Real Estate Agents And Short Sales: What You Need To Make Sure You Ask Your Agent

It is no surprise that this real estate market we are in the midst of is a confusing one to say the least. People are losing their jobs or getting a decrease in income left and right, leaving home owners in a situation where they need to choose their electric bill over their mortgage payment.
It is leaving home owners that cannot afford to make their mortgage payments left to be at the mercy of their bank, asking for a loan modification and, if they are even paid attention to, in most cases the loan modifications may not be significant enough to really help them in crisis.
If selling the home is the answer, and whether or not the homeowner is in jeopardy of not making their payment, a seller that owns a significant amount on their home still and gets an appraisal they may be sadly surprised that their house has depreciated to a place that they now owe more than their house is worth.
This is now a situation that most may think would be an impossible situation to get out of. Well, thankfully for the homeowner there is a solution. The solution is called a short sale. In simplest of terms a short sale is when the lender (bank that holds the note on the home being sold) accepts a settlement to pay off the mortgage that is less than the amount owed. The easiest way to explain this is think of if you had a credit card bill that was $10,000. You could not keep up with the payments so you negotiated with the credit card company to take less than the amount you owed them and they settled for less, closed the card account and you now owe nothing other than the amount that was agreed upon, usually up front in one lump sum. That is basically a short sale. However, and this is very important to understand, all banks are different and all loans are different. There are some loans that even if you do a short sale the bank MAY have rights to come after the homeowner for the amount they lost AFTER the home is sold. This is not to scare anyone that is thinking of having their home put on the market as a short sale, it is to educate and make sure you get the facts UP FRONT.
When a homeowner decides that they should put their house on the market and that they know the home will be sold as a short sale, there are certain things that will need to be done before the short sale is approved. When I say approved I do NOT mean a contract is approved, I am talking about the short sale itself being approved. The bank has to approve the house to be sold as a short sale first before they will even think of accepting a contract.
The following is a list of things you need to ask your real estate agent as well as get prepared for your agent so they can take this information to the bank for you:
Write a hardship letter. Write a letter describing why you are in the situation you are in, for example perhaps you lost a job, or there was a pay decrease, a medical reason, etc. Explain.
Get the latest tax return together, 2 months of bank statements (checking/savings) and last 30 days of pay stubs.
Ask your realtor if they have ever listed a short sale home before, if so ask them to show you the listing(s) and see how many days it took to sell from listing day to closing day. If the days on the market are low but the days under contract are high, chances are the agent did a good job marketing the home, but the bank took a long time to approve the contract. That is very common but you really need an aggressive realtor for a short sale to be persistent with the bank.
Ask your realtor to explain to you the steps involved in a short sale. If they cant, get a new realtor, I am not kidding.
Interview at least three agents and ask each of them to show you what other homes they have sold that are short sales. (They can show you 20 homes they listed and sold but if none of them are short sales, it does not make them a short sale expert, thus may not be the agent for you).
If the agent you are interviewing does not advise you to talk to an accountant or financial advisor first before taking the listing to make sure a short sale is in your best interest (filing for bankruptcy can save your home if you do not want to sell) then get a real estate agent that is going to be upfront and honest with you, will give you all options and are not just there to get the listing but are truly there to help you get through what can be a truly scary situation if you are not properly educated.

Asking questions and seeking knowledge about all of your options is imperative to make sure you are doing exactly what is right for you. Everyones situation is different, and putting your home up for sale as a short sale may or may not be your answer. You will never know though unless you ask. Do not procrastinate either, doing nothing is worse.

John Horne, is considered to be one of the top brokers in the U.S. with a more than 800 real estate brokers under his direct supervision. He is the author of Just Shut Up and Buy the House- which in its first month was nominated for a Pinnacle Achievement Award and is a professional guide for real estate professionals and mortgage lenders. He has just been accepted into the prestigious membership of the American Society for Training and Development professionals. He is the owner and CEO of Agent Edge Training Inc.