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The Beauty of the Short Sale Transaction (No Folks, I’m Really Not Kidding)



melissa zavalaPlease welcome our newest writer, Melissa Zavala, Broker/Owner of Broadpoint Properties, who is a Short Sale Expeditor that has become so well known for her work in pre-foreclosure sales that her expertise is sought out by industry professionals. Melissa brings with her a fascinating background, having earned a BA and Masters in English from Northwestern University and was a Senior Editor at McDougal Littell before her work as an Educational Consultant at Harcourt. Upon leaving the educational publishing world, she chose to work with her husband in the real estate industry and has since become a recognized expert in short sales.

Melissa will be showing agents how to prepare for the changing world of real estate and you will see her passion for her work as you learn how to navigate the tricky waters of short sales. Please welcome her in comments!

Almost everyone complains about a short sale: the sellers, the buyers, and even the agents.

Wilted PlantEveryone rants about some aspect of the transaction. The biggest complaint by far is that it takes too long for the bank to generate lien holder approval. By then, buyers are tired, frustrated, and have, quite possibly, moved on. Sellers are just “over it” and possibly considering other options. Agents are extremely frustrated by the process, particularly given how much energy and work a typical short sale transaction entails.

But, I say . . . bring your short sales here! Short sales are truly a blessing in disguise. They are an ideal opportunity to polish your listing skills by taking more listings than ever before. Plus, you have the added benefits of helping others and re-familiarizing yourself with state and local contracts.

When you take a listing on a short sale transaction, the traditional seller stalls and objections are gone.

Long gone are the listing appointments where you sit on the clients’ sofa for a “chat” about the list price. A few years ago, sellers began to use the Internet to investigate the home’s value and then met you with that price when you walked in the door. Well, despite the fact that the seller may still not concur with your value, the list price is not a hot button topic any longer. Since the seller will not walk away with any money in a short sale, it is far easier for sellers and their agents to come to agreement on the list price.

Also long gone are the conversations about commission and how So-and-So with Down-the-Street Realty will be willing to accept 4% commission so that Mr. Seller can net a little more money. Since the commission is paid by the bank out of the net proceeds, this discussion of commission is now a moot point

Short sale listings are also easy to find. You’ve heard of the “six degrees of separation” theory, right? Well, almost everyone knows someone who knows someone who is having trouble making ends meet. There must be someone out there in your sphere of influence who could use your help today—someone who might need to participate in a short sale.

Don’t be that agent in the office whose attitude makes the plants wilt.

This current economic climate has created a unique opportunity for you to challenge yourself, obtain more listings, and polish your skills so that you can become a master listing agent.

While it is extremely upsetting that folks must give up their homes, there has never been a better opportunity to help someone out of a jam. If you can help the client and he or she is happy with your service, you will receive referrals for life.

What better way could there be then to start off the year with a few short sale listings?

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. Nanette Labastida

    January 15, 2010 at 12:38 am

    I am taking a short sale class in a couple of weeks precisely because of these thougths and the realization that Short Sales are possibly going to be a more plentiful in the upcoming year.
    I am currently in the middle of one as the buyers rep, and altho it has been a bit frustrating, the expertise and knowlege of the team representing the seller has been so helpful and educational it has inspired me to learn all there is to know. they have made the entire ordeal a breeze.

  2. Mike

    January 15, 2010 at 6:09 am

    You can also make your SS listing more atractive to purchasers and BAs by, I don’t know, HAVING MORE THAN ONE OR ZERO PHOTOS IN YOUR LISTING. We all know that NAR’s study a few years ago showed that listings with multiple photos get 3 times the clicks as with zero or one. A lack of photos is incredibly unprofessional. Also, if you have, “I close all of my SSs” in the listing remarks, remember that BA’s can look up your history in the MLS to see all of your failures. LAs need to treat SSs with the same professionalism that they would a traditional listing. Submit positive remarks such as, “Only the best offer will be ratified and sent to the bank.” If it walks like a duck… If you have a reputation as a profession, you have a better chance of getting offers on a SS. It’s pretty obvious.

    • Melissa Zavala

      January 16, 2010 at 7:21 pm

      Mike: In our neck of the woods, there does seem to be a trend which sometimes includes not dedicating quite as much time to such details as the photos on the MLS, and the property description on the MLS as well. As Realtors®, we all have a fiduciary obligation to our clients–not matter who they are and what their needs are. It’s always a shame when some of our colleagues do not strictly adhere to that Code of Ethics!

  3. Broker Bryant

    January 15, 2010 at 8:11 am

    Welcome to AG Melissa!! This post hits it right on the head. The beauty of short sales is that the actually listing and selling of the property is so much easier than a traditional transaction. The time delays on the back end or more than made up for on the front end.

  4. Christy Ruschel, Realtor, CDPE, SFR, HRC

    January 15, 2010 at 8:21 am

    Great Article Melissa! I hold both the CDPE Designation & the SFR. I have been doing short sales for a period of time now. Even though there are still agents that won’t even
    show them. I have been very successful in this and look forward to doing many more.
    There are some lenders that still don’t get it but for the most part they are not too bad!!
    It is diligence with them that prevails for everyone…

  5. Brad Officer - Jacksonville Real Estate

    January 15, 2010 at 10:15 am

    Completely agree Melissa! While most are turning them away or complaining about taking them, I’m actively hunting down Short Sale listings. They are more difficult, take far longer to close, but in this market it’s about as good a listing as you can get.

  6. Shar Rundio

    January 15, 2010 at 10:46 am

    Thanks for the great outlook on a fairly sore subject in the market these days, Melissa! While I’ll whine about the banks periodically, I completely agree with your points.

    I meet with a short sale mastermind group 2x/mo and just yesterday we were laughing at ourselves and how sick we were that we are actively looking for more short sales.

    From a business point of view it’s about market share. In our market 37% of the listings are short sale so if you don’t work short sales you’ve effectively eliminated 1/3 of the potential market.

    From a personal point of view there’s nothing like the feeling of helping your clients avoid foreclosure…and that’s what it’s really about for if you ask me.

    Looking forward to seeing more coming from you, Melissa!

  7. Kathy Jerzak

    January 15, 2010 at 11:04 am

    Welcome Melissa. Look forward to your posts and just entering the short sale arena. My first one was approved yesterday at 6 weeks so I am not discouraged.

  8. Janie Coffey

    January 15, 2010 at 11:08 am

    can’t wait to read more of your posts Melissa. Things are changing quite a bit in the SS realm, I am interested to read more of what you sense, hear about and experience in SS transactions.

  9. Russell Shaw

    January 15, 2010 at 11:17 am

    Welcome to AG. Excellent points. Glad you are here.

  10. ShortSaleArtisan

    January 16, 2010 at 3:18 pm

    Welcome Melissa! Great post and article! It’s funny – you can spend your time complaining about the difficulty of short sales, or get on the ground and get them DONE! 2010 will be a great year!

  11. MIssy Caulk

    January 28, 2010 at 9:37 am

    Welcome to Agent Genius, sorry I have not stopped by before. You will be a tremendous asset to AG as one who has success in short sales.
    No, I can’t say I “adore” them but I do them…have too in Michigan.

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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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