Short Sales here to Stay, Title Company Official Tells REALTORS®

Katherine Handley, senior vice president of Old Republic Title Company

Short sale transactions are not just passing through the market; they are here to stay for at least three or more years, according to senior vice president of the Old Republic Title Company Katherine Handley. Handley advised REALTORS® at the Cupertino/Sunnyvale District tour meeting this week to learn as much as they can about these types of transactions, so they can render the best assistance to their clients.

Short sales used to be more prevalent in the lower-end markets impacting the huge, growing subdivisions that had overbuilt and subprime loans, but these days, they are starting to impact higher-end markets. Handley has also observed some lenders have become more pro-active.

“They will curtail REOs as much as possible and be more active in working out a short sale,” Handley said. 

She also stressed, “There is no such thing as a quick and easy short sale. They are brutal.”

With a few exceptions, the standard time for a short sale transaction from close to finish is four to five months, or longer. Handley gave her opinion on several lenders:

• Washington Mutual/Chase is on Handley’s “horrible” list because it could take four to five months or more before you can personally speak to a negotiator.

• Bank of America/Countrywide has improved its process with the introduction of equator.com, which allows licensed agents to register, upload information and communicate through this platform. This appears to be speeding up the process.

• Wachovia is on Handley’s “best” list because this institution is being very pro-active and has local people who immediately meet with the sellers to determine hardship. Transactions can take only 45 days. This lender will also offer up to 7 percent commission for agents. It is the only lender to give the seller a cash-out at closing.

• Wells Fargo is also improving slowly.

Here is Handley’s advice to REALTORS® whose clients are considering a short sale:

1. Give your client ALL options up front, so your client can decide whether a short sale or a foreclosure is the right route to take.

2. Partner with a knowledgeable, experienced attorney and CPA even before putting the property up as a short sale. These experts will be able to advise and guide your client on what to expect.

3. Make sure you know whether the seller has a recourse or nonrecourse loan. Handley said at one time second lenders were complacent and satisfied with a small amount of money; these days they have become more aggressive and even ruthless, pursuing the seller immediately after closing.

4. Prepare the seller, buyer and buyer’s agent for the time frame. “Make sure all parties are willing to go all the way. If they are willing to hang on, then you will have a greater chance of success,” Handley said.

5. Once the lender reviews the package and comes back with conditions, be proactive and creative with solutions.

6. Read the short sale approval letter carefully. The letter will contain conditions that affect the buyer and the seller. These letters are time sensitive, usually with a window of 30 days. Delays will come at a price, such as losing the deal, a reduction in commission or a per diem fine.

7. Make sure letters between the first and second lenders match.

8. Make sure it is an arms-length transaction. Parties cannot be related.

9. There are no flips on short sales; you cannot immediately transfer the deed to the property.

10. Learn everything you can about short sales.

“The best advice I can give you is learn short sales, arm yourself with someone who can give you tax and legal advice, learn what they are all about so you can be a true professional and help your client,” Handley said.