Advice from a Sr. Short Sale Negotiator
I started doing short sale negotiations almost 4 years ago, before the banks and the state and local real estate associations had really begun to codify terms and requirements. I started because I saw that there was a need to help people out of debt and I realized that as a Realtor with my background in mortgage banking, I was uniquely qualified to try to help.
Since I have been around the short sale block longer than most people in my field, I get asked a lot of questions by my colleagues and I thought I would write about some of my thoughts and advice that have sprung from that.
The questions that I get the most have to do with contracts and payments. After several trials and tribulations, I find that the best way to ensure payment is through a strong contract. Make sure that your contract states that you will be paid for your short sale service at the completion of the bank approval and not at the close of escrow. Or, consider a laddered payment structure in case you are called upon to re-negotiate for a new buyer (or several new buyers.) I also suggest, when possible, to hook any repayment (from junior lien payoffs) or payment into the escrow so that you get paid by title.
My fellow Realtors also want to know how far I think they can push the bank. Negotiating with a bank is a confidence game that reminds me of a great blog called The Art of Manliness that offers a lesson in negotiating for a used car. Many of his used car lessons apply here:
- Knowledge is Power
I think this is the most important rule when negotiating a short sale—know your client’s file! Never let the bank have the upper hand. Educate yourself about the lien-holding banks, monies owed, deficiencies and your client’s story. Interview and research extensively. - Know How the Dealers (Banks) Make Their Money
Remember that the banks insure against losses in several different ways, through the FDIC, through mortgage insurance and also through other government programs, not the least of which are TARP funds. So while they are taking a loss, a short sale is never as uncomfortable for them as it is for your clients, so negotiate accordingly. - CarFax. (Property Inspection) Get One.
Surprises are great, but not at close of escrow. Don’t let surprise disclosures foul up the deal. When possible, get your inspections done up front before you begin short sale negotiations, because this is an ‘as is’ sale.