Short Sales Demystified

Regardless of the reasons that are used to explain the current mortgage crisis in the US, the reality that we are faced with is that more homeowners are in financial distress due to real estate than at any other time in the history of residential real estate.

It is my sincere belief that one thing remains the same for the majority of all homeowners: the solution for an individual wanting to sell a property is to seek the guidance, counsel and services of an educated licensed real estate agent.

Distressed homeowners need an advocate that will act in their best interest and help them find the best solution to the financial crisis they are facing. The individual best suited for this role is the well informed agent.

I decided to accept this task and work with distressed homeowners along with my normal real estate business. I believe this can be the most rewarding work I’ll do in real estate: rewarding not only in a financial sense but more importantly as a person and as a professional.

I committed myself to learn what it takes to succeed in this category and became a Certified Distressed Property Expert and a member of the Distressed Property Institute. I have chosen to elevate myself above agents with little or no formal training in this category and set myself apart in my marketplace.

What is a short sale? That’s when the lender will agree to take less than the payoff of the mortgage to get the property sold. The seller is still on title and comes to the closing but walks away with no money but lots of peace of mind. Also, the bank pays the real estate commission and not the seller. If a property is not sold short, it goes into foreclosure. Mortgage banks are in the business of loaning money and that’s how they make money. They do not want to be in the real estate business. A short sale can be a win-win for everyone; the seller, the buyer and the bank. The average cost to a bank for a foreclosure in this country is $58,000. Whereas, with a short sale, the average cost to the bank is around $22,000. Plus, when a property is foreclosed upon, the bank has to put up 2-6 times the payoff in reserve. That affects their ability to make other loans as well as their trading position with the Federal Reserve Bank. Bottom line COSTLY! With a short sale, it just shows that some payments were late. Also, with a foreclosure, the owner’s credit is ruined for 7-10 years. It’s just as bad as a bankruptcy. The owner will get hit at about 250 points on their credit report. Whereas with a short sale, their credit is affected for 3-6 months and only 40-80 points on their report. These are just a few reasons why sellers and banks prefer short sales to foreclosures.

The average short sale only gets to closing 12% of the time. With my training (and experience) I can get to closing aprox. 90% of the time.

I just heard shocking news. Last week on July 7^th, 2009 at the courthouse steps in Cobb County, GA. alone, there were 1300 foreclosed homes auctioned. That’s the largest in the county’s history.

The average distressed homeowner doesn’t know they have options. I wish I could have gotten to just 10% of those Cobb County homeowners. That would have made my year!

In any given market there are always a certain percentage of homes or homeowners who are distressed. The reasons for distress are many. According to most investor publications and common knowledge the percentage is somewhere around 1 to3% in a healthy market. Recent changes in the Real Estate market have pushed that number many times higher. Add to that those owners that may be forced to relocate, lost their job, are involved in a divorce, many have had a death in the family, know they owe more than their home is worth and many other reasons for distress and the percent gets higher. In Georgia it’s 1 in 8. Currently, 40% of listed properties are in some stage of the foreclosure process and the number continues to grow.

In a normal real estate market, agents would dismiss short sold and foreclosure properties they weren’t relative because the percentage was so small that we called it a special circumstance or a variance and did not include those properties when we were putting together a CMA (Comparative Market Analysis) for a listing. Now, the percentage is so high, its common place that most of the time we include those in the CMA. This puts a traditional seller at a huge competitive disadvantage if they need to sell their home. The distressed market has violently collided with the traditional real estate market and the unprepared agents are caught off guard and lose opportunities to help their clients.

Because this is a new real estate market, I now intertwine my first phone call with a potential listing client by asking if they are current on their mortgage. Owners are embarrassed and have possibly waited to long to call an agent. Nothing is more uncomfortable for an agent than showing up to what was supposed to be a normal listing appointment and discovering that the homeowner owes more than their property is worth or is behind on their mortgage. I need to be well prepared to consult and deal with a seller who is a few months behind so I can develop the best strategy for the circumstance.

I am excited about the opportunity to be an advocate for families that need a professional, knowledgeable agent who can help them with the issue they are facing.

Just in case you’re curious about where the housing market in Atlanta is right now, the single family segment of Metro Atlanta has stabilized. We bottomed out 1^st Quarter of 2009. Meaning, the property values have stopped dropping. However, the condo/townhome market still has a ways to go. We’ve got a little less inventory out there but still way too much for buyers to choose from. Most economists are telling us that because housing is the largest industry in the US, if we can get housing moving again, we’ll see the economy began to recover.

So, if you or someone you know has been trying to time the market to buy, they better get busy and soon. We know that 50% of buyers will be 1^st time home buyers. With the $8000 US federal tax credit and the GA $1,800 credit ($600 per year for 3 years) for 1^st time homebuyers and buyers who haven’t owned in three years and…with interest rates trying to climb, but still at all time lows, buyers will never in their life times see a better time to buy. The planets are lined up. The average cost of a home in the US right now is $155,000 (In metro Atlanta it’s $200,000). It’s like owning your house for free the 1^st year and like paying 11 instead of 12 monthly payments for the next 3 years.

Also, if you or anyone you know  has a distressed property situation, please let me help. My goal is: No more foreclosures on my watch.

If you or someone you know are not in Georgia, I can still help. I network with other Realtors® around the country and can put you in contact with a quality CDPE in that area who will be happy to help.

Regardless of the reasons that are used to explain the current mortgage crisis in the US, the reality that we are faced with is that more homeowners are in financial distress due to real estate than at any other time in the history of residential real estate.

It is my sincere belief that one thing remains the same for the majority of all homeowners: the solution for an individual wanting to sell a property is to seek the guidance, counsel and services of an educated licensed real estate agent.

Distressed homeowners need an advocate that will act in their best interest and help them find the best solution to the financial crisis they are facing. The individual best suited for this role is the well informed agent.

I decided to accept this task and work with distressed homeowners along with my normal real estate business. I believe this can be the most rewarding work I’ll do in real estate: rewarding not only in a financial sense but more importantly as a person and as a professional.

I committed myself to learn what it takes to succeed in this category and became a Certified Distressed Property Expert and a member of the Distressed Property Institute. I have chosen to elevate myself above agents with little or no formal training in this category and set myself apart in my marketplace.

What is a short sale? That’s when the lender will agree to take less than the payoff of the mortgage to get the property sold. The seller is still on title and comes to the closing but walks away with no money but lots of peace of mind. Also, the bank pays the real estate commission and not the seller. If a property is not sold short, it goes into foreclosure. Mortgage banks are in the business of loaning money and that’s how they make money. They do not want to be in the real estate business. A short sale can be a win-win for everyone; the seller, the buyer and the bank. The average cost to a bank for a foreclosure in this country is $58,000. Whereas, with a short sale, the average cost to the bank is around $22,000. Plus, when a property is foreclosed upon, the bank has to put up 2-6 times the payoff in reserve. That affects their ability to make other loans as well as their trading position with the Federal Reserve Bank. Bottom line COSTLY! With a short sale, it just shows that some payments were late. Also, with a foreclosure, the owner’s credit is ruined for 7-10 years. It’s just as bad as a bankruptcy. The owner will get hit at about 250 points on their credit report. Whereas with a short sale, their credit is affected for 3-6 months and only 40-80 points on their report. These are just a few reasons why sellers and banks prefer short sales to foreclosures.

The average short sale only gets to closing 12% of the time. With my training (and experience) I can get to closing aprox. 90% of the time.

I just heard shocking news. Last week on July 7^th, 2009 at the courthouse steps in Cobb County, GA. alone, there were 1300 foreclosed homes auctioned. That’s the largest in the county’s history.

The average distressed homeowner doesn’t know they have options. I wish I could have gotten to just 10% of those Cobb County homeowners. That would have made my year!

In any given market there are always a certain percentage of homes or homeowners who are distressed. The reasons for distress are many. According to most investor publications and common knowledge the percentage is somewhere around 1 to3% in a healthy market. Recent changes in the Real Estate market have pushed that number many times higher. Add to that those owners that may be forced to relocate, lost their job, are involved in a divorce, many have had a death in the family, know they owe more than their home is worth and many other reasons for distress and the percent gets higher. In Georgia it’s 1 in 8. Currently, 40% of listed properties are in some stage of the foreclosure process and the number continues to grow.

In a normal real estate market, agents would dismiss short sold and foreclosure properties they weren’t relative because the percentage was so small that we called it a special circumstance or a variance and did not include those properties when we were putting together a CMA (Comparative Market Analysis) for a listing. Now, the percentage is so high, its common place that most of the time we include those in the CMA. This puts a traditional seller at a huge competitive disadvantage if they need to sell their home. The distressed market has violently collided with the traditional real estate market and the unprepared agents are caught off guard and lose opportunities to help their clients.

Because this is a new real estate market, I now intertwine my first phone call with a potential listing client by asking if they are current on their mortgage. Owners are embarrassed and have possibly waited to long to call an agent. Nothing is more uncomfortable for an agent than showing up to what was supposed to be a normal listing appointment and discovering that the homeowner owes more than their property is worth or is behind on their mortgage. I need to be well prepared to consult and deal with a seller who is a few months behind so I can develop the best strategy for the circumstance.

I am excited about the opportunity to be an advocate for families that need a professional, knowledgeable agent who can help them with the issue they are facing.

Just in case you’re curious about where the housing market in Atlanta is right now, the single family segment of Metro Atlanta has stabilized. We bottomed out 1^st Quarter of 2009. Meaning, the property values have stopped dropping. However, the condo/townhome market still has a ways to go. We’ve got a little less inventory out there but still way too much for buyers to choose from. Most economists are telling us that because housing is the largest industry in the US, if we can get housing moving again, we’ll see the economy began to recover.

So, if you or someone you know has been trying to time the market to buy, they better get busy and soon. We know that 50% of buyers will be 1^st time home buyers. With the $8000 US federal tax credit and the GA $1,800 credit ($600 per year for 3 years) for 1^st time homebuyers and buyers who haven’t owned in three years and…with interest rates trying to climb, but still at all time lows, buyers will never in their life times see a better time to buy. The planets are lined up. The average cost of a home in the US right now is $155,000 (In metro Atlanta it’s $200,000). It’s like owning your house for free the 1^st year and like paying 11 instead of 12 monthly payments for the next 3 years.

Also, if you or anyone you know  has a distressed property situation, please let me help. My goal is: No more foreclosures on my watch.

If you or someone you know are not in Georgia, I can still help. I network with other Realtors® around the country and can put you in contact with a quality CDPE in that area who will be happy to help.

We Can Help.

Sarah Hinson, CDPE

404-713-5487