by Christopher Reale
on August 30, 2011
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
- 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
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