To help members get the hang of short sales, we're 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.
This week's questions:
Q. What and how should I disclose about the short-sale property to prospective buyers?
A. Russ: Heartland MLS rules state that short sales MUST be disclosed in the Showing Agent Info field on listings. I disclose all of my short sales in the property description field as well - otherwise called the Remarks or Directions field - but only after first placing notice of a short sale in the Showing Agent Info field.
Buyers should be made aware of what a short sale is and what that means prior to ever stepping foot on the property. Other than HMLS rules, though, the rest of this answer is simply fair and wise business practices, in my opinion.
Q. What information will the bank need to decide whether to accept a short sale? What can the seller and I do to make a short sale more attractive to a lender?
A. Paul: There are usually two times documents should be sent to the lender(s). First is when the listing agreement is signed. At this point, go ahead and fax a Letter of Authorization to the seller's lender(s), giving the seller's permission to the lender to talk with you about loan(s). Second is when a purchase offer has been signed by both sides. Fax a copy of the offer along with the additional supporting documentation all under one cover letter. You might need to contact the lender to know where to fax the information.
Some lenders will specify what additional documents they require. In the event they do not, the following is a common list. Templates of most of these can be obtained by your franchisor, broker, and/or at http://www.realtor.org/. Some faxes I've sent have been 70+ pages. Send all of this under a single fax cover letter:
- Purchase Offer
- Listing Agreement
- Estimated HUD-1 Settlement Statement
- Hardship Letter written from the seller to the lender explaining the situation
- Income and Expense Worksheet for the most recent month
- Savings, Checking, and Loan Statements
- Utility bills
- Medical bills
- Work severance, layoff notice, termination letter, etc.
The seller and REALTOR® should ensure all the documents are complete and sent in a single fax to improve the lender's response time. Lenders will look closely at the borrower's hardship letter, financial statements and bills to evaluate whether or not the borrower can afford the loan now and in the near future.
About Russ and Paul:
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.
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.
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