Short Sales and Foreclosures: Still a Hot Topic

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With all the news (or is it hype?) about foreclosures and short sales, it’s not surprising the topic generated a lot of interest from MAAR members with more than 100 attending a panel discussion today in the MAAR Education Center. The panel - made up some local experts on both topics includeing Jeff Burress of Crye-Leike, Bonnie Garrison of Magna Bank, Kim Hairrell of Crye-Leike, and Joe Kirsch of the Law Office of Shapiro & Kirsch - spent more than an hour and a half discussing issues and answering questions related to short sales and foreclosures.

While foreclosure statistics seem to be a hot topic of debate, according to MAARdata numbers there were 2,198 foreclosure sales recorded in Shelby County during the first four months of 2008, a 12.1% increase from the same period in 2007.

The panelists covered a lot of material; here are some of the highlights:

  • When working with a seller who might be in a short sale situation, find out as early as possible in the process. The seller’s lender must agree to a short sale and that process takes time.
  • When a lender has a agreed to a short sale, the listing agent should consider any MLS rules that might apply and consider getting the seller’s permission to disclose the potential short sale in the REALTOR® remarks section of the MLS listing.
  • It’s often more difficult to complete a short sale on a home with a second mortgage. In those cases not only one but two lenders have to agree to take less than what they’re owed.
  • When working as a buyer’s agent on a short sale or foreclosure, it can take longer to get an offer accepted as it requires the bank’s approval. Bank personnel are often working with hundreds of cases at once so don’t assume yours is their first priority.
  • In cases where mortgage insurance is involved, a deal can fall through even when the lender agrees because the mortgage insurer won’t accept the terms of the sale.
  • Banks are not like other sellers - they’re not likely to negotiate on offers that are much below the dollar amount that they must net in the sale.
  • Cash buyers are not necessarily more attractive to a bank in a short sale or foreclosure situation - don’t assume they can offer much less just because they’re paying cash. The banks don’t care where the money is coming from.
  • Working with foreclosures requires a big investment of the listing agent’s time and money - they act as property managers and any maintenance expenses come out of their pocket up front.
  • In a foreclosure auction, the opening bid is always from the bank or investor who owns the property.

And these points are just the tip of the iceberg. The National Association of REALTORS® offers several resources for members online, and a good starting point is the Field Guide to Short Sales and Field Guide to Foreclosures. MAAR is also offering a class specifically on short sales on Friday, August 8, from 9 a.m. to noon.

Posted by Scott Sherrin at 3:47 pm

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