.

Good advise.  A lot of people are scared to be honest with us about everything going on as they are embarrassed.  They don't want to lay out the entire sad financial picture.  The other half is they cannot be honest with themselves.  They don't want to put the entire problem down to look at.

Great info, Todd.  Seems the biggest reason agents don't get paid is buyers who walk after all the work is done and the bank has issued an acceptance.  There is a free, cooperative service for Realtors to get those properties resold ASAP at www.RealEstateRoadkill.com

Before I take a short sale listing, I get the authorization to talk with the lender directly, and from there, tell the lender that ALL communication from here until otherwise noted is to be through me.  Solves problem one of trying to find out what the lender/seller said to each other.  A request a short sale package and everything is taken care of before the listing is signed/finalized.

Some have said use a short sale negotiator to get the deal done.  If there is enough money to do that, I'd recommend it, too.  Unfortunately, commissions don't cover the basics in some areas.  Here, I've worked on a $40K, a $50K and currently a $15K offer on a short sale.  Commissions of $500-$1500 a side hardly gives room for an added party to participate in the deal

What's the point of taking the listing unless the seller cooperates?  I insist the seller has the complete package at the time I take the listing.  Otherwise, I reschedule the appt.  I also send an email ahead of time listing the items that I need so that I have a record of the communication and consent from the seller in writing just in case.  I may even start having them sign the email for the future. 

This is so ture. I give the sellers a "Short Sale Packet" in english or spansh. I tell them to fill it all out and give me copies of thier documentaion. They fill it out with in 2 days and then my team starts the process.

Great post! I have a short sale listing right now and I told the seller's I couldn't list it until I had all of their paperwork and information...thinking this might take a while, I was prepared to wait. To my surprise, I had everything that was needed the next day! I love working with people who are prepared :) However, after getting numerous offers on the property I have realized the waiting game is with the bank! This is my first short sale and I'm just curious if anyone has a miracle solution to speed up the process with the bank?? I've been waiting 6 weeks and counting...

Todd, great advice and it also goes to the motivation of the seller.  If the seller cooperates, well then you've just got the next step with the bank.

I agree with you 100%. Our short sale team has had to go with that strategy because sellers don't realize how important the paperwork is. They all take too much time when it comes to filling out the forms. I understand that the amount of paperwork that they must complete is staggering. I know they are overwhelmed. Since they are anxious to get their property listed, this strategy seems to move them much faster than anything we can say.

Answer to Christina Burks' question about speeding up the short sale process:

Disclaimer - can't take the credit for this myself as I just learned it from another agent.

Here's the trick, you don't list the property until the bank has ordered and received the BPO.  The trick to getting the BPO ordered IS TO PUT IN AN OFFER.  Regardless of what was said in a post earlier in this tread, you have to have an offer to get the bank to order a BPO. 

Half of the waiting game on short sales is waiting for the bank to get back their BPO/valuation.  That done, negotiation can take a week or two with closing another 3 or 4 weeks.  Shortens up the average cradle to grave time by about 4 or 5 weeks.

That's just my experience and I've currently got 16 short sale listings, lost of approval letters on firsts and seconds, 6 pendings, closed one today! 

Best of luck to everyone - short sales are complex but with effort and patience CAN ABSOLUTELY be done!

Todd:

Great post! It only touches on the basics of a Short Sale but it is still good Information. I have been doing “Shorties” as I call them for years. I do a two step listing. I go to the home do my basics and obtain the Lender Information as well as the Listing Agreement. I have a Short Sale Addendum to the listing Agreement. The Addendum states will it will be advertises as a Short Sale and what Conditions must be met. I send the Listing Agreement to the Lenders as Well as the Letter of Hardship and last two Seller’s pay stubs etc… and get them to agree as well on a separate Agreement, which is Addendum #2 to the listing ( Lenders Addendum to the Listing for a Short Sale. This works out really well for me. I do a lot of Shorts and I works. By the way I’m usually a critic of most Blogs but, hey way to go. See ya at the TOP! I give you an IQ Score of 175.

Anonymous because you would not believe who I’am.

That is good practice !  However another way this can be done is to have the seller send directly to the bank or banks all required documentation and the hardship. I have done that before and it worked fine. I only handled the offer and CMA.  I called the lender to confirm they have what they need;put the seller in the driver's seat of their own financial, that way you could have less liability if the bank ever questions the financial.  I would actually prefer to do it this way but some lenders require everything in a package and some sellers don't want to take the time to do that work .

I agree.  Have the seller get the entire package to you prior to listing.  Keep in mind though, most recent Bank Statements, Financial Statements, etc.  will be required by the lender when the offer is submitted. 

Ditto what Elena said. I just had this conversation with my broker today. Assisting Sellers with the financial package - telling them what to put in it etc., is very controversial. If it comes from the lender, that's different. It is outside the scope of our license to be advising what to put in a package.

Just got word! Sold -Pending 5 Shorts over the phone, took4 days from start to acceptance from all parties. That's listing to Contract to Pending 4 days. You can not beat that with a stick. Commission earned $35,000. Closing next week. Not Bad for 4 days worth of work!

Anonymous because you would not believe who I’am

You are so right, Todd. It took at least three weeks for my sellers to get all the paperwork to me. Also they moved out of state so it was even more challenging. Great idea to get all the paperwork prior to entering the listing into the MLS. I will do that if I ever choose to list a short sale again. Thanks for the post.

Great posting. I would add that you tell the sellers to consult with their CPA and attorney about the potential ramifications of the short sale and put it in writing that you have advised them to do this and make them confirm that they will do so in writing and keep this in your file.  Additionally, with respect to financials -do not give any advice, as that is outside of your area of expertise and could open a world of trouble for you if something isn't kosher.  If the bank will accept it directly from the seller have the seller submit the financials.  We truly must be careful when accepting these deals and really shouldn't advertise as short sale "experts" unless you've handled many of these without any negative consequences for you or your sellers/buyers.

Great post.  I haven't made this mistake yet, after reading your post I won't.