Real Estate Agents: Seven Reasons to Outsource Short Sale Negotiations

As a Realtor®, how do you help sellers who are over-leveraged on their mortgage? Do you refer them to someone else – anyone else – or try to find a buyer before the sheriff’s sale? Did you ever help anyone work with their lender instead? It’s not the easiest transaction you’ll ever deal with, is it?

The best solution to selling problem properties is often a short sale, and the best solution to dealing with a short sale is always to outsource the details to someone who specializes in short sale negotiations. Why? No, let me ask you: Why not?

After speaking with many real estate agents about this, I found several objections being thrown at me. I’ll share seven of them with you, and then I’ll show you how to think about them a little differently.

“I don’t have time to keep track of the paperwork.” It’s true – negotiating a short sale requires timely information as to the status of the transaction. That’s okay. Your local short sale expert has access to special software programs that manage status updates. Go to www.realeflow.com and check it out. All you have to do is check the status, update the sellers, and remind them that there will be periods of time where it looks like nothing is happening, but where the file is actually moving closer and closer to a resolution on the loss mitigator’s desk.

“My short sale packages only get buried in some loss mitigator’s to-do pile.” That can be exactly what happens when you’re working with a loss mitigator who has scores of files on his desk. Loss mitigators prefer working on fully assembled short sale packages, and will put off handling and dealing with disorganized, incomplete or poorly and improperly submitted short sale packages. Move your seller’s file to the top of that pile by using a competent and proven investor or loss mitigation negotiation company who will know what to do.

“It is a breach of fiduciary duty to involve an investor who is only going to buy and resell the property for a profit.” There is no detriment to the seller here if the resale price is less than the original indebtedness owned by the seller in distress or default, and the market itself will virtually guarantee that. The investor is only being compensated for their time and effort in negotiating the short sale, and there is a greater likelihood of success in getting that short sale approved if the negotiator understands how to overcome any lender’s concerns or objections regarding an approval.

“The seller might feel that they could have gotten more from the house without involving a third party.” This is simply a misunderstanding on the part of the seller, and it needs to be corrected. First, buyers won’t pay more than the current market value of a property. The only way to sell the property before the lender does it for them is a short sale and, when that happens, the lender will make sure that the homeowner who is in distress or default is not going to receive any of the sale proceeds irrespective of whether the property sells for $20,000 or $30,000 more or less.

“Using an investor results in a higher deficiency judgment for the seller.” This may initially seem to have merit as a reason why Realtors® should not deal with investors on short sales. However, a deeper examination reveals that such a suggestion is based upon a combination of facts that rarely occur. Furthermore, when a professional short sale negotiator is involved, a lender is more likely to accept the payoff as payment in full, which actually decreases the deficiency. Finally, deficiency issues go away if the homeowner has already chosen to stay in the property longer by filing a Chapter 7 bankruptcy.

“Buyers don’t want to wait for a short sale to be approved before closing on the property.” This is generally true. The likelihood of an end buyer making a high offer early in the process and patiently waiting all the months necessary to negotiate the short sale is unrealistic. However, one of two things may happen to make this a nonissue. The first scenario is that the investor may already have a buyer. That alone takes much of the work off your plate. The second scenario is that, when a potential buyer is interested in the property, they will be encouraged by the involvement of a professional short sale negotiator who can give the short sale a greater chance of being approved and who will take care of the property until they close.
 
“If the negotiation fails, the investor is going to find a way to profit anyway.” It is often not until the end of the short sale negotiation process that the homeowner and the other parties involved learn that the lender is adamant about refusing to accept any short sale as payment in full, and instead, the lender is insisting on a deficiency. In these rare instances, ethical investors have been known to step out the middle and let the house get sold to the higher-paying end buyer. Just make sure that the investor agrees to do that ahead of time.

You are already selective about handling only those real estate transactions for which you are properly trained, whether it be residential, commercial, new construction, or condominiums. The same should apply to working with homeowners who are in default, distress or foreclosure. Serve the seller best by working with people who are trained to handle problem properties.