By Gee Dunsten
This is the classic short-sale lament of our time and for good reason—short sales have been a difficult and frustrating process for all involved: sellers, buyers, agents and banks. But the pendulum is swinging and short sales are moving—now is the time to reinvest in your short-sale strategy.
There are several key reasons why things are starting to change in the short sale arena. First, the facts still speak for themselves. Distressed properties account for approximately 30 percent of the U.S. residential real estate market. While the percentage of homes actually underwater is 15.8 percent, 49 percent of today’s homeowners believe their home is underwater. And an estimated two million homes are currently in the foreclosure pipeline.
Second, and extremely important to note, is the fact that lenders are finally realizing that short sales are really the lesser evil. Loan modifications are few and far between—not because the lender doesn’t want to accommodate them, but because most of these loans have been packaged and sold three or four times over. The rate of return is so small that it’s just not worth it. And, of course, foreclosure is the ultimate fail for the lender.
Third, there is increased pressure on lenders to start moving short sales through the pipeline coming directly from Washington.
The bottom line is that we’re finally reaching some important consensus on short sales. The major lenders/servicers, as well as the investors, Fannie Mae, Freddie Mac, HUD, etc., now agree that keeping homeowners in their homes by facilitating a short sale is a much better alternative than a foreclosure for the homeowner, servicers, investors and neighborhoods involved.
The timing couldn’t be better for this turning of the tide. There is still a huge supply of short sales on the market, no matter what market you’re talking about.
The “road map” or foundation to a successful short sale outcome starts with understanding the four qualifications for a short sale and then determining whether the client is a good candidate or not. Those four qualifications are:
1. The homeowner must need to sell, not want to sell.
2. The homeowners must be experiencing a genuine hardship that has made a significant change in their life since they took out the loan, which now prevents them from paying the mortgage, such as:
• Loss of job or employment
• Business failure
• Severe illness
• Major health expense
• Legal separation
• Damage to the property
• Job relocation
• Military service
• Death of spouse or wage earner
• Death of non-wage earner
• Property insurance or tax increase
• Payment increase or mortgage adjustment
3. It must be clear that the homeowner does not have assets to pay off the mortgage.
4. It must be evident that the homeowner is having or will soon have a financial short fall.
Once you have established that a client meets the above criteria for a short sale, the next steps are all about details, from securing the right information from the seller to successfully translating that information to the lender. We’ll explore this in detail next month. When done correctly, you’ll be surprised at how lucrative this segment has become.
George “Gee” Dunsten, president of Gee Dunsten Seminars, Inc., has been a real estate agent and broker/owner for almost 40 years.
Copyright© 2013 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.
Content on this website is copyrighted and may not be redistributed without express written permission from RISMedia. Access to RISMedia archives and thousands of articles like this, as well as consumer real estate videos, are available through RISMedia's REsource Licensed Content Solutions. Offering the industry’s most comprehensive and affordable content packages. Click here to learn more! http://resource.rismedia.com