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Psycholgy of the Short Sale

Psychology of the Short Sale

Whether you are a buyer or seller, the short sale process can be an extremely frustrating.  As agents we have inherited the role of therapist, psychologist and counselor.  Without an in depth conversation with our customers prior to embarking on the short sale route, the chances of closing a deal are slim to none. 

As a seller, the thought of giving up your home takes an emotional toll.  The thought of failure, losing equity or having made the wrong decision is unbearable.  It is up to the agent to share the appropriate information, so that they feel comfortable making the ultimate commitment.  The seller’s must understand that will be one of a million home owners, who are faced with being “upside down” with the home’s value.  The banks offer this service, so that homeowners can take advantage of alleviating the imbalance of value in their home.  If a simple loan modification is not enough, than a short sale is their only option.  A seller should consider this a sound business decision versus losing their home.  It is easier said than done, although the sooner the seller can separate themselves the better.  I have many families that will leave their homestead property and rent, so that they can get on with their lives. 

The seller has to come to terms with the idea of late payments on their credit versus a foreclosure.  Some owners cannot face their problems and end up in a far worse place, than if they confronted the issue with a qualified and experienced agent.  Long term, the late payments and a satisfied mortgage versus a foreclosure is a better re-starting point than a foreclosure or bankruptcy.

The first thing that a seller should know is that they must be behind on their mortgage payments in order to apply and qualify for a short sale.  In addition, the bank will not entertain the process until there is a contract and HUD 1 submitted.  Sellers assume that they should be the ones to determine the acceptable price of the contract.  The price is irrelevant and only a starting point for the bank to their thing.    Eventually, the bank will offer their approved price, so the asking price is irrelevant.

As a buyer, I believe it is even more difficult to come to grips with process of contracting and actually, closing on a short sale property.  The first thing that I share with the buyer is that there are no guarantees.  Again, the process must be handled like a business transaction with the emotional commitment on the back burner.  The time frame is uncertain; the banks process is infuriating and the agents non- communication was enough to pull out your hair.  I worked with a family that was determined to buy a short sale.  After ten months and numerous contracts, they removed themselves from the search all together.  As much as I attempted to convince them that the negative and idiotic things that occurred were to not be taken personally, they could not stomach the insults.  In hien site, they missed a great opportunity within the first couple of weeks because they felt that there was a better deal around the corner.  They refused to afford “market value” and only wanted the “deal” of the century.  The biggest lesson learned is that short sales are not always the best deal.  The banks utilize the same comparable properties that agents do to evaluate the value.  The misconception is that you can buy below market and steal something; this is truly a waste of time.  Some of my short sale properties have been rented with the permission of the bank; they want to wait for the market value to increase instead of giving it away.  Buyer’s have a better chance of finding a “deal” by searching for bank- owned homes or seller’s that are desperate to sell and have priced their home correctly. 

As soon as a buyer tries to put some sense to the process, you know that they are wasting their energy.  The banks are so overwhelmed with these mitigations, that there is nothing ethical, moral, emotional or friendly about their short sale process.

All I want for Christmas??........  a phone call from a family that is not upside down or have lost a job.  How about, “we are pregnant and need a bigger home”, or “ I got promoted and want to buy up”.  We cannot go anywhere but up from here, those of us who have survived will be the most experienced and appreciative.

 Cheers to a prosperous 2010!

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