The paradigm has shifted as short sales and foreclosures dominate many markets, prompting REALTORS® to sharpen their skills. Such transactions differ from the average, normal real estate transaction, they note.
In a short sales transaction, both agent and seller need to be pro-active, and above all, all parties need to be very patient, Katherine Handley, senior vice president of Old Republic Title Company, shared her experiences with short sales at a recent Silicon Valley Association of REALTORS® tour meeting.
A short sale is a transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would in a foreclosure.
Homeowners considering a short sale must generally meet three criteria: they must be behind on their payments; be able to prove a legitimate hardship; and have little or no equity in their home. As sellers, they need to be very forthright and timely in submitting the required document package, which will contain all financial information – tax returns, bank statements, W-2s. They will also need to tell all in a hardship letter, said Handley. The agent, in turn, should present documents that support correct pricing of the home. Then it could take one to four weeks before a lender downloads the package and assigns a loan mitigation officer to the case, and another four to six weeks to review the paperwork.
At a recent local REALTOR® tour meeting in Palo Alto, San Jose real estate attorney Jeffrey Hare told members of the local trade association that problems arise when properties have two or even three loans against them and whether these are recourse or nonrecourse loans. Many homeowners don't realize if they modify or refinance a loan since purchasing their home, the loan becomes a recourse loan and they may still be liable for the "losses absorbed" by the lender in the transaction. He explained in a short sale or foreclosure, the debt of a recourse loan does not go away and the debtor can still be sued.
Agents also need to understand where the short sale is in the foreclosure process. Once a default is recorded, there is a 90-day window before foreclosure. If the seller waits too long to start the short sale process, it may be too late to negotiate and the home may go directly into foreclosure.
Most short sales take three to six months to close. "It's important that the seller and the buyer's agent understand and are willing to hang on," Handley said.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.