This is the powerpoint presentation that went along with the breakout session SHIFT: Mastering Short Sales at Keller Williams Realty's Family Reunion 2009
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Transcript
SHIFT : Mastering Short Sales KW170
Presenter
Barbara Horan
Temecula, CA
Agent, Short Sale Expert
Mastering Short Sales
Main Ideas
Foreclosure: Origin of Short Sales
The Win-Win Solution
Sources of Business
Steps to a Short Sale
Short Sale Math
After the Short Sale
Are You Able, Ready, and Willing?
A copy of this presentation is available for download at
www.kellerwilliamsuniversity.com
Foreclosure: Origin of Short Sales
The Foreclosure Process
Preforeclosure Short Sales
Public Auction Foreclosures
Real Estate Owned (REO) Property
Foreclosure: Origin of Short Sales (continued) Phase 1:
Preforeclosure Short Sales Phase 2: Public Auction Foreclosures
Phase 3: Postforeclosure REOs 1. Homeowner misses loan payment . 30
60 90 120 150 180 210 240 270 300 330 360 390 days 2. Late charges
begin accruing. 4. Notice of Intent to Foreclose publicized. 5.
Auction 6. Redemption Period 7. REO 3. Lender sends Notice of
Default. 0
Foreclosure: Origin of Short Sales (continued)
Definition of Short Sale
Sale for less than amount owed, with lender accepting proceeds
as payment in full
Preforeclosure phase on chart
Foreclosure: Origin of Short Sales (continued)
Why Properties Go into Foreclosure
Subprime loans
Unable to refinance
Zero-down loans
Loss of income
Unexpected events
Market shifts
Foreclosure: Origin of Short Sales (continued)
Options Before Short Sale
Forbearance
Mortgage modification
Refinance with an FHA-backed loan
Advise the homeowner to contact their lender immediately.
The Win-Win Solution
Truth
A short sale can be a win-win for the agent , the homeowner facing
foreclosure, and the lender .
Sources of Business
Your Solutions-Based Unique Selling Proposition (USP)
Notice of Default Lists
Public Notices of Auction
FSBOs
Lenders
Listing Appointments
Sources of Business (continued)
Qualifying Short Sale Candidates
Market pricing must be less than the loan amount.
The homeowner must be financially insolvent.
The homeowner must demonstrate a hardship.
The homeowner must be cooperative.
Sources of Business (continued)
Additional Considerations
Bankruptcy
Private Mortgage Insurance (PMI)
Imminent Foreclosure Date
Steps to a Short Sale The Eight Steps to a Short Sale Close the
Deal Step 8 Negotiate the Deal Step 7 Submit a Proposal Step 6
Obtain an Offer Step 5 List the Home Step 4 Develop the Proposal
Step 3 Open Communication Step 2 Gather Information Step 1
Steps to a Short Sale (continued)
The selling and communication cycle in a short sale is long and
tenuous. You cannot wing it. But if you stay with it, if you
nurture this skill set, you can become an Opportunity Warrior in a
challenging market.
- Dave Jenks
Steps to a Short Sale (continued)
Step 1: Gather Information
Bank statements, W2s, paycheck stubs, tax returns
Property tax bill
Monthly bills
Check for additional liens
Hardship letter and documentation
Complete loan information
Short Sale Checklist Information Gathering
Steps to a Short Sale (continued)
Step 2: Open Communication
Obtain and submit authorization
Initiate communication with lender
Short sale application packet
Name and direct number of decision maker in Loss Mitigation
Department
Information about their policies
Systematize communication
Short Sale Contact Record
Steps to a Short Sale (continued)
Step 3: Develop the Proposal
Proof of financial insolvencyforeclosure is imminent
Documentation of the hardship
Business case for accepting a reduced price
Short Sale Proposal Checklist
Steps to a Short Sale (continued)
Step 4: List the Home
Develop a pricing strategy
Educate the seller
Considerations
List home as is
Enter Short Sale in the agent remarks on the MLS (if
optional)
Indicate variable commission split with buyer on the MLS
Steps to a Short Sale (continued)
Step 5: Obtain an Offer
Determine lenders requirements
Ask potential buyers for their best offers
Give the lender the best offer
Seller should approve offer
Lender will order a brokers price opinion (BPO)
Educate the buyer
Steps to a Short Sale (continued)
Step 6: Submit a Proposal
Add the offer to the proposal
Create a proposal for each loan
Send it by registered mail to all appropriate contacts
Follow up
Be persistent
Steps to a Short Sale (continued)
Step 7: Negotiate the Deal
Balance negotiations between lenders if more than one
lender
Create systems for communication
Consider leveraging help
Services are available to negotiate
Short Sale Contact Record
Steps to a Short Sale (continued)
Step 8: Close the Deal
Complete the deal within thirty days of lender acceptance
Prepareno surprises at closing
Seller cannot bring cash to the closing
Alert the closing company
Time is a factor
Lenders will limit time to complete a short saleoften in the
range of 60 120 days (90 days for FHA)
Short Sale Math
Critical Numbers in a Short Sale
Initial list price to bank
Initial list price to MLS (may or may not be the same)
Net proceeds required by lender
Bottom-line amount that will cover banks net, plus
commissions
and seller closing costs
Short Sale Math (continued)
Calculation Steps
Establish net dollars to bank
Different lender thresholds for net (FHA, VA,
Conventional)
Factor in commissions and closing costs
Factor in any other fees or costs
Leave room for negotiation
Short Sale Math (continued)
Math examplecollect all relevant data
Miscellaneous Closing Costs Commissions HOA Dues Liens or Judgments
Taxes Owed Market Value Debt Loan Type
Short Sale Math (continued)
Math examplegather all raw data
$200,000 current market value
$210,000 debt owed
$170,000 lenders minimum net (conventional loan)85% of market
value
$3,000 back real estate taxes due
6% real estate commissions
2% seller closing costs
3% negotiation buffer
$0 dues and miscellaneous expenses
continued
Short Sale Math (continued)
Math examplegross up, working backward from lender minimum net
($170,000)