Continuing with the theme from my last blog post, I thought I’d post a thought on actually working short sale deals. When working short sales a big part of your job will be educating the seller or homeowner you are assisting on the entire foreclosure process. I particularly like the seven options mentioned in the note below that homeowners have when facing foreclosure. Laying out these options to sellers and homeowners will give them a clear picture of their options and lend credibility to you as an investor/buyer.
How to Diagnose a Short Sale
To help sellers navigate the difficult world of distressed sales, you must be able to identify and evaluate all of your client’s options.
Lori Cox, ABR®, CRB, who instructed a full-day foreclosure seminar Wednesday in Orlando, said that sellers generally have seven options:
1. Refinancing
2. Selling and bringing cash to closing to cover the loss.
3. A lender workout.
4. A deed in lieu of foreclosure.
5. A short sale
6. A foreclosure.
7. Simply walking away.
“Walking away is never the best option but it might be their only option,� Cox said.
Which option is best for your client? To find out, “you have to be a diagnostician and you have to be a technician,� Cox said.
To diagnose the situation, work with sellers to answer the following questions:
Are they current on their payments? If not, how far behind are they? Sellers who are only one or two payments behind are in the best position to negotiate with a lender.
Do they have savings to pay off the loss? If sellers are under water on their mortgage—meaning they owe more than the house is worth—they’ll be able to protect their credit if they can pay off the remainder of the mortgage.
Are they facing a hardship? If it’s a temporary hardship, a lender might grant forbearance. If it’s a long-term hardship, the sale could be qualified for a short sale.
Being a technician, meanwhile, means helping sellers put together a short-sale package that’ll pass lender scrutiny. “They need more paperwork to get out of the loan than they needed to get into it, and you have to prepare them for that,� Cox said.
—Stacey Moncrieff
Posted by Carter Brown
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