Selling your house for less than you owe on your mortgage is a scary financial situation to be in. With all the uncertainty that goes along with a short sale, it’s tempting to reach out for help from a familiar face—say the wonderful real estate agent who originally sold you your home.
But that may be a mistake.
If that favorite agent of yours doesn’t specialize in short sales, you won’t have the right help. A short sale has multiple parties involved, numerous regulations that must be met, and requires several rounds of negotiations.
Only an agent well-versed in short sales can successfully navigate this complex transaction. So the minute you decide that a short sale is the right way to sell your home—that is the moment you need to start looking for an expert short sale agent.
Short Sales Realtor®: Not An Ordinary Agent
On the surface, the short sale process shares some similarities with a traditional one—you find an agent, list your home, find a buyer and negotiate the sale. But that’s where the similarities stop.
Your agent must also negotiate with the lender holding the current mortgage on the property over the amount of money they’re willing to lose on the short sale. These negotiations start before your home even goes on the market. They begin the first time your agent approaches your lender about allowing a short sale.
You need an expert in place to handle these initial negotiations because some lenders would rather foreclose on a property than allow a short sale. If the bank will make more money between the private mortgage insurance payout and selling your foreclosed home themselves (typically for less than your short sale offer), you’re out of luck.
An experienced agent will have worked with your lender on previous short sales. This gives them insider knowledge on how best to convince your mortgage company that short selling the home is in their best interest.
A major part of these initial negotiations is the short sale package you’ll need to put together to convince the bank that you are financially unable to pay your mortgage. Along with a hardship letter, you’ll need to share all of your financial records with your agent—including all of those overdue notices and other uncomfortable collection documents.
Since your short sale agent is going to see all of the nitty-gritty details of your difficult financial situation, you need to find one that you trust and feel comfortable with. The trouble is that short sales aren’t so common these days, so finding an expert isn’t always easy.
Finding the right short sale expert for you starts with generating a list of qualified candidates. Then it’s just a matter of finding a trustworthy agent who makes you feel comfortable and has the right answers to your questions.
Also, a quick note: A Realtor® is not exactly the same thing as a real estate agent, though there is a lot of overlap between those two job titles. A real estate agent is someone who’s been licensed by the state to help transact real estate (and is usually also a Realtor®, but not always); A Realtor® is a member of the National Association of Realtors® (and is almost always also a practicing real estate agent or broker).
Short Sales Real Estate Agent Q & A
Just because an agent claims to have short sale experience, doesn’t mean they do. According to short sale expert Brad Wallace, who ranks in the top 9% of 8,627 agents in the Philadelphia area, “Some agents don’t know what they’re doing. They can talk a good game, but then they drop the ball. And if your agent doesn’t know what they’re doing, they’re not going to give you very good advice.”
The first and most important question to ask during your agent interviews is: “What is your short sale experience?”
Wallace advises, “You want to make sure that they have done short sales. Sometimes agents will take any listing they can and they say, ‘I’ll figure it out along the way.’ Don’t let them figure it out along the way on you.”
An agent with short sale experience should be able to show it to you. Ask to see their current short sale listings in the MLS and how many they’ve closed within the past year. If they haven’t done any or many short sales within the last year, they may not be the best choice.
Recent experience isn’t all that matters though. The reason an short sale expert doesn’t have many recent short sales may just be because short sales simply aren’t that common anymore.
During the U.S. subprime mortgage crisis of the late-2000s, the vast number of looming foreclosures led to a major upswing in short sales. For agents that don’t have a large number of recent short sales, ask for their short sale history from late 2008 into the early to mid-2010s. Just make sure they’ve stayed up-to-date on any changes to federal regulations that could help or hurt you.
The next big question to ask is: Have you completed any short sales with my specific lender? (If yes, how many?)
It’s okay if they haven’t but if they have, it’s a big help when it comes to negotiations. If they’ve done enough transactions with your particular mortgage company, they may have developed personal working relationships with the bank’s short sale processors that can help yours go smoothly.
Be sure to ask about all of the lenders who have liens and loans against your property to discover your agent’s experience with each one. You should also ask for the agent’s history of handling short sales with multiple mortgages and lenders. Confirm their short sale track record by asking to speak with former clients who successfully completed a short sale with the agent.
As a bonus question, you should ask: “Do you have any short sale training, licensing or certification?”
While this isn’t a necessity, specialization training for transactions as complex as a short sale certainly helps. Agents may have completed the National Association of Realtors® Short Sales and Foreclosures Resource Certification program, or they may be a Certified Distressed Property Expert. You may even want to consult a housing counselor through the Consumer Financial Protection Bureau on your choice of an agent.
Building the Team You Need
In most traditional home sales, the agent is likely the only advocate on the seller’s side. In a short sale, you may need a team of several experts to help you through the complex process. Aside from your agent, you may also enlist the help of an attorney and a professional negotiator with short sale experience.
A lawyer may be required to navigate the legal complexities and changing regulations of a short sale. A negotiator might be necessary to help you come out of the short sale in the best financial shape possible.
Once you’ve signed on with an experienced short sale agent, they’ll advise you if either an attorney or a negotiator are necessary in your situation. If they’re currently doing a lot of short sales, they may even have an in-house team already in place.
If you’re thinking you may be able to skip the agent and just hire an attorney or negotiator yourself—don’t. Neither will know the current housing market the way an agent does. An agent is also your best bet in keeping your buyer on board during the lengthy short sale process with its unpredictable closing date.
An experienced, licensed Realtor® will also be able to help you avoid any scams or shady offers of legal help targeting homeowners in financial distress. They are also in the best position to advise you on the steps to take to prepare for getting another mortgage after a short sale.
Going through a financial crisis like a short sale is always difficult and demoralizing. But the right short sale agent can help make the traumatic ordeal as painless as possible.
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