We are honored to have Christopher Reale, Director of Short Sale Operations at Lepizzera and Laprocina Title and Escrow Services, as today's guest blogger. He is an expert on the short sale process and will share his knowledge with us on a regular basis. - The KCM Crew
In any business discipline, having the proper mindset is the key to a successful business venture. This holds true in the Real Estate industry. Now more than ever, having the proper “Short Sale Mindset” is a key ingredient to a successful short sale transaction. In order to have the proper” Short Sale Mindset” we need to ask ourselves:
What are the parties involved thinking?
During our nationwide educational seminars regarding the short sale process, we have found the following mindsets to permeate the industry:
- Listing Agents - The short sale process is too lengthy. It is impossible to deal with the short selling banks.
- Buyers - The short sale process takes too long. We want an answer from the short selling bank ASAP. Why should I wait to purchase a short sale when I can purchase a non- distressed asset?
- Sellers - What is the point? I am just going to let the bank foreclose.
- Banks - Their mindset changes all the time!
The Key to Success
The following comments, though general in nature, are the keys to changing these mindsets.
1.) Listing Agents - Though the short sale process does take longer than the traditional non distressed property sale, the short sale process on average is taking 72 days from start to finish. If the agents are properly positioned to negotiate with the bank, preferably through a law firm who has experience in the short sale process, their mindset will change. Taking the negotiation burden off the agent will allow them to properly market the property and help the distressed seller.
2.) Buyers - Understandably the short sale process is lengthy and not every buyer is a “short sale buyer” depending on their individual circumstances. However, according to the Realty Trac Foreclosure Report dated 8/23/2011, a buyer who engages in the purchase of a short sale will typically purchase the property at a 21% reduction to the current market value. That means INSTANT EQUITY for the potential buyer. In most cases this will change the mindset of the buyer.
3.) Sellers - In nearly every instance, a short sale is more advantageous to the seller than a foreclosure. We will cover this in detail in a later post.
4.) Banks - It is apparent the bank’s mindset changes on a day to day basis. However, through successfully negotiating over 1000 short sale transactions, we have found one common thread to be true. Banks are becoming more and more open to a discussion regarding short selling a property. We will again reference the RealtyTrac Foreclosure Report to explain our point. If a bank approves a short sale, on average, they will be approving a sales price that is at 79% of current market value. The other most common loss mitigation option is for the bank to foreclose on the property. When sold, the bank will sell the REO asset for 60% of current market value. Their mindsets are changing!
We certainly understand that a short sale transaction is not one without its complexities. That being said, if we change our mindset when dealing with them, we will be truly doing a service to our communities and the entire Real Estate market.