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Mastering the juggling act that is real estate short sales



Organization is important in a short sale transaction.

Short SalesI can’t juggle. Well, maybe I can if throwing two tennis balls up in the air counts as juggling. So, in a physical sense I can manage the two tennis balls. But, with regard to short sales and the short sale transaction, there is quite a bit more to juggle then just two tennis balls.

First off, you need to be able to coordinate the preparation of the short sale package. You need to assure that the seller has presented you with the latest pay stubs, tax returns and bank statements. You need to assure that the seller has a verifiable hardship and that this hardship has been explained in the seller’s hardship letter.

Next, you need to be able to manage the banks—to juggle the phone calls with lien holders and assure that everything is moving along quickly and efficiently.

You also need to be able to manage the buyer, the buyer’s agent and any prospective back-up buyers. That’s a lot more than many of us are accustomed to managing, and much more than we managed in real estate transactions from the days of yore (read: 2006).

Lastly, we need to be up to date on all of the latest news and government policies with regard to short sales. There’s the Mortgage Debt Relief Act of 2007; there’s HAFA; there are also Fannie Mae and Freddie Mac. In addition, each and every lien holder has its own submission policies and procedures for short sales.

That’s a lot more than two tennis balls, isn’t it?

Short Sale Preparation Homework Assignment

So, here is what you need to do: you need to take a breath, slow down, and make a list. First, make a list of all of the items you will need to collect from your seller. Make a list of all of the documents that you will need your seller to sign. Make a list of all of the questions that you will need to ask your seller and all of the due diligence activities that you will need to complete prior to the listing appointment.

Then, make another list, chart, or communication record for dealing with the banks. And, make a third list for the buyer’s agent. Include in this list all of the items that you may need to include in your counter offer as well as any information that you will need to collect from the buyer for the short sale lender. (For example, the Equator system requires some specific information about the buyer. And, most lien holders would like to see a pre-approval letter from the buyer and/or proof of funds.)

I can pretty much guarantee that if you make these lists (do this homework) that it will help you to master the short sale transaction and make the whole process move along more quickly and efficiently for all parties. It will be just like juggling six tennis balls, and not dropping a single one.

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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  1. Joe Manausa

    September 21, 2010 at 7:18 am

    Hey Melissa, this is a great guide. It’s funny, there are many of us who now specialize in short sales who once uttered “I don’t do short sales.” The extra paperwork and bureaucracy was all it took to chase many of us away when short sales were a tiny minority of the housing market.

    The key for us is to (as you said) “take a deep breath” and know that you cannot necessarily hurry things along, rather you can keep everything organized and push everybody towards the objective.

  2. Paula Henry

    September 21, 2010 at 9:40 am

    Melissa – there is so much more transactional work with a short sale. I use Short Sale Commander and have an assistant to manage my short sales. Still, every day, there seems to be a new litany of obstacles. New documents, updated documents and 24 hour deadlines for getting the newest documents required, MI company approval, etc.

    This week, I have a bank who says the MI company insists the seller sign a $25,000 promissory note or no short sale. With a $25,000 promissory note, the seller will be paying more to short sale than his current balance.

    Sometimes, even the best prepared file can be put on hold or rejected because of bank requirements like this.

  3. Rob McCance

    September 21, 2010 at 11:31 am


    I’m sure it’s a great article and judging by the quick skim I just did, I have no doubt of that.

    But I just hate short sales so much that I can’t read another SS article. People should just ignore short sales until they turn into their slightly less irritating cousin, the foreclosure.

    Then, maybe, but still full of BS, depending on which bank.

    On the buy side, if you are attempting short sales, it means you have a lot of time on your hands and NON ideal buyers. Buyers with timelines of infinity-to-never are not good business.

    On the listing side, seriously, why bother. Who wants to make minimum wage?

    Agents everywhere should just ignore short sales. Refuse to show them and refuse to list them. Then when they become foreclosures, we can get re-engaged.

    Just my two,


  4. Short Sale Artisan

    September 21, 2010 at 12:00 pm

    Interesting comments Rob. I wonder, where are you located? Comments like this: “Agents everywhere should just ignore short sales. Refuse to show them and refuse to list them. Then when they become foreclosures, we can get re-engaged.”

    I find quite interesting. Short Sales today are here to stay, at least for the next few years in strong numbers. In some markets over half of the inventory qualifiies for short sales. I think for a real estate agent to ignore the overwhelming pressure of the real estate market means you are cutting off 50% or more of your potential business.

    That’s not to say short sales aren’t challenging. I agree they are in almost all cases more tedious, and often much more tedious, than a standard sale or even a foreclosure. But that’s why this article is timely; because having a process in place (whether its on a notecard or a full fledged software system) is important. Being efficient in short sales is almost necessary to be succesful in the real estate market today, unless you are in a few isolated pockets of the country where short sales aren’t a huge part of the market.

    NAR basically agrees that agents need to be proficient in short sales as well.

    • Rob McCance

      September 21, 2010 at 12:10 pm

      Ha ha! A pro-short sale comment from someone called the Short Sale Artisan. I’m surprised your comment cleared moderation with your “name” being Short Sale Artisan.


      I’m in the Atlanta metro. We have our share. We also have our share of non distressed.

      I only work with well qualified serious clients (mostly buyers) with actual timelines and needs for a home. Short sales won’t work for these clients.

      Short sales would not be here “to stay” if they never were invented in the first place and homes just foreclosed as they should.

      When payments can be made on a loan, the loan and the collateral should go back to the bank. All this irritating nonense in between can just go away as far as I’m concerned.

      Your comment on the NAR, I will make NO comment on other than laughable.

      Just one man’s delio, buddy.

      • Rob McCance

        September 21, 2010 at 12:31 pm

        “When payments can be made on a loan” should of course read “When payments CAN’T be made on a loan”

        But I can’t figure out how to edit an existing post.

      • Short Sale Artisan

        September 21, 2010 at 7:05 pm

        I’m surprised you have some pent up animosity. I’ve commented on Melissa’s blog posts fairly often (they are after all pretty good articles).

        Short sales were “invented” by the banks as way for them to mitigate losses. For everyone involved in a short sale transaction, the result is usually positive. The homeowner saves some credit; the bank minimizes their loss (vs. foreclosure, and on average save a LOT compared to a foreclosure) multiply that by the quantity of affected volume and you are talking big numbers.

        Short sales also turn volume for banks, clearing inventory way faster than foreclosures. Anyway, despite your somewhat antagonistic comments, I think short sales play an important part of the market today and “ignoring” them just reduces your available workload by a lot. If you can make do without it, then I’m happy for you 🙂 but in many areas of the country realtors who aren’t proficient in short sales are, well, no longer realtors.

        Re: “When payments can be made on a loan, the loan and the collateral should go back to the bank. All this irritating nonsense in between can just go away as far as I’m concerned.” I think you are missing the point. In a foreclosure the bank has to take ownership of the house and then act as a seller. That is not a position the bank wants to be in. Nor do they want to sit on inventory for that long. It costs them money.

        For what its worth, the banks (even the dread BofA) have made some significant strides in working to improve their processes. It’s still far from perfect, but certainly better than it was even six months ago.

        -Nick Reuter

        • Rob McCance

          September 22, 2010 at 12:12 am

          “I’m surprised you have some pent up animosity.”

          There’s none of that here. I gave my opinion of a short sale. I don’t think anyone LIKES a short sale. What’s the big surprise?

          “Short sales were “invented” by the banks as way for them to mitigate losses.”

          I don’t profess to be a short sale historian but I seriously doubt the banks said, let’s set up a system to take less than the loan amount as a payoff for our loans. We’ll call it a short sale and spread it to the world.

          Look, your agenda is super clear. You are hanging at least one of your business ideas on the short sale. That’s cool. Nice site btw.

          I don’t want to get into it with you because you are probably very pro ‘this-whole-process,’ and frankly I really don’t care that much about it.

          Other than, I think the whole thing is messy, based on a lot of failures, and I don’t care to make it part of MY business.

          One thing though – if a bank gets no payments for 12 months, then accepts a short sale for 70% of the loan, how is this so different from getting no payments for 2-3 months, foreclosing, then selling for 70% of the loan amount. The latter being a foreclosure.

          Seems to me that unless the short sale is accepted while the loan is current, which believe no bank will do, then at a minimum it’s a wash and in many cases the short sale would cost the bank more. In GA, a non-judicial foreclosure state, the bank can foreclose in 60 days, so the bank only misses two payments.

          Again, don’t waste a lot of time educating me. I’m still not going to do short sales.


          • Short Sale Artisan

            September 22, 2010 at 9:12 am

            No problem 🙂

            I’ll be the first to say they aren’t for everyone. I was just pointing out that it’s not just me. There are def. a lot of real estate agents whose success hinges on their ability to do a short sale, and do it in the most efficient manner possible and the market is overloaded with them today. I don’t think that’s going to last forever (obviously) but probably will for a few years.

            I’ll keep my ear to the ground to see if your boycott idea catches wind! 😉


  5. Homes In Pasadena

    October 6, 2010 at 9:35 am

    Great tips. I have found that no matter how well you ‘think’ you are prepared and how much you plan ahead, something always pops up. Each bank/situation always requires at least more one item that you did not plan for.

    With a short sale I always take a deep breath and make sure I have plenty of ‘patience’. And like Joe comments above, “push everybody towards the objective”.

    Thanks for the article – Steven

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Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!



magic eight ball

magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:



short sales standoff

short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.



short sales

short sale approval

Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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