How to Avoid the Short Sale Storm
When a short sale prospect calls me about a potential short sale, I need to identify whether it’s a go or a no and I do that by investigating a number of items even before attending the listing appointment.
Title Report. Before going out to any appointment, I review either a property profile or a copy of the preliminary title report. I seek to understand how many liens there are against the property (and for how much) as well as whether the lien holders have begun any foreclosure activity.
Liens on the Property. If there is more than one lien against the property, I then go on to identify whether or not the first will be paid in full or whether the transaction will only be a short sale to the junior lien holder. It is not so uncommon for a first lien holder to be paid in full and for the short sale to only be negotiated for the second lien holder.* In order to determine this, you may need to request mortgage statements from the seller.
Foreclosure Activity. Another thing to look at is whether the property is in active foreclosure. Is the seller just five days from foreclosure auction and calling you as a last stitch effort to stay in his/her home for a little while longer? Or, is there going to be plenty of time to list, advertise, and sell the subject property to a ready, willing, and able buyer? When a property is already in active foreclosure, it’s a race to the finish. Which will arrive first—the short sale closing or the auction date?
Maybe it’s just me, but the bottom line is that if I am going to dedicate hours and hours to a cause, I want to know what I am in for. Not only do I want to see if I can close the deal successfully, but I don’t want to provide the borrower with false hope about what may lie ahead.
Short sales are never total smooth sailing. Personally, I prefer a few rough patches to a full-blown hurricane. What say you?
*As a side note, note that there may also be liens against one of the property owners. These liens may not show up on the title report, but may need to be satisfied in order to see a successful closing.