By Darryl Davis
RISMEDIA, August 25, 2008-Now that you have a clear understanding of what a “Short Sale” is, you may realize the necessity to participate in this market. As we stated in Understanding Short Sales, Part 1, the recent decline in property values has created many challenges for real estate agents and homeowners alike. However, a short sale is an answer for all parties involved, and can benefit the homeowner, the lender, and you, as an agent.
The nationwide rise of defaulted mortgages and foreclosures is an opportunity for agents to help the suffering homeowner. As a result the agent is valued greatly. In addition, agents who use short sales ease the strain on the current housing market. Overall, short sales create an opportunity for more listings and buyers, which benefits the real estate agent tremendously. In becoming a specialist in the area of short sales, an agent can assist homeowners in a way that no other professional can: by providing assistance professionally, as well as support emotionally through a tough time. In the end, there is a very beneficial outcome for the agent as well; they have built their reputation and have new opportunities for referrals.
Create Value for Your Business
It is typical for real estate agents to encounter homeowners who feel that they don’t need help from an agent to sell their home. However, the short sale situation is not typical; in this case, the homeowner owes more money on their home than what it is worth. In the instance a short sale would occur, the homeowner is generally in one of two situations. Often, the homeowner is trying to hold on to their property or will soon be facing foreclosure. The homeowner is rightfully distressed- often looking to place blame, hindering them from seeing other options. Therefore, the homeowner may not see that selling is an option. However as an agent, with an understanding of the homeowner’s mindset, a breakthrough can occur. The agent can help the homeowner to understand why a short sale is the best option. By doing this, the homeowner will see that a real estate agent is the best person to rely on for help out of such a difficult situation.
Only a real estate agent can explain the true market value to a homeowner, and, eventually, to a bank. Real estate agents are the best option for homeowners in a crisis. Saving a homeowner from a disastrous hit to their credit and many years of debt can truly help homeowners see new opportunity for a better life. With the assistance of a real estate agent during a short sale, the homeowner goes from being in a state of distress and despair, to a renewed look on life. In addition to increasing profit, real estate agents will increase the value of their business by helping homeowners to repair their credit and move forward with their lives. Due to the genuine satisfaction of the homeowner the agent has a solid referral base. Because the homeowner now feels comfortable with the agent who provided help, they will most likely use the same agent for future real estate needs and will recommend them to friends and family.
Additionally, most agents are not short sale savvy. The process is extremely delicate and can fall through without the proper know-how. By becoming an expert in short sales, an agent can network with new people in other professions, such as attorneys and lenders. Finally, as an agent, you have an advantage, with new knowledge and confidence, to tackle even today’s challenging market with ease.
Help the Industry by Easing the Foreclosure Crisis
As stated in our previous article, each foreclosure in a neighborhood has a tremendous backlash on the value of other homes in the surrounding area. The more foreclosures that occur, the worse off the real estate industry is. It can be inferred, that this has severe consequences for real estate agents.
Once an agent has written permission to negotiate with the bank on behalf of the homeowner, the short sale process can begin. Many banks, nationwide, are realizing that they have made mistakes, and are surprisingly willing to accept the consequences. In this case, an agent is offering sale of the home with a willing buyer. If a foreclosure occurs, the bank risks letting an unoccupied home sit on the market for many months while, at the same time, bringing down the value of other homes in the neighborhood (home values decrease an average of 8 to 10 percent from one foreclosure in a neighborhood).
Essentially, a foreclosure is not a successful situation for a bank. If an agent presents a complete, effective package to the lender, explains the current value of the house, and the homeowner’s financial circumstances, there is a good chance the short sale will be approved. According to the latest forecast by Housing Predictor “U.S. foreclosure crisis is worsening and the number of foreclosures will even become higher over the next few years.” Not only does this affect real estate agents, homeowners and buyers, but banks are losing money affecting the overall economy. With a forecast of even more foreclosures, lenders prefer a short sale.
By preventing foreclosures, as an agent, you will gain business and help the economy. Through keeping prices steady and the market in swing, you are protecting your business.
Higher Commissions and Increased Business
A short sale is a very time consuming process in which only the agents who are the most efficient, attentive, and knowledgeable will succeed. Because more work is required than a usual sale, the agent deserves and should ask for a higher commission. Due to the fact that agents would normally pass up the (now abundant) short sale situations, they are also passing up a higher commission. What most agents find confusing is how they will receive a higher commission, if the homeowner was previously facing foreclosure. A great way to ensure your commission is to show it on the buyer’s side of the deal.
Asking for a commission on the buyer’s end of the deal is done for a reason: when the commission is on the buyer’s end, the bank seemingly disregards it. In summation, on the final paper there is a sales price minus the buyer’s expenses including the commission, closing costs, points, and attorney’s fees. After these fees are subtracted, whatever is left goes to the bank. Because the bank is already aware of certain fees, an agent can take a bigger commission.
As mentioned earlier, another significant advantage to dealing with short sales is that they generate buyers. In today’s market, buyers are often referred to as “gold.” There are many sellers, but not enough buyers. Buyers see foreclosures and short sales as great opportunities because what they are buying is being sold for much less than what it would be sold for in the future. Additionally, buyers are under the impression that they can negotiate and purchase a home for a much lower cost because of the abundance of houses for sale. By presenting a pre-foreclosure to a buyer, it immediately sparks interest because buyers believe that a foreclosure “is a great deal.” Whether the home is listed below market value or not, the words “short sale” or “pre-foreclosure” are synonymous to “good deal.”
More frequently, buyers are searching the internet only for foreclosures and short sales. By advertising your short sales, you attract more buyers to your business. While a buyer may be interested in short sales, that shouldn’t stop an agent from showing other houses. Once an agent has built a relationship with a buyer, they can earn themselves a sale. As a bonus, in the future, they will most likely contact an agent they have a strong relationship with to sell their home.
All misconceptions about short sale are untrue for a real estate agent who is knowledgeable. Short sales present opportunities for increased commissions, added value and credibility to your real estate business, generation of leads and buyers, and an overall improvement for the real estate industry. Keep an eye out for our third, jam-packed article in this five-part series on Short Sales-Part 3: What Goes in a Short Sale Package?
About the program: Darryl Davis’ “CSSPTM: Certified Short Sale Professional” Home study designation course teaches agents and brokers how to fully understand and capitalize on the profitable and overlooked Short Sale market. Through this effective and informative learning program, you agents develop the tools and techniques to increase their sales, always receive a full commission and generate higher profits in any type of marketing condition. After completion of the program, each agent receives their designation as Certified Short Sale Professional.
To learn more and order the program, visit www.ShortSaleDesignation.com
About the author: One of the most sough-after speakers in real estate, Darryl Davis has been a Master Trainer and Advisor for the past 15 years. He has been named one of the Highest Rated Speakers at the National Association Of Realtors® Convention for the past 9 years. Darryl has directly impacted hundreds of thousands of real estate professionals with his live events, best-selling books, learning systems and coaching program.
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