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Pricing the Short Sale

When listing a Short Sale it is imperative that the property is priced right. When I say "priced right" I mean as close to market value as possible at a price that will get the property under contract quickly.One of the problems I see in my market is that short sales are priced way to low. It seems like listing brokers are just picking a number out of the clear blue sky and placing the property on the market. While they may generate a lot of activity, these deals, more than likely, will not close. Plus they are doing the Sellers a major injustice. The Seller will either be foreclosed on or end up with a huge deficiency judgment against them. Not to mention the possibility of owing good ole' Uncle Sam some money.Pricing a short sale should be just like pricing any other property. You are looking for a price that will sell the property in a reasonable amount of time and at a reasonable price. The fact that the property is a short sale, requiring 3rd party approval, is nothing more than a negative market condition.If the true market value of the property, if not a short sale, is $200,000, then what you should be doing is taking this figure and making an "adjustment" for the "negative market condition(short sale)". Depending on your market it could be a 10% to 20% downward adjustment. Let's say that your market is showing you that short sells are selling for 20% below a normal sale of similar properties. That means that this property should sell for $160,000. So maybe you price at $165,000 or $169,000 depending on your area's sales price to list price ratio.Now you have a property that is priced right AND you have a very good chance of getting the Lender to agree to the short sale if you bring them a CONTRACT at $160,000.OK so here's the second step. Negotiating the deal. Notice up there where I bolded CONTRACT. This is important. Many REALTORS® are submitting OFFERS to the Lenders for approval. This is wrong and will limit your ability to get the short sale accepted.A short sale requires 3rd party approval of the CONTRACT not the offer. What this means is the Buyer and the Seller should be negotiating the deal as they normally would. Once they have agreed on a price, hopefully as close to the $160,000 possible, they sign the contract and the deal goes pending, subject to 3rd party approval. The 3rd party approval is nothing more than a contingency and should have an end date on it. It's no different than inspections, loan approval etc., except that it is a Seller contingency. It is a contingency that needs to be removed or it will expire with time.Once the deal is signed, by all parties, you are now in a position to submit the short sale package to the Lender. Then the wait begins.It's important to remember that, if you are working for the Seller, your goal is to get them as much as you can for the property in a reasonable amount of time. By doing this you are limiting their liability created by the "short" and you are giving them a good chance to avoid a foreclosure by presenting a fair contract to the Lender.So, if you are inclined to handle some sort sales. Do it right. I know short sale is the "buzz" word right now but as professionals we need to understand what we are doing. There's a lot more to it than just throwing it out there and hoping it sticks. If that is what you are doing then you are harming the consumer and need to stop. I hope this post helps. If there are any short sale experts out there that feel this info is incorrect please let me know. I'm trying to learn as much as I can. Thanks.
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Short Sale Submission Letter

Hi folks. I'm sure there are many of you that are either doing short sales or want to do short sales. Therefore, I am posting this sample cover letter that may help you when submitting a short sale package to the lender. Just remember, you are submitting a fully signed and accepted contract and asking the lender to remove the 3rd party approval. You are not asking them to accept the offer. The lender is not a party to the contract. The offer has already been negotiated and accepted by the Seller.Also, check with your Broker and your State's laws concerning short sales. I am a Florida Broker and this is how I handle short sales. This is my opinion only.*************SAMPLE SHORT SALE COVER LETTER***************Ref: LN# XXXXXXXXXXX345 Saint Blasse Ct Kissimmee Fl 34758Bertha Tutas SSN# xxx-xx-xxxxTo whom it may concern,Following is a complete short sale package. We are requesting a removal of the 3rd party approval clause in the attached purchase contract.Included are 56 pages:*Authorization to release information*Fully signed purchase contract with addendums*Buyer's pre-approval certificate from Bank of America*A copy of the escrow deposit*Preliminary HUD 1*Current listing agreement with addendums*Listing history*MLS property print out*Property market analysis*Hardship letter*Seller's financial statement*Last 2 years tax returns*Last 2 bank statements*Last 2 paycheck stubs*Proof of child support paymentsMy comments:This property has been on the market since 01/04/08. It was first offered for sale at a price of $129,000. The property has been extensively marketed on the MLS, Realtor.com, Craigslist, Zillow, Trulia, Cyberhomes, Virtual tours and was syndicated to over 500 web sites.Unfortunately, with the market decline, there was no interest in this property. The property has functional obsolescence being that it only has 2 bedrooms, a 1 car garage and sits on a "back flag" lot. With over 1200 homes available in Poinciana and only 30-40 selling per month this property was being overlooked. We slowly started lowering the price, however, trying to avoid getting into a short sale situation, we were not able to price the property low enough for the market to be interested.Finally, the Seller, due to the hardship outlined in her letter, had to vacate the home. As hard as she tried to keep the house she could no longer afford to live there. At that time, we reduced the price to $109,000 then slowly reduced every 2 weeks until there was an interest. There were NO showings until we reduced to $59,000. Several days after reducing to this price we received and accepted the attached contract.There has not been a 2 bedroom home that has sold, on the Osceola County side of Poinciana, since August and there has only been 2 in the last 4 months.Based on current market conditions and the fact that this property is not only functionally obsolete but also a short sale, we feel the agreed purchase price of $60,000 is far better than the price the property will sell for if it is foreclosed on and placed back on the market. We have done everything possible to get as high a purchase price as the market will bare.I have 14 years experience as a Broker specializing in selling Poinciana property and on behalf of Ms. Bertha request that Country Wide accept this short sale so we can move forward towards closing.Please fee free to contact me with any questions or additional information that you may need. Thank you in advance for your attention to this matter.
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Why I Negotiate My Own Short Sales

In the last couple of days I've been approached by two Destin FL sellers who wish to do Short Sales. After explaining the Short Sale process, I explained what items I would need. When I got to "financial worksheet" etc. I was stopped in my tracks. These sellers told me that their attorney said not to turn over any information, that he would be handling the short sale negotiations. I immediately told the sellers that I will only take the listing if I handle the entire transaction including bank negotiations. Why?To take on a listing in this market, and any market, involves taking a risk. That is, a substantial business investment covering the cost "doing" business, which includes time, advertising, payroll, insurance, licensing, internet, phone, rent, etc. etc.. In a normal market, the calculated risk of the business investment is that the listing will most likely sell, and the burden of expenses will reimbursed, plus some business profit. With a Short Sale, the risk is much higher. Why? The Short Sale lender may not approve the sale. And the time investment to reap a return may be five times longer than a normal sale, reducing any profit if the sale is approved.To lessen the key business risk of an unapproved Short Sale-- both for me and my seller, I must control the Short Sale from start to finish. Why? Because I can:Assemble excellent lender packages personally reviewed by meDirectly and immediately respond to negotiators' calls and emailsImmediately provide well-written market narratives and critical analyses proving priceEnsure that appraisers and bank BPO agents understand the subject property's challengesImmediately provide additional documentation required by the lenderKeep the parties well-informed and in the dealDocument all tasks in detail for transaction-saving referenceProvide creative solutions to negotiators' demands such as promissory notes and cash contributionsUse twenty years of negotiations skills to ensure successCan a third party do all this? Perhaps. But I know I can. If I pass along the critical Short Sale negotiation stage to a third party, my company's business success is entrusted to others, as is my seller's chance of approval.It's Wendy!Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.Destin FL real estateShort Sale Pre Foreclosure Help.Call toll-free 1-877-ITS-WNDY (1-877-487-9639) or local 850-650-7883 ext 204Email itswendy@rulnickrealty.comWendy Rulnick specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy Rulnick, Broker and Realtor, has been selling real estate for almost 20 years. She has won numerous awards, including the coveted ADDY for advertising design. An expert marketer of real estate listings, she negotiates successfully to her dients' advantage. She is supported by a team of top buyer specialists. She lists and sells homes, condos and townhomes.All Rights Reserved. *Why I Negotiate My Own Short Sales* Contact Wendy Rulnick regarding Destin Florida real estate and vicinity. Copyright © 2008 by Wendy Rulnick.This site, Wendy Rulnick or Rulnick Realty, Inc. is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information.
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22 Questions to Ask the Short Sale Lender

Are you at a loss for words with the Short Sale lender? Here are some questions to pose when you check in on your Short Sale transaction status. Even if you've asked some of these questions before, you may want to ask them again, and repeat certain questions on each call. Many times, you'll elicit a different answer or discover a problem that may help you get your approval more quickly.1. Have you received our package?2. Is anything missing from our package?3. Has the loan been submitted as a short sale (or "referred" with Countrywide/Bank of America)?4. Has a negotiator been assigned?5. When will a negotiator be assigned?6. How do you spell the negotiator's name?7. What is the negotiator's email address?8. What is the negotiator's direct number, extension or fax number?9. Has an appraisal or broker price opinion been ordered?10. Can you order the appraisal?11. When will the appraisal be ordered?12. Have you received the appraisal back yet?13. Is the appraisal value within range?14. Has the second mortgage been "serviced released"? If so, who is the new servicer?15. Is there MI (mortgage insurance) on the loan?16. Is the loan Fannie Mae, etc?17. Is your company delegated (authority to make decision on approval)?18. Can you read me any notes on the file?19. What was the last action taken on the file?20. Would you email the negotiator for me?21. Would you ring the negotiator for me?22. Would you connect me with the supervisor?It's Wendy!Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.Destin Florida real estateShort Sale Pre Foreclosure Help.Call toll-free 1-877-ITS-WNDY (1-877-487-9639) or local 850-650-7883 ext 204Email itswendy@rulnickrealty.comWendy Rulnick specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Crestview, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy Rulnick, Broker and Realtor, has been selling real estate for 20 years. She has won numerous awards, including the coveted ADDY for advertising design. An expert marketer of real estate listings, she negotiates successfully to her clients' advantage. She is supported by a team of top buyer specialists. She lists and sells homes, condos and townhomes.All Rights Reserved. *22 Questions To Ask The Short Sale Lender* Contact Wendy Rulnick regarding Destin Florida real estate and vicinity. Copyright © 2008-2009 by Wendy Rulnick.This site, Wendy Rulnick or Rulnick Realty, Inc. is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information.
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Short sales are serious business.

Hi there. Whether you like short sales, want to do short sales or want to avoid short sales, they are here to stay. Short sales are a major part of the market and in my opinion will become even more so. Lenders WANT to do short sales. A successful short sale cuts losses and keeps the lender from owning a declining asset.This post is about taking control of the short sale situation from the get go, knowing what we are doing, preparing the Seller in advance of what to expect and being strong enough in our negotiation skills so we do not have to accept whatever bone the banks want to throw us.Here are a few of my thoughts:* With a short sale we are submitting CONTRACTS, not offers, to the lenders. We are not asking them to accept an offer we are asking them to accept a "short" payoff so a contingency can be removed from the CONTRACT and the deal can close. Anyone who submits an offer to the lender to see if they will accept it does not know how to handle short sales and is wasting time and clogging up the system.* The lender is NOT a party to the contract(s)(listing or purchase). They do not control the purchase price and the commission. They do have control over how much they are willing, or able, to accept as a payoff. If this payoff figure is too high then a solution needs to be found. The solution may be to have the seller sign a promissory note, raise the purchase price or lower the expenses of the deal(commission etc...). However, lowering the commission in the deal does not mean the seller is off the hook for paying the FULL commission as agreed in the listing agreement. They can bring cash to closing to pay the difference and/or they can sign a note to the Broker.* If the lender, investor or PMI company ask the Seller to sign a promissory note, a good short sale negotiator, will be able to negotiate the amount of this note downward or may even be able to make it go away. The PMI companies almost always ask for a promissory note to be signed when the seller can afford to make payments. Be prepared for it. If the Seller has funds in the bank, IRA, mutual fund and/or decent income chances are they will be asked to pay a promissory note. This should be ascertained at time of listing. Get a complete financial package from the Seller prior to listing the property.*Our job is to do the best job we can to help qualified short sale sellers salvage their credit. It is the Sellers sole decision on whether or not to sign a promissory note. Their willingness to sign a note needs to be established at time of listing so we don't waste our time trying to help Sellers who are not willing to help us.*When a PMI company comes back requesting the seller sign a note I take it as an acceptance of my short sale request. Now all I have to do is negotiate the note. I have had a note request of $135,000 negotiated down to ZERO and one for $50,000 settled for $1,500 at closing. BUT the reason I was able to negotiate is because the Sellers truly could not afford to pay. Remember we are helping folks with a legitimate hardship not people that just want to avoid paying a debt.*Commission should not be an issue in a short sale. A Broker/agent should know before listing the property what lender is being negotiated with and how much commission they will "allow" almost all are 5% to 6% if there are two Brokers...and 4% if there is only one Broker. Fannie Mae will allow 5%. Countrywide will allow 6% as will Wells Fargo and Washington Mutual. I just closed a on Countrywide short sale and in addition to the commission I was paid 1% as reimbursement of costs to maintain the property for a total of 7%. We need to know these things.Folks, agents are getting screwed on short sales because they don't know what they are doing. Sellers are getting screwed because they are hiring these agents.Short sales are serious business and need to be treated as such. Sellers need to seek legal and tax advice and then hire a Broker/agent that understands the process.My biggest frustration is the lack of education of folks trying to handle these transactions. The public is being harmed and that goes against every thing being a REALTOR(R) stands for. Let's take the time, to learn what we need to know, so we can help folks get on with their lives. Let's all step up to the plate. Not only can we help people but we can get paid for doing so!!! Are you ready to get serious?
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