7 Tips for Short Sale Success

Secrets That Only Top Producing Successful Short Sale Agents Know

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People often ask me why I share my secret tips for short sale success with the public and other agents. It's true that I enjoy success with short sales, and I have been closing short sales for a long time. I analyze short sales, step-by-step, and I constantly strive to do a better job month after month.

What I have learned is that what I consider a short sale secret and what another person considers a secret are two different things.

For starters, maybe it's not a secret. Maybe you just don't know about it. Besides, there is plenty of business in this world to go around. I never worry that I am giving away too many secrets. I am concerned that I don't share enough short sale success stories.

Here are seven tips for short sale success:

Fine-tune the Short Sale Hardship Letter

I would never send out a client's short sale package without looking through the paperwork. Some short sale agents and negotiators believe a package is what it is, and while I would never give a client legal advice, if I spot a red flag, I will say something.

The cornerstone of every successful short sale is the hardship letter. It explains:

  • How the seller got into this mess
  • What the seller has done to try to fix the mess
  • Why nothing the seller can do will correct the situation and a short sale is the best answer

I look through the hardship letter for lack of strength or conviction.

Sometimes sellers might say, with a bit of trepidation, "We are thinking about doing a short sale". There is no maybe. A seller is either doing the short sale or not putting the home on the market. I look for signs of weakness or a place where a bank negotiator might zero in and withhold empathy. For example, the bank doesn't care if you can't afford ballet classes for your daughter.

But I do not change the intent or verbiage. I offer small suggestions to tweak and firm the hardship letter draft.

Focus on the Successful Short Sale Closing

Every short sale has a folder, a label, and identical forms. It is entered into the system as a short sale on its way to closing. Never once do I lose sight of the fact that I expect the short sale to close.

If I see an obstacle that could possibly present a snag, it is addressed in advance. My sellers qualify for a short sale because I am not afraid to ask the hard questions. Even a seller hoping to do a strategic short sale often qualifies for a short sale.

Keep the Short Sale Buyer Engaged

The first thing I do is question the short sale buyer's agent. I want to make sure the buyer is committed. My sellers and I ask the buyer's agent to give us a promise in writing that he or she will not write any other offers for the buyer while we work toward short sale approval. Buyers who do not want to wait for short sale approval should not write offers on short sales.

Maintain Your Sense of Humor

It takes a certain kind of personality to put up with the annoyances and aggravations caused by ineptness surrounding the short sale industry. I'm not just talking about AMS HAFA short sales at Bank of America.

Each of the banks, except maybe a Wachovia short sale, has unique problems and short fuses among employees.

My secret is to think of something extremely funny when I feel my blood start to boil. I am particularly attracted to the Celebrity Jeopardy skits on Saturday Night Live.

Provide Consistent Follow-up and Feedback

Buyers and their agents tend to get squirmy and skittish when they don't know what's going on. They need information about the short sale process and its progress. I set up a Google Docs file that I have attached to my website, and I post all updates every day in real time as they happen.

Negotiate the Short Sale From the Heart

Sometimes, when a bank negotiator says it's his way or the highway, you need to find a different road to drive down. There might be a trade-off. If we need to pay a fee, I might look at how I can offset that fee through a reduction elsewhere or where additional money is lurking.

I ask bank negotiators to help me put the transaction together, not to reject the file. I find I get further with honey than trying to strong-arm, but I'm not afraid to pull out the bazooka if I need it.

Prepare to Close After Short Sale Approval

Getting short sale approval is only half the battle in a short sale. In California, where I sell short sales, upon approval, buyers generally have 17 days to figure out if they want to close that short sale. They have to do due diligence and there are inspections to perform.

This is a process during which the pending sale can blow up. If it blows up, we are back to the drawing board and looking for a new buyer. We often ask for the desktop underwriting findings on the buyer at the time of receipt of the loan preapproval letter, when the offer was presented. A quick glance at the ratios and FICOs tells us whether a buyer might struggle through underwriting. The last thing I want is for a buyer to go into underwriting and never come back out.

Sometimes, I might suggest that the buyer order an appraisal and begin processing the loan prior to short sale approval. It's a risk for the buyer, but it's a calculated risk between the buyer and the buyer's agent. It is a way for the buyer to get a jump start on the loan process.

After they wait 3 to 4 months for approval, many buyers are eager to close and don't want to wait another 30 days. Some loan approval letters expire within a very short window, less than 30 days. Without an early start to the loan, it might not close if the agent can't get a short sale extension. Extensions are neither automatic nor guaranteed.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.