Short sale listings need to go through a pre-qualification process.
I had an agent from Riverside County contact me the other day about his short sale listing. He seems to be a pretty detail-oriented guy, and he had some really good questions. He was actually taking the time to study the property and the preliminary title report before signing the listing agreement and putting that property on the MLS.
Some agents are so excited to take a short sale listing that they do not take the time to qualify that listing and to assure that it is going to make for a viable short sale transaction. After all, if we pre-qualify our buyers, why not pre-qualify the sellers and the property as well?
Here are a few things that you should do in order to “qualify” your short sale listing:
On or around the time of the first consultation with the seller, obtain a copy of the preliminary title report or property profile. These documents will reveal how many liens exist against the property. You will also learn about the nature of those liens. All liens need to be satisfied at settlement.
In most short sale transactions, institutional lien holders will only “throw a bone” to other institutional lien holders in junior positions. So, if there is a lien against the property placed by Mr. Seller’s cousin, that lien may need to be satisfied by Mr. Seller, and not by the first lien holder. Is Mr. Seller going to be able to resolve the matter with his cousin? The answer to that question will help you to qualify the short sale listing.
The preliminary title report will also reveal whether the foreclosure proceedings have begun. Foreclosure time frames and procedures vary from state to state. If foreclosure proceedings have begun, then you need to be mindful of those dates when taking the short sale listing. For example, if the preliminary title report shows an auction scheduled for next Monday, the property in question may not be a viable short sale listing.
A third way to qualify the short sale listing is to qualify the seller. Is the seller truly interested in participating in the short sale? Will she or he provide you with all of the documentation that you need in order to get the short sale approved? If the seller is reluctant to share information from tax returns and bank statements with his or her mortgage lenders, it is going to be tough to get the short sale approved. Lien holders have very strict guidelines as to what they require in order to consider a property for short sale. If the seller is not willing to adhere to those guidelines and submit the required documentation, then you may not want to “pre-qualify” this short sale listing.
There are a number of other ways that you can qualify your short sale listing. Start with these, and I’ll share a few more in the coming days.
Are you still on the fence about taking a short sale listing? Think again. Read here to learn more about the beauty of the short sale transaction.