To help members get the hang of short sales, we'll be publishing a series of articles with Practical Tips on Short Sales over the next several weeks. We've partnered with members Russ Bouknight and Paul Surles, two agents well-schooled in short sales, to give all our members the lowdown on what you need to know in this growing niche. Russ and Paul will answer one question on short sales each week.

Russ has worked in real estate since 2002 and has achieved between $3.5 million and $8 million in sales volume per year ever since. In the past two years, he's listed approximately 95 short sales.

Paul works with Realty Resource, LLC and has been the listing agent or has partnered with other listing agents to educate sellers about their options to avoid foreclosure over the last two years. He’s sold both investment property and personal residences as short sales.

This week's questions:

Q. What are the advantages of a short sale, for both the buyer and the seller? The disadvantages?

A. Russ: Short sales provide many advantages for sellers. First, it can be a prideful exit to a bad situation. The seller can get a sold sign in the yard to avoid an eviction notice from the sheriff. Also, the seller can stay in the home until closing, as in a normal sale.

The advantage for buyers is that they can usually purchase a short sale home at 10% to 18% below the average neighborhood value. The home is generally left in better condition than foreclosed homes, which is exactly what we’re trying to avoid with a short sale.

However, a disadvantage to the seller is when the seller does not know if the sale will be accepted by the lender and if the buyer will wait - closings usually take longer in a short sale situation (in some cases, closings can be as short as 35 days but can also be up to 65 or 70 days) and buyers also have to wait longer to hear if their offer was accepted by the lender. Sellers are also not sure if their lender will pursue him or her in the future for a judgment on the remainder of the debt.

Q. How do I know a short sale when I see one? What are the first things an agent should do when he/she realizes the transaction will be a short sale?

A. Paul: The first general sign of a potential short sale is when you realize the seller's net proceeds at closing will be short of what is owed to payoff mortgages and potential back taxes and HOA dues. This conversation could come up as early as when the listing agent starts talking with the seller about the suggested list price. Sometimes the topic comes up when you share with the seller his/her estimated settlement proceeds worksheet and discover the seller doesn't have the funds to cover the shortage.

We as REALTORS® have an opportunity to help sellers avoid foreclosure and stabilize our neighborhoods. My first recommendation for every Realtor is to visit www.Realtor.org and click on "Right Tools, Right Now" and learn from the multitude of short sale articles and resources. This will give listing agents enough information to provide sound advice to sellers about their options to avoid foreclosure, which might be selling their home "short" of what they owe.  

Next is to decide if you have the knowledge and resources to list the property yourself. If not, I always recommend the listing agent bring in another REALTOR® with short sale experience to at least help navigate at least your first one or two short sale transactions. Doing this also gives you an edge over other competing listing agents by letting the seller know you have the experience on your team to help them.

Want to know more about short sales? Check out upcoming courses at KCRAR - including one for CE, "Don't Get Caught Short," and a Free Friday Focus Workshop in which you'll hear the advanced ins and outs of the subject. And go here to register for the classes.

Watch for more on short sales next week! If you've got a short sales question for Russ or Paul, e-mail Kelli Bamforth, Communications Manager, at kellib@kcrar.com or call 913-266-5907.