When there are adverse conditions, such as the market that we are currently experiencing, we often have to find new ways to navigate through these conditions. Short Sales, (where the lender agrees to allow the property that they have loaned against to be sold for less than the loan amount and release of their interest in on the title, resulting in some loan forgiveness or at least additional time to pay the deficient amount), have become a leading way for many sellers to survive and move on in this market.There are a number of challenges and barriers with this type of transaction that require abundant patience, persistence and perseverance on the part of everyone involved. One of the major challenges is to persuade the lender to agree to a Short Sale in the first place. To achieve this, the lender must be convinced that it is to their benefit to agree to to a short sale rather than foreclose on the property. Also, unless you have a buyer in hand, you will have to convince the lender of the viability of the marketing plan on the property.
Below are two lists that will help you convince a lender to agree to this plan of action. The first list shows the benefits of a Short Sale vs. Foreclosure for the lender. This should help you persuade the lender to go the Short Sale direction.
SHORT SALE VS. FORECLOSURE
TEN CONSIDERATIONS
FORECLOSURE
- More legal costs
- Recovery of lesser amount
- More non-performing loans
- Higher reserve requirements
- Possible negative impact on salability of existing loans to secondary market
- More R.E.O. marketing costs
- Negative perception by public
- Possible extensive property repairs
- Marketing challenge of extensive inventory
Likely lower appraisal value can have negative impact on neighborhood & community
SHORT SALE
- Fewer legal costs
- Greater recovery ratio
- Fewer non-performing loans
- Lower reserves
- Existing loans more marketable to secondary market
- Fewer R.E.O. marketing costs
- Fewer repairs likely
- Greater marketability of property
- Likely greater value from broker price opinion
- Less negative impact on neighborhood
In addition to sharing this list with the lender, it will also be worth your while to highlight special steps that will be taken to market the property. Presenting these ideas will significantly differentiate and distinguish you from.
TEN SHORT SALE MARKETING STEPS
- Promote property as a short-sale property on the MLS. (Review agency issues with seller.)
- Identify and target top-producing agents who specialize in working with investors.
- Have an "Agent Open House" promoting the property as a short sale opportunity and invite the target agents.
- Promote the property in publications that cater to different cultural/ethnic groups. (Be sure to observe the Fair Housing advertising laws.)
- Target foreign investors by contacting consular offices.
- Contact boutique brokers associated with the EUROPEAN REAL ESTATE NETWORK.
- Approach banks and private trust companies that have extensive foreign clientele.
- Canvass the neighborhood about the property being offered on a short sale.
- Have an Open House highlighting the home is available on a short sale basis.
- Invite the neighbors, their friends and relatives to this Open House event.
