Blog

Short Sale Success: Key is to Change Our Mindset!


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.

Share
Christopher Reale

About Christopher Reale

Christopher Reale is the Director of Short Sale Operations at Lepizzera and Laprocina and is the Co-Founder of The LepLap Institute. Since 2007, Lepizzera and Laprocina has successfully negotiated over 2,500 short sale transactions. The LepLap Institute is the issuer of the Certified Distressed Property Lender™ (CDPL) designation. For more information, go to www.CDPLender.com.

21 Responses to “Short Sale Success: Key is to Change Our Mindset!”

  1. Chris Hacker August 30, 2011 at 12:17 pm # Reply

    FYI

  2. Nancy Shelton Williams August 30, 2011 at 3:18 pm # Reply

    You have address good reasons for all to consider and utilize the short sale option but one...... Sellers become highly adgitated with their banks for numerous reasons (some legitimate... some not). Can we next address the advantages for a seller to tolerate the short sale process? Thanks so much!

    • Steve Harney August 30, 2011 at 4:07 pm # Reply

      @Nancy,
      We will be covering this to a certain degree tomorrow.

  3. David Slack August 30, 2011 at 4:41 pm # Reply

    Thanks for this information. A couple of additional thoughts:
    1) Listing agents - continue to take CE and seminars on this subject. Yes it takes time but it's an investment in your business and your clients. The short sale process continues to evolve and we need to stay current.
    2) Buyers and their agents - too many buyers have been listening to the media, their favorite uncle, etc, saying that "they" are saying (whomever "they" are) that the local market is "down 30%". They then proceed to make an offer 30% below the current list price no matter how reflective that list price is of where current market - less short sale and maintenance adjustments - currently is. Short sale offers that have no chance of closing are a waste of the buyer's, seller's, realtor's, and lender's time.
    3) Sellers - keep the objective clearly in mind at all times, which is to get you out from under the burden of the deficiency on their loan. It constantly amazes me when a seller's ego gets in the way of considering an offer they ought to take - or when a seller refuses to cooperate with the sales process - all while they're tens or hundreds of thousands of dollars under water. We need to keep coaching them that the goal might be the most important thing in their lives right now.
    4) Lenders - in addition to trying to get your seller qualified for a HAFA sale, several of the "Big Four" lenders are beginning to offer their own "private HAFA" processes with much larger incentives. If seller, realtor, attorney, and lender all cooperate with the process these lenders are offering significant incentives to sellers willing to stick with the process until the sale closes.

  4. Jim Warns August 30, 2011 at 4:48 pm # Reply

    "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. "

    Did you mean to write "market value" or "loan balance?"

    • Steve Harney August 30, 2011 at 5:54 pm # Reply

      Both percentages are in relation to market value (what a non-distressed property would sell for).

  5. Seth September 5, 2011 at 2:42 pm # Reply

    We absolutely agree with you. Short sales do take a certain mindset - in addition to perseverance and preparedness (for both the borrower and the buyer). Thanks.

  6. Chad Kumpe September 10, 2011 at 9:14 am # Reply

    I am wondering how much success agents are having with HAFA the Treasury "Short Sale" program we had three classers on at the New Orleans NAR meeting.

Trackbacks/Pingbacks

  1. Short Sale Success: Key is to Change Our Mindset! | Richard Barrow Utah Mortgage Professional - August 30, 2011

    [...]  Print [...]

  2. Short Sale Success: Key is to Change Our Mindset! « Bruce Murphy - August 30, 2011

    [...] Short Sale Success: Key is to Change Our Mindset!. Share this:FacebookTwitterEmailPrintLike this:LikeBe the first to like this post. [...]

  3. Short Sale Success: Key is to Change Our Mindset! « pattigregory - August 30, 2011

    [...] Short Sale Success: Key is to Change Our Mindset!. Advertisement LD_AddCustomAttr("AdOpt", "1"); LD_AddCustomAttr("Origin", "other"); [...]

  4. Short Sale Success: Key is to Change Our Mindset! | Ft. Worth and Dallas Area Happenings - August 30, 2011

    [...] Short Sale Success: Key is to Change Our Mindset!. Share this:TwitterFacebookLike this:LikeBe the first to like this post. This entry was posted in [...]

  5. Short Sales…a shift in mindset is proving to lead to benefits to all parties | Home Search West Of Boston - September 2, 2011

    [...] to benefit the banks, the sellers and the buyers. This week, the KCM Blog focused on short sales.  In one post, they had a guest blogger featured who summed up what the previous mindset [...]

  6. Des Moines Short Sale Success: Key is to Changing Our Mindset - January 4, 2012

    [...] Article Source Filed Under: Short Sales Tagged With: Des Moines, Iowa, Johnston, Real Estate, realtor, Short Sale [...]

  7. Short Sales Skyrocketing - June 19, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  8. homessoldbylou | Short sales Skyrocketing - June 19, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  9. Big upswing in short sales of real estate « massachusettsrealestatesearch - June 19, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  10. Short Sales Skyrocketing! | timmorissette - June 19, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  11. Short Sales Skyrocketing | Presenting Sonoma County - June 20, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  12. Short Sales Skyrocketing | Charleston SC Real Estate | Carolina One Real Estate - June 20, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

  13. Lisa Carlson | Short Sales Skyrocketing - June 25, 2012

    [...] Short Sale Success: Key is to Change Our Mindset! [...]

Leave a Reply