7 tips for a successful short sale in Lake Tahoe

by Joe Salcedo on 10:52 pm

In this article I share my thoughts on the 7 factors needed for a successful short sale.

Yes–banks, buyer’s agent, title company, even HOA dues (payment or the refusal of) all play crucial roles in the outcome of your short sale. Government nudging also plays a part in how banks hand out short sale approvals.

And yes, you have to hire an experienced Realtor to handle the transaction.

But in my experience, the number one element in the success of a short sale is the homeowner. The commitment of the owner to get the deal done is crucial. Everything else follows.

Your short sale will have the best chance if you have the following:

1. Get the right person for the job.

Short sales have been the buzz word of the real estate industry. With this booming trend comes the avalanche of short sale “experts”. Experience plays an important part in handling your short sale, look for someone with at least three successful short sale deals. Also, ask for proof. Many agents tend to overstate their experience. You can also ask how many short sale deals they closed the past year. In this market, change is constant.

Less than a year ago, Bank of America launched Equator Service. This is a major overhaul of their broken system. Instead of calling them back and forth and faxing necessary documents, they streamlined the process by uploading documents directly to the Equator system.

(Click here to learn more about the Equator system: Equator FAQ’S)

An experienced Realtor will know the necessary steps in order to get the job done (ex: submitting a complete package, having updated fax numbers, knowing what the banks are looking for, knowing what to say to the buyer’s agents in order to avoid failed expectations, deciding on a price tag that would be the same or near bank’s perception of market value of the home.).

Not to mention that in almost every short sale deal, there will be hiccups (ex: 2nd lien holder is asking for more than $3,000 that the 1st lien holder is not willing to pay).

Be nice to your bank negotiator.

2. Marketing: Try to get an offer on the table as soon as possible.

The short sale package cannot be submitted until there is an offer. As I write this, there are 976 short sale homes on the market (Northern NV Regional MLS). Competition is fierce. It’s getting harder and harder to get noticed as more and more short sales hit the market.

3. Negotiations: From negotiating with the buyers agent to the bank lien-holder(s) your patience and persistence will be tested. (Once, I was dealing with 3 lien-holders in one deal).

Humps are part of the road to a successful short sale. Don’t panic. Anticipating it and setting up back up plans would help you close the deal. There are times when the homeowner would need to pay off missed HOA dues or pay for the difference that the 2nd lien holder is demanding (1st lien holder usually caps out at $3,000 payoff to the 2nd. )

In the past, banks have deliberately waited ’till the last stage of the deal to cut my commission. There are times when both the buyer and listing agents would need to give up as much as half of our total commission just to close the deal.

4. Legitimate hardship: Banks require that homeowners submit their tax returns (last two years), financial / banks statements and recent pay stubs. Your financial standing will play a big part in the terms of the bank’s short sale approval.

Some common examples of hardship:

a) Loss of income

b) Payment adjustment. If the loan has an adjustable rate and has gone up.

c) Medical Emergency

d) Death of co-borrower. Loan was approved with two incomes. The death of borrower falls into letter a, loss of income.

e) Divorce

f) Relocation of employment. The borrower has been relocated in a different state due to employment reason(s).

5. Purchase price vs Market Value

The banks will order a BPO (bank price opinion) to determine if they will accept or counter the offer price of the buyer. Many will say banks will NOT accept anything below 90% of market value (which is based on the BPO). This is not always the case. I’ve had deals where banks have accepted below the 90% threshold. I also had a case where the bank countered + $40,000 of the market value of the listing! Some banks flat out counters the buyer’s offer even if it’s 95% of market value. It’s a case to case basis.

If you price the short sale too low, then you risk being countered by the bank at a wide margin; in the process agitating your buyers–setting up false hope. This is usually the time when the first buyers back out of the deal.

In contrast, if you price your short sale too high, you risk your home being shunned by potential buyers.

It’s a delicate balance, this is where your agent’s experience plays a big role.

Note: the bank always counters higher but never lower.

6. Offer in place, buyer intact.

This is easier said than done, since most of my first buyers that writes an offer on my listing will likely walk out in the first 30-45 days. Many simply cannot wait, while some look for greener pastures.

The first offer takes the longest because this starts the whole process. The second or third buyer is always the winner of these short sales due to the fact that the listing price has been previously approved by the banks.

When the second or third buyers comes in the picture I already know exactly how much the banks are willing to sell the house. This makes the transaction infinitely easier for all parties involved.

It’s also worth mentioning that the buyer’s agent plays a central role in the whole process. They also need to know what a short sale entails so they can adequately explain the “waiting,” the counter offers and the 10 other surprises that will most likely happen. In my experience, a buyer’s agent plays a major role in how long the buyers stay in the transaction.

7. Focused and determined seller.

Losing our home is one of the toughest things to go through in life. It will never be easy. It is very stressful.

In 2008, I also went though my own short sale. We start out hours and hours of study and internal debate on what’s the best option to take—to short sale or foreclose? Perhaps deed-in-Lieu. We finally decide on the best route to take. Agents asks for all kinds of paperwork, banks asks you to create your own account and demand another wave of documents (equator system asks homeowners to create their own account aside from the agent’s). Agent lists the house. About 2-5 potential buyers a week schedule showings on the house, sometimes while you are about to sleep. You finally get an offer. An approval letter comes in from the bank asking for the homeowner to contribute to the closing, and you’re already cash strapped. You ponder the thought of just letting it all go to foreclosure. But you move on and decide to pay. Before you close the deal, you would have to find a new place, most probably rent an apartment. Lots of moving. Emotional turmoil.

All these can take it’s toll, lose focus in closing the deal. I can’t blame them. But hold on you must. Especially if you already decided that in your case, the pros outweighs the cons. Short sale is hard work. But in many cases, it is worth it.

Stay focused. It’s going to get better. I salute you for riding out this emotional roller coaster called “short sale.”

You will bounce back from this.

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“Joe’s your man if you need someone to trust. Joe Salcedo is a hard working Realtor. Joe is very professional and will go the extra mile.”

– Philip Duane Johncock

“I was laid off from the state in November of 2007 due to major budget cuts. We were no longer able to make our house payments as the job market was just beginning to get worse and worse. My agent in San Jose found Joe Salcedo in Reno for me and told me he has a lot of experience in short sales. He priced our home at a very realistic price in relation to the market values at the time. Joe was very professional and before we knew it we had an offer on our home. In September of 2008 our home closed and the bank forgave the difference. A short sale comes off of your credit in a much, much shorter time than a bank foreclosure. We will be forever grateful for the assistance of Joe Salcedo”

– James and Marsha McGinnis (feel free to call for a reference, Joe has my number)

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