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Taking a Short Sale Listing: ‘To Be or Not to Be?’



Is Your Short Sale Listing Meant to Be?

shakespeareRemember high school? Remember Prince Hamlet? Remember the famous soliloquy he delivers about the fact that his situation is so wretched that he may be better off elsewhere? While high school was a long time ago for many of us, you may remember Prince Hamlet and you may be playing that soliloquy over many times if you take “the wrong” short sale listing.

You see, while it is wonderful to use this challenging and unique real estate market in order to become a master listing agent and take more listings than ever before, there is a certain kind of short sale listing that is just not meant to be.

In my opinion (and this blog post expresses only MY opinion), there are three types of short sale listings that are just not an effective use of an agent’s time, and are not even worth the value of the printed paper contract.

The first type of short sale listing that is just not meant to be includes an uncooperative seller. Any seller who is not willing to provide the listing agent with all of the required documentation to submit to the bank as part of the short sale package would be considered uncooperative. A seller needs to be fully invested in the process and must understand that many lending institutions will not even consider a short sale without a complete package of seller documentation.

Uncooperative seller = listing not meant to be. Why list a short sale that the bank is not even going to consider?

The second type of short sale listing that is just not meant to be is one that has an auction date that is too close for comfort. When a seller calls you to list a property on Monday and casually mentions that the auction date is scheduled for Friday of the very same week, you will probably not have enough time to do your job. In order to postpone an auction, most banks require a complete short sale package (including a purchase contract) and this would be hard to put together in just a few days. Additionally, certain mortgage lenders will not even entertain a short sale so close to the auction date.

Auction date too close for comfort = listing not meant to be. Why set yourself up for failure and set your seller up for further disappointment?

The third type of short sale listing that is just not meant to be is the one with too many liens against the property and/or the seller. I cannot underscore enough how important it is to run a preliminary title report and have the title company run the seller’s names in order to ascertain the types of outstanding liens against the property and/or the seller. If the only liens that come up are the mortgage liens and property tax liens, than all is well. However, if there are other liens such as child support liens, abstracts of judgment, and IRS tax liens, than this is going to be a tough short sale to close—unless the seller is willing to clear all of the non-institutional liens prior to closing.

Too many non-institutional liens = listing not meant to be. Why waste three months negotiating a short sale only to learn at the eleventh hour that is it not going to close—due to the non-institutional liens?

Working short sales has many benefits. Not only is it a great niche in this real estate market but it is also a great way to help sellers and obtain referrals for life. But, no matter what, you need to do your homework!

Do not take short sale listings that are not meant to be, otherwise you may feel like Prince Hamlet and wonder whether it is all worth it.

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. LesleyLambert

    March 9, 2010 at 8:58 am

    Great advice here!

  2. Chuck G

    March 9, 2010 at 11:10 am


    What about a 4th category — Sellers who haven’t demonstrated the appropriate “hardship” required for the bank to consider a short sale? I’m hearing more stories about people who bought homes at the peak in 2005 and are now trying to sell their house short only because they’re underwater and they don’t want to make payments anymore. They’re employed, and their credit is fine — never missed a payment.

    From my understanding, the banks won’t even look at this situation. So it’s another “short sale” to avoid. Your thoughts?


    • Melissa Zavala

      March 12, 2010 at 8:17 pm

      Chuck: I agree with you. This post could have so many categories! A non-hardship might be a great one to avoid. With so many real hardships out there right now, it should be a little easier to say ‘no’.

  3. Ted Mackel

    March 9, 2010 at 11:34 am


    Great Article. I wrote about the the process from the selling side

    There are too many agents just taking these listing without doing the evaluations. Yesterday on Trulia an agent advised a person inquiring about short selling their home “Just put the home on the market way below area values and you’ll get multiple offers” This stuff drives me nuts. What few take time to pay attention too is that the lender has or is going to send out for 2-3 BPOs and either an interior appraisal or drive by appraisal. The lender knows market value and will not agree to a short sale with a purchase price significantly below market value.

    • Melissa Zavala

      March 12, 2010 at 8:18 pm

      Ted: You will get no argument from me on this one!

  4. Mike

    March 9, 2010 at 1:28 pm

    I agree with Chuck D. That may be the #1 reason to avoid the listing. I have a cut n paste with about 6 or 8 questions, when emailing a SS listing agent. This is the first question, along with 2 trusts or one, who are the lenders, will you change the status to UC within 48 hours, and keep it UC, (I make the offer contingent on it), among other questions.
    I usually get no response, or, “already UC”, even though it is still listed.
    There are ways to know if a SS LA can get it done. First, if there is only 1 photo, and the listing itself is insufficiently completed, that is a bad sign. No return call or email. The most important, and I do this prior to even inquirering, is to look up the track record in the MLS. Go back 1 year, if they have 6 solds, and 30 expireds and withdrawns. Run, run away. IMHO, of course.

    • Melissa Zavala

      March 12, 2010 at 8:20 pm

      Someone recently suggested the MLS tactic to me in a previous blog post comment. Was it you? It is certainly a great way to pre-qualify an agent. You would not want to get your buyer or your seller into a 5 month deal that isn’t going to close. Now, that would be very unfortunate!

  5. Joe Loomer

    March 9, 2010 at 7:25 pm

    Chuck G makes an excellent post, but the fourth category should be:

    Sellers who’s primary or secondary liens are held by Bank of America – truly the epitome of “just not meant to be.” I have an agent on month seven of working a short sale with BOA holding the SECOND lien (and a very small one at that). Nightmare.

    Navy Chief, Navy Pride

    • Short Sale Artisan

      March 10, 2010 at 9:24 am

      I’m hearing through the grapevine that things at BofA are *slowly* but *surely* improving. I know they recently made some hires in their short sale division to try and streamline and improve their processes. It seems like the “backlash” is very slowly receding.

      • Melissa Zavala

        March 12, 2010 at 8:21 pm

        Bank of America is improving a little bit. But, I could NOT say that they are turning over approvals like dice at a craps game.

  6. Melissa Zavala

    March 9, 2010 at 8:06 pm

    Is the short sale listing meant to be? Here are a few tips on how to get 'em closed:

  7. Realty Infusion

    March 9, 2010 at 8:37 pm

    RT @MelissaZavala: Is the short sale listing meant to be? Here are a few tips on how to get 'em closed:

  8. Nashville Grant

    March 9, 2010 at 9:51 pm

    Quite honestly and frankly, I am VERY tired of agents taking short sale listings who have no idea how to work a short sale, especially from the lien holder’s perspective. I have seen way too many sellers receive the complete disservice of an under educated listing agent who is overeager to help, but under qualified to do so. Let the short sale specialists do their jobs.

  9. Short Sale Artisan

    March 10, 2010 at 9:22 am

    Another great article Melissa. I think you are absolutely correct. Perhaps another good one to add to the list is the one where the case to the bank for accepting the short sale just doesn’t have enough “breathing room”.

    In other words, a situation where the bank won’t be saving enough or their benefit isn’t significant enough (vs. foreclosing) to make it clear to them to accept the short sale offer. Then you can be stuck in a situation trying to convince the bank the short sale is the best way to proceed; when the facts around the circumstance should stand alone to make that case all by themselves.

    Great points!

  10. Bruce

    March 14, 2010 at 9:03 pm

    Great information provided in these posts.

    We should all be diligent in researching SS listings as well as the agents that espouse to be “Short Sale Experts”. We can save our buyers many headaches and lost opportunities.

    I find it unusual that a listing agent would allow the buyers agent to contact the lender and negotiate on behalf of seller. Strange but true……

  11. Kieran Loughman

    March 16, 2010 at 2:02 pm

    Hi Melissa!
    Thank you and I believe you asre correct. I had one that I worked on for a long time that was turned down because the lender didn’t believe the hardship letter.

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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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