Selecting the right real estate agent to help you short sell your house can be very challenging. Once you let your friends and family know that you have decided to short sell your home real estate agents will descend upon you like locusts, all assuring you that they are “Short Sale Experts” or that they use an “Experienced Short Sale Negotiator” or that they are a “Certified Short Sale Specialist”. Friends and friends of friends will appear at school or church or soccer games or parties all offering to help you in this great time of need. The reality is that not all short sale agents are created the same. Some agents claim to have years and years of industry experience and still others claim to be outright “Gurus” at selling distressed properties. Beware and take your time. Friends are friends but business is business. A good philosophy is to keep friendship and business separate.
The following are some questions and tips for correctly choosing the right short sale real estate agent for your situation:
1. Does the real estate agent process their own short sales or do they use an “expert”? Real estate agents that process their own short sale transactions tend to have a greater understanding of how short sales work than ones that rely on 3rd party ”professional negotiators”. Additionally, real estate agents that use 3rd party negotiators tend to try and pass the cost of the negotiator onto the homeowner. As a homeowner the cost of the negotiator should NEVER come from you. If a real estate agent wants to use a professional negotiator that real estate agent should pay for the negotiator out of their own commissions. Better yet, find a real estate agent that has experience processing their own short sales.
2. Do you have more than 1 lien on your property? Short sales that involve multiple liens on the property are exponentially more difficult to negotiate than short sales with just 1 lien. While anti-deficiency laws in California have protected homeowners from lenders who would otherwise agree to a short sale but still attempt to recover the deficiency they have now made second lien holders more difficult to negotiate with. There is no law that requires either a 1st or 2nd lien holder to agree to a short sale. Since 2nd lien holders can no longer pursue deficiencies they have become more obstinate. An average real estate agent can become overwhelmed or discouraged by the amount of tenacity it can take to bring a 2nd lien holder into line. Typically the first lien holder will agree to pay the 2nd lien holder a small (very small) percentage as a payoff. The 2nd lien holder usually wants more than the first lien holder is willing to give them in order to approve the short sale (thus giving up any deficiency rights that they might have if the property were to go to foreclosure). Getting the 1st and 2nd lien holders to agree can be extremely difficult.
3. Do you have any judgment liens or HOA liens on the property? If your property has any type of judgment liens and/or HOA liens then the short sale cannot be finalized until these liens are taken care of. This is a VERY difficult endeavor and something that 95% of real estate agents are not equipped to deal with.
4. Is the property a rental or is it owner occupied? Short selling a rental property has many nuances that can make it difficult for an average real estate agent. First, the real estate agent should strongly recommend that you perform your due diligence as to the tax ramifications of short selling a rental property. The tax ramifications could be via debt forgiveness or capital gains. If your real estate agent glosses over this issue then you should be very cautious about using that particular agent. A true real estate agent will have your best interests ahead of his own. The truth is that you should seek counsel from a CPA or tax attorney prior to entering into a short sale listing agreement, especially when the subject property is a rental. Second, renters can present another set of challenges that a normal real estate agent is not prepared or capable of dealing with.
5. Are the loans on your home Purchase Money Loans or have you refinanced? Purchase Money Loans refers to homeowners that still have the same note (loan) that they purchased the property with. In other words, if you have never refinanced your house you probably have a purchase money loan. Purchase money loans are important because they carry special protections that are lost if you refinance. The applicability of laws like The Mortgage Debt Forgiveness Act of 2007 are somewhat dependent on the status of your loan as a purchase money loan or refinanced loan.
6. What is the reason for your hardship (like real estate agents, not all hardships are created the same)? Short sales are not guaranteed nor is the lender obligated to approve every single short sale. Like a loan modification one of the important considerations is the nature of the hardship that is forcing you to short sell your house. An experienced real estate agent should have an idea as to whether or not your hardship has a good chance at meeting the investor guidelines for an acceptable hardship.
7. Have you received a Notice of Default or Trustee Sale? If you have already received a Notice of Default (“NOD”) or Notice of Trustee Sale (“NOT”) the foreclosure clock is ticking and you need to find a real estate agent that is 1) familiar with the foreclosure process 2) capable of negotiating your short sale in a shorter amount of time and 3) has the know how to be able to push the sale dates off if necessary. Some lenders are VERY difficult and do not like to push sale dates off just to accommodate a short sale. Likewise, some investors, such as Freddie Mac and Fannie Mae, do not like to push sale dates off at all. You must be cautious and select a real estate agent that possesses the know how and ingenuity to perform under pressure.
8. How many short sales has the real estate agent that you are considering successfully completed? How many of those had multiple lien holders? Every real estate agent that approaches you will claim to be experienced in short sales. They have to say this because they would otherwise have no business in this economy. Remember, real estate agents are sales people. Not only will they attempt to sell your house they will also attempt to sell you on their qualifications. While you might want to help out your neighbor or friend from church that is a real estate agent the bottom line is that you are short selling your house because it is the best financial alternative for your family. Do not be persuaded by personal feelings. Short selling your house is a business decision and friendship is friendship and business is business. Experience is vital in selecting a real estate agent.
9. What type of training and/or educational background does the agent you are considering possess? Let’s face it, not all real estate agents are created equally. Check out your agent’s educational background. Do they have a college degree? Do they have a graduate degree? What tools does the agent bring to the table that will provide you with the best all around service. In addition, check out your agent’s credentials. What additional training courses or certifications do they possess?
Selecting the right real estate agent is a very important decision. Choosing the wrong agent can cause a homeowner to suffer consequences or stress that would have been avoided by performing due diligence during the real estate agent selection process.