It’s understandable for homeowners who are faced with the stark realization that they may have to sell their homes for less than they owe on their mortgage to be worried. Because, there’s a lot of uncertainty surrounding a short sale, a homeowner might reach out to the real estate agent who originally sold them their home. But that may not be the best choice because even if the whole experience was positive, you’re not going to get the same help that a short sales Realtor® can provide. An agent who specializes in short sales can navigate all of the complexities that are in your future.
When you decide that going the short sale route is your best option, you’ll need to find an expert short sales real estate agent.
The short sales Realtor® is not your ordinary agent
At first glance, the short sales process looks like your average transaction. You’ll find a real estate agent. They’ll then list your home, find a buyer, and negotiate the sale. But that’s where the similarities end.
Your short sale Realtor® negotiates with the lending firm currently holding the property’s mortgage. The goal is to determine how much money the lender is willing to lose on the short sale. Unlike a traditional sale, the negotiation starts before the house is listed. A short sales real estate agent must get the lender’s O.K. to go ahead with a short sale.
Lenders want to recover as much money as they can. If the lender stands to make more money between the private mortgage insurance payout and selling the property themselves, a seller may have difficulty gaining lender approval.
This is where the short sales Realtor® can flex their skills, having worked with lenders on previous short sales. As a result, they know what approach to use to hopefully persuade the lender that selling the property short would be in their best interest.
During the initial negotiations, the short sale real estate agent will ask you to put together a short sale package that explains why you’re seeking a short sale. In addition, it will include a hardship letter and your financial records for the past two years (if not more). Since you will be sharing your financial records — including any overdue and collection notices — you must hire an agent you can trust.
The problem with finding a short sale Realtor® in today’s market is that short sales haven’t been widespread as of late. For example, during the Great Recession in 2008, 1 in 10 houses that have changed owners were short sales.
Note: A Realtor® isn’t the same as a real estate agent, though they are similar. Both a Realtor® and a real estate agent are licensed by their state to handle real estate transactions. A Realtor® is a member of the National Association of Realtors®, whereas a real estate agent is not. Also, a Realtor® almost always performs the duties of a real estate agent and a broker.
Questions to ask a short sales Realtor®
On your quest to find a short sales real estate agent, you’re going to find a lot who say they are experts, but that doesn’t mean they are. Short sale expert Brad Wallace, who ranks in the top 9% of 8,627 agents in the Philadelphia area, says that finding an agent with demonstrable expertise in short sales is key for sellers.
When interviewing agents to find the short sale expert who best knows how to navigate this complex financial ordeal, ask these questions:
Q: “What is your short sale experience?”
Wallace advises that “You want to make sure that they have done short sales.” An expert in short sales should be able to show proof of their experience. Ask to see their current short sale listings in the MLS and how many short sales they’ve closed within the past 12 months. If they can’t show you proof or they haven’t closed many deals recently, you might want to keep them on standby.
With that said, you shouldn’t place too much weight on recent experience because short sales haven’t been commonplace as of late. As of May 2022, short sales represent less than 1% of all sales.
If you interview agents that haven’t had many short sales recently, ask about their short sale history from 2008 to the mid-2010s. Remember to ask them if they’ve stayed up-to-date with current short sale regulations, both federally and locally.
Q: Have you completed any short sales with my particular lender?
(If so, how many?)
Although it’s helpful if the short sale agent you hire has experience dealing with your particular lender, it isn’t a deal-breaker. However, it is beneficial if they have because your agent may have good working relations with your lender’s short sale processors, which can help your transaction go smoothly.
If your property has more than one lien or loan holder, ask the agent about their experience working with each one. You’ll also want to ask the prospective agent about their history of dealing with short sales with more than one mortgage or lender.
It doesn’t hurt to ask to speak with previous clients who had successful short sales with the agent.
Q: Do you have short sale training, certification, or licensing?
An agent may have experience dealing with short sales, but it’s always helpful and reassuring to know they have training for complex transactions like short sales. Agents may have completed NARs (National Association of Realtors®) Short Sales and Foreclosures Resource Certification (SFR), or they may have become Certified Distressed Property Expert® (CDPE).
There’s also the option of consulting a housing counselor through the Consumer Financial Protection Bureau to learn more about an agent you’re interviewing.
Building your short sale dream team
When selling your house the traditional way, the real estate agent you hire is the only one advocating for you. However, when going through a short sale, you’ll need a couple more people on your team. So along with your short sale Realtor®, you might want to hire a short sale attorney and short sale negotiator. They should have a real estate license, a mortgage loan originator license, or a debt-management company registration.
Having a short sale attorney on your team can help your real estate agent navigate the legal complexities and regulations regarding short sales. In addition, by having a negotiator on your team, they may be able to help you come out of the short sale as financially sound as possible.
Once you’ve hired a short sales Realtor® who you feel confident working with, they’ll be able to recommend whether or not you should consider adding an attorney or negotiator to your team. It all depends on your particular circumstance. If you hire an agent with a lot of short sales experience, they may even have an in-house team to help out.
Not only will a licensed Realtor® with short sale expertise help you come out of this difficult time as well off as possible, but they can also help you avoid scams or questionable offers that target people in your position. In addition, they’ll also be able to advise you on how to prepare for getting another mortgage after going through a short sale.
Dealing with a serious financial challenge like a short sale can leave you feeling drained and demoralized, but hiring a short sale Realtor® can help you navigate the ordeal as painlessly as possible.
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- "What is a Short Sale?," NextAdvisor (April 2022)
- "Serious mortgage delinquencies are up 55% over pre-pandemic levels. But what this means for the housing market isn’t what you might think," MarketWatch (June 2022)
- "Housing Market Predictions 2022: Is the Market Cooling Off?," Norada Real Estate Investments (August 2022)