Does Your Realtor Understand Short Sales?

In most situations, well-planned short sales of Phoenix Arizona Homes have significant advantages over foreclosures. Indeed, a close look at the Phoenix MLS shows a relatively high percentage of short sales among all Phoenix Homes for Sale. However, a short sale is not to be taken lightly -- preparation and experience is essential. Among the important questions to consider when pursuing a short sale is the big question: Does my Realtor understand short sales?

To help you evaluate how well prepared your Realtor is for handling your short sale, have a discussion with them about the short-sale process, and be sure to ask the questions below. If you don’t hear the answers or the knowledge and familiarity that you’re looking for, be prepared to keep looking for a Realtor that’s equipped to help you.

1.  Who is the service company and what do they do in the process?

In general, the service company of the mortgage is the name on the mortgage statement you receive every month. Bank of America, Chase and Wells Fargo are common service companies. In most cases, the service companies are only in charge of processing the file and have very little to do in the decision-making process and negotiation of the sale itself.

2.  Who is the investor?

Fannie Mae, Freddie Mack and Ginne Mae tend to be the investors of the majority of loans. Large service companies such as Bank of America, Chase and Wells Fargo may also be an investor on a mortgage. The investor is usually the decision- maker on each loan and has specific guidelines to follow in negotiating a short sale. Experience in negotiating with different investor guidelines is essential experience for a Realtor to have in order to have a successful close of escrow

3.  Who is the MI Company?

Not all loans have MI (mortgage insurance), but some do. In the event that there is MI on a loan, you be certain that the MI Company is going to negotiate with you (the seller) before allowing a close of escrow. The MI Company is generally covering the loss in the short sale and paying out the investor for the loss on the mortgage, so the goal of the MI Company is to reduce the lost payout as much as possible.

4.  How will each be negotiating with me?

This is a great question for an agent. Negotiating with service companies, investors and MI Companies is not like negotiating a normal purchase contract. The process is bureaucratic, paperwork-intensive, and detailed. Experience really pays here and a good Realtor will know how to get it done and cost you very little at closing. However, a lack of experience and less-than-thorough paperwork by your agent could result in you writing a large check at closing, or worse, a foreclosure.   

5.  What are the potential tax consequences?

In every short sale, there are potential tax consequences that a seller must deal with. Asking your CPA or tax advisor about your particular situation and possible consequences is a very important part of planning for your future. A Realtor should have some general knowledge of the potential consequences as well as a good reference for you to get further help, but should also encourage you to discuss with your CPA or tax advisor.

6.  What are the potential liabilities after closing?

Most loans are written as “non-recourse”, meaning that the lender will not be able to pursue you in the future for a loss incurred. However, some loans are recourse loans in which the financial institution may choose to pursue legal and collection avenues for the loss. When working with a recourse loan, there is always future potential liability where you should consult an attorney about the situation and again, a competent Realtor experienced with short sales in the Phoenix Real Estate market will encourage you to discuss the situation with your attorney.

Remember – a short sale is truly a “double-edged sword.”  On one hand it can usually offer significant advantages over foreclosure, but on the other hand it requires specific knowledge and expertise to successfully complete. Our Phoenix AZ Realtors have the short sale knowledge and experience to help you succeed – give us a call today!