A homeowner decides that they want to sell their property – and get as much as they can from the sale even though it won’t pay the mortgage – by a short sale. But if the home is already in the foreclosure process, is it already too late to start thinking about that. It might be. Today, I’ll tackle the timing of the short sale decision, and why it something that if you’re going to consider it, you need to start thinking about it before you start missing those mortgage payments.
It’s not uncommon for me to get phone calls from frantic homeowners who believe they should save their home from foreclosure. A typical conversation might go like this:
Bob: “I’ve been working with the lender, but I just received notice that there is an auction in two months.”
Me: “What do you want to do?”
Bob: “I don’t want the property to go into foreclosure. I’d rather sell it, even if it is a short sale.”
Me: “Have you listed the property with a broker?”
Me: “Have you spoken with a local real estate broker? Do you know how much you could for your home in this market?”
Bob: “No, because I really only made this decision recently.”
Me: “How recently?”
Bob: “Right before I called you.”
That pretty might make take wind out of my sails. What has Bob been up to?
First, Bob needs to get the property listed with the broker now. It takes time to find a good, respectable broker who will do what needs to be done to get you a qualified buyer who is willing to pay the most for your property. He has not done that yet – and he’s way behind scheduled.
Second, he needs to get the property ready for showing. This means cleaning it up, patching holes, putting a fresh coat of paint on.
And third, making sure the property is advertised and marketed.
If a homeowner is doing all of these, chances are the lender will work with the homeowner in finding a buyer…rather than start the process of foreclosing. Of course, that should not be read as some indefinite stay on a foreclosure – but rather an accommodation. But if the homeowner is not doing anything, and has not done anything in furtherance of selling the property, it makes my job a bit difficult.
Let’s assume this homeowner retains me to work with the lender. Let’s assume that my first phone conversation on the phone goes like this:
Me: “I’ve been hired by the homeowner and they are hoping for a short sale – what can we do about this pending foreclosure auction?”
Lender’s counsel: “What do you want to do?”
Me: “I need some time here.”
Lender’s counsel: “Have you listed the property with a broker?”
Lender’s counsel: “Have they spoken with a local real estate broker? Do you know how much they could get in this market?
Me: “Well, no, but they are going to very soon.”
Will I get some time? Maybe – but it is not guaranteed. Bob might have been “working with the lender” for months before they called me and the servicer and their counsel may be disinclined to be any more accommodating. But the problem here is one of timing – Bob is exploring an option that could and should have been explored well before the foreclosure process was commenced.
In our example, by the time Bob mentioned he was considering a “short sale”, no real estate broker was hired, the property was not listed and it has not even been shown to any prospective buyers. I’m willing to bet that Bob has not figured out a way to cover up that big stain in the rug or paint the hall. Without that planning, merely requesting time to explore a short sale will look like what it may every well be – just another request for more time. And if you’re not seriously exploring your options, at some point the servicer is not going to give you any more time.
- The Short Sale Option
- Short Sales & Foreclosure: Perception & Reality
- Are Short Sales Just Silly?
- Before Foreclosure Rescue Scammers Start Knocking…
- Saving the Home: Thinking Beyond “Delay and Pray”