PROView - January 2008 - (Page 5) A short sale is not a new phenomenon by any means. In light of the current mortgage crisis and recent downturn in home prices, however, more attention has recently been given to this alternative to foreclosure. “The fact is that foreclosures and short sales will be part of the real estate landscape for quite a while,” said Denne Banville with the CARE Group of Keller Williams Realty in St. Petersburg. She offered a perspective on the rather drastic increase from only a year ago: “approximately 1,700 lis pendens and auctions were scheduled from January to September last year in Pinellas County, this year that number has grown to over 11,000 in the same time frame and could be an indication of what might come in 2008.” forming a relationship with a title company should be a priority. “While dealing with a short sale may be new for an individual Realtor®, a title company is experienced with the process. “We expect the number of short sales transactions to increase and recommend that Realtors® form a close relationship with a trusted title company and become familiar with the process before they are asked to represent a property in a short sale.” She also recommends forming a relationship with a tax advisor specifically experienced with short sale transactions. Let’s say you have attended a few workshops on short sales and all of a sudden you receive a call from a prospective customer. During your initial meeting with a seller you find out that the homeowner owes more than the house is worth. Do you automatically turn to present the idea of a short sale? Not so fast. According to Banville, Realtors® need to make potential customers aware of all options available to them in order to help them avoid foreclosure. During the first consultation with a seller, she said, Realtors® need to start gathering enough information to get a clear view of the seller’s financial situation. Banville cautioned against assuming that a short sale may be the only or best solution. “A short sale is typically the best option when a homeowner is upside down, can prove financial hardship, and is unable to bring the loan current.” Other solutions may include deed in lieu, forbearance, mortgage modification, refinancing and/or bankruptcy. Although Realtors® should disclose possible downsides of a short sale, they should be careful not to give legal or tax advice. Realtors® should, however, ask if a homeowner previously has filed for bankruptcy, currently is in bankruptcy proceedings, or if they plan to file for bankruptcy. Banville urged that Realtors® never make a suggestion to homeowners to fall behind in their mortgage payments. Just because a deal seems likely to be a short sale, it’s actually not considered one until you have received lender approval. While each process may look very different, here are some general steps through the process for a prospective short sale transaction. The Essentials of a Short Sale So what exactly is a short sale transaction? Imagine a homebuyer who purchased a home last year with 100% financing yet recently lost his job. Add to the scenario a marketplace with decreasing home prices. Now behind a few months on his mortgage payments, and with the value of the home less than the amount owed, going into foreclosure seems all but certain. A lender, however, may not want to take on the rather significant expense of foreclosure. Instead, the lender may accept less than the debt in order to at least recoup some of the borrowed money. While the concept of a short sale may not seem complicated, the execution of one can be rather challenging. According to Banville, any Realtor® engaging in a short sales transaction should expect a much longer sales cycle than a regular transaction would entail. “Every case I am working with is different, including the time it will take to bring a short sale to closing,” said Banville. “As a general rule, however, expect the process to take at least 4 to 6 months.” She added that due to lenders’ restructuring their processes to handle the volume of foreclosures, Realtors® may need to get 30-40% of the total work of a short sale process completed before they even know whether it is possible to bring the case to a close. “Working with a short sale can be very rewarding, but it’s a tremendous time commitment for a Realtor®, with little guarantee of a close.” According to Diane Luttmann, Branch Manager of Fidelity National Title Insurance Co. in S. Pasadena, Staying Ahead of the Call Consultation Banville pointed out that before you take on a listing, you need to make sure your customer understands the role you will play with the short sale process. PINELLAS REALTOR® ORGANIZATION January 2008 5
Table of Contents Feed for the Digital Edition of PROView - January 2008 PROView - January 2008 Contents Chairman's Notes Feature ProActive Marketing Finance Marketplace Analysis Home Sales Report MLS Update MLS Mind Your Manners Education Calendar of Events & Programs PROBiz Special Feature Brokerage Design New Affiliates and Members for 2008 PROView - January 2008 PROView - January 2008 - PROView - January 2008 (Page Cover1) PROView - January 2008 - PROView - January 2008 (Page Cover2) PROView - January 2008 - Contents (Page 1) PROView - January 2008 - Chairman's Notes (Page 2) PROView - January 2008 - Chairman's Notes (Page 3) PROView - January 2008 - Feature (Page 4) PROView - January 2008 - Feature (Page 5) PROView - January 2008 - Feature (Page 6) PROView - January 2008 - ProActive (Page 7) PROView - January 2008 - Marketing (Page 8) PROView - January 2008 - Marketing (Page 9) PROView - January 2008 - Finance (Page 10) PROView - January 2008 - Finance (Page 11) PROView - January 2008 - Finance (Page 12) PROView - January 2008 - Finance (Page 13) PROView - January 2008 - Marketplace Analysis (Page 14) PROView - January 2008 - Home Sales Report (Page 15) PROView - January 2008 - MLS Update (Page 16) PROView - January 2008 - MLS Mind Your Manners (Page 17) PROView - January 2008 - Education (Page 18) PROView - January 2008 - Calendar of Events & Programs (Page 19) PROView - January 2008 - PROBiz (Page 20) PROView - January 2008 - Special Feature (Page 21) PROView - January 2008 - Brokerage Design (Page 22) PROView - January 2008 - Brokerage Design (Page 23) PROView - January 2008 - Brokerage Design (Page 24) PROView - January 2008 - Brokerage Design (Page 25) PROView - January 2008 - New Affiliates and Members for 2008 (Page 26) PROView - January 2008 - New Affiliates and Members for 2008 (Page Cover4)
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