Short Sale Blog

In general, short sales are despised in the real estate industry. People tend to stay away from them like the plague. Common concerns are how they drag down the market prices, how difficult they are, and how much time they take to follow-up with the foreclosing lender. Frankly, these are misconceptions, put forth by inexperienced agents and rookie short sale negotiators. Short sales are currently the fastest way to get property sold, and take less effort for an agent than a conventional listing, if done right.

Let's start with the facts. I just did a review of closed sales on the NWMLS in July and August of 2009 in King County for single-family homes. The average time on market was 121 days. With an estimated average closing time of 30 days, that would be around 151 days (or five months) for a conventional listing, start to finish.

Looking at the last seven Seattle Short Sales short sale closings, start to finish: 106 days. That is 45 days quicker than a conventional listing. Now, to be fair, closed short sales in King County, as tracked by the NWMLS, during the same time period averaged 189 days, start to finish. But those weren't Seattle Short Sales short sales. Let's look at the difference between a conventional short sale and a Seattle Short Sales short sale.

A conventional short sale takes 60-90 days to get an offer. The lender then takes another 60-90 days to do their BPO and make a decision. Then you close after approximately 30 days. That's how you end up with an average time of around 6 months. To Seattle Short Sales, that is a completely unacceptable amount of time. Most of the time, the seller doesn't have 6 months to wait for the process to unfold. They need results immediately. Here is how the Seattle Short Sales short sale process works:

Day 1: The listing goes live at the fair-market value price. We submit an immediate offer to the foreclosing lien holder at 80% of FMV. This offer is supported by comps of other distressed properties. It is just high enough to be in the 'automated valuation' range of the lender.

Day 7-21: We work to get the BPO ordered and completed. Our offer includes every piece of information that the lender needs, the first time. We don't send incomplete short sale packages. Our file rises to the top of the stack and gets processed quickly.

Day 30: After 30 days, per NWMLS Form 22, without mutual acceptance, the offer is automatically rescinded. The offer we submitted was a valid, investor offer. If we receive a payoff within 30 days the buyer is prepared to step in and close on the transaction. Rarely, if ever, will a lender issue a payoff within 30 days.

Day 30-45: During the time between the offer being submitted and the BPO being completed, the seller is packing and moving. It is great if the house is in disarray when the BPO is completed. Once the BPO is complete, the house is cleaned, staged, and made move-in ready. The price is lowered by 10%, and the agent remarks are changed to state that the lender has completed the BPO. Quite often, at this point, the lender has countered the original offer and we can put in the agent remarks that we have verbal approval at the current listing price. These agent remarks are the key to getting strong offers on the property quickly. Without those remarks, buyer's agents will stay away from the property.

Day 45-60: An offer, or multiple offers are received. We look for the strongest offer and send it to the lender. This offer is usually 10% higher than the first offer, and the lender is appreciative of our successful marketing of the property.

Day 60-90: Payoffs received from lender. The BPO had been done already, the lender's negotiator had already named a price, and we quickly delivered a buyer who could meet that number and is cash strong, and ready to close. The only delay at this point is when the file needs to be sent to FNMA or FDMC or a PMI company for final approval.

Day 90-120: Closing. We recommend that buyers get their ducks in a row early. We tell them that there isn't a guarantee that we will get a payoff, but that when we do, we have to move quickly. Their investment in getting a property at 10% off an already low market price might be the cost of their inspection or appraisal, but that may be a wise investment in order to make the transaction close on time.

Everything we do is based on previous experiences that we have learned from. We are constantly looking for ways to become more efficient in the short sale process. We track every data point and attempt to compress the timeline on every transaction. Our goal is to get the homeowner's account settled as fast as possible, get the lender their money as fast as possible, get the agents paid as fast as possible and get the buyer into their new home as fast as possible.

If you are a real estate agent and would like more information about the Seattle Short Sale Advantage, please register for our next Webinar, where we will cover the process from start to finish and get all of your questions answered.

http://www.SeattleShortSales.com/webinars/

If you are a homeowner, please complete the following form and we will be in touch with you immediately: http://www.SeattleShortSales.com

We look forward to serving you.

Best regards,

Ross Kilburn
General Manager, Seattle Short Sales