Short Sales & Loss Mitigation Resource Center
Short sales have become common transactions for most Realtors®. These lengthy transactions are always a challenge to take on. But those Realtors® who have rolled up their sleeves are realizing the benefit of gaining expertise on these time-consuming transactions. The end result is better service to your clients and better business for you in a trying market.
This is your one-stop-shop to access a variety of resources to make you an expert on short sales and other complicated and distressed transactions.
IN THIS SECTION:
|Short sales basics|
|Short sales forms & contracts|
|Training & education|
What is a short sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Why is the number of short sales so high?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
- Limited experience
Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders' lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
- Absence of a uniform process and application
Until HAFA guidelines were established, both short-sales documents and processes were lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
- Multiple lenders
When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
Click here to access NAR's Field Guide to Short Sales, a comprehensive online resource for information, tools, homeowner information, and more.
Short sales have spilled over into virtually every corner of the state, and in some areas, sales of distressed properties now make up the majority of transactions. The increase in short sales has led to the creation and use of a variety of forms to help manage these complicated transactions. Visit the VAR Standard Forms Center to download the following:
- Short Sale Addendum to Residential Contract of Purchase
- Short Sale Addendum to Exclusive Authorization to Sell
- Short Sales: Information of Purchasers
- Short Sales: Information for Sellers
Click here to access the VAR Standard Forms library (password protected).
There are only two NAR-endorsed short sales/foreclosure-specific certification, the Loss and Mitigation Certification program, offered by the Massachusetts Association of REALTORS®, and the Short Sale and Foreclosure Resource (SFR) certification. However, CRS and REBAC (both NAR-endorsed designation programs) have stepped up to the plate curriculum-wise and developed short-sale specific courses. PLUS: the Realtor® University offers an auction primer course.
Short Sales & Foreclosure Resources Certification (SFR)
Designed for real estate professionals at all experience levels, NAR’s new Short Sales and Foreclosure Resource certification, or SFR for short, gives you a road map for understanding how to:
Counsel sellers facing foreclosure
Qualify sellers for short sales
Develop a short-sale package
Negotiate with lenders
Tap into buyer demand
Safeguard your commission
Council of Residential Specialists (CRS) Short Sales and Foreclosure Course
The course explains the intricacies of the short sale and foreclosure processes, as well as the roles of lenders, sellers, buyers, and cooperating agents involved. Dialogues and systems for working with financial institutions and other owners of REO properties are also provided.
Foreclosure and Short Sales Course for REBAC-Licensees Only
This course helps students evaluate all available options for distressed homeowners and identify the components of an effective short-sale package. This course looks at how real estate professionals can counsel buyer-clients in the purchase of foreclosure properties.
Loss and Mitigation Certification Program (MA Association of REALTORS®)
The one-day Loss Mitigation Certification course (LMC) equips REALTORS® with the tools to work on the complicated transactions involving foreclosures and REOs, short sales, and auctions. The LMC is now recognized by the National Association of REALTORS®.
Freddie Mac "Introduction to Short Sales for Real Estate Professionals" Power Point
From the Freddie Mac Intro to Short Sales Webinar, this presentation covers:
Background and key statistics on delinquencies and workouts
Real Estate Professional’s perspective on current environment
Retention and Liquidation Workout Options
Webinar on NAR's Foreclosure Prevention and Response Program
This webex session will provide information on NAR’s $3 million initiative to help state and local Realtor® associations develop and implement action plans related to the foreclosure crisis. NAR will provide funding, allocated according to membership levels, to allow state and local associations, on a coordinated basis, to carry out activities that are suited to local needs. See also: Powerpoint from Webinar on NAR's Foreclosure Prevention and Response Program.
Realtor.org Field Guide to Foreclosures
This field guide provides links and tips for the potential investor as well as help for those trying to prevent foreclosure. Also included is a video by Freddie Mac (in English and Spanish) on avoiding foreclosure scams.
- Realtor.org Field Guide to Short Sales
- REALTOR® Concerns about Short Sales and NAR Response
REALTORS® have sounded the alarm about the short sales process. This is what they are reporting to the National Association of REALTORS® (NAR).
- Introduction to Real Estate Auctions (Realtor® University)
This course will help you understand the auction marketing process; the sellers, properties, and markets for which auction is best suited; and the ways in which real estate agents can work with auction firms.
There are non-NAR educational resources through a myriad of government and consumer advocacy agencies.
Center for Responsible Lending
As a non-partisan research and policy organization, CRL provides you with expertise on the financial services industry, whether it’s about mortgage lending, payday loans, credit cards or a host of other products and services that have a daily impact on the wallets and economic well-being of every American.
Foreclosure-Response.org is an online guide to foreclosure prevention and neighborhood stabilization developed and maintained by the Center for Housing Policy, KnowledgePlex, the Local Initiatives Support Corporation (LISC), and the Urban Institute.
- Navigating Short Sales, by Lem Marshall, originally published in the May 2008 issue of Commonwealth Magazine
- Defaulting on the Dream: States Respond to America's Foreclosure Crisis, report published by the Pew Charitable Trust, April 2008 (.PDF download)
- The Complete Short Sales Process, by Elizabeth Weintraub of About.com
- Short Sales: The New Wild West, by Robert Freedman, originally published in the March 2009 issue of REALTOR® Magazine
- NAR's Field Guide to Short Sales
The Code of Ethics is what sets Realtors® apart from the crowd. It's more than a conceptual guide to right and wrong. It’s a powerful business tool that leads to more sales, more referrals and more profitable, long-standing relationships with both clients and other Realtors®.
The complexity of short sales and distressed property sales makes ethical practice an absolute necessity. These tools will guide you through making the right decisions for you and for your clients, everyday. Below you'll find some guidelines to keep the transactions going smoothly.
Ethics Dialogue Group
Five local associations in a part of Virginia that has been heavily affected by short sales have joined forces to address the ethical issues that often crop up in short sales transactions. Their Web site offers a Reference Guide as a tool for Realtors to serve clients with utmost professionalism.
Beyond the Golden Rule: Ethical Practice Means Professionalism
Don't miss NVAR's comprehensive guide to ethical practice within the sphere of the changing Virginia real estate market.
Community Response to Foreclosure Crisis: Thoughts on Local Intervention
From the Federal Reserve Bank of Atlanta comes an objective look on the effects of short sales on the real estate industry and what it means for the future of the market.
Foreclosure Prevention Practices
From the National League of Cities
Defaulting on the Dream: States Respond to America's Foreclosure Crisis
From the Pew Charitable Trusts, an overview of the forclosure crisis and "what it all means."
Vacant and Abandoned Properties: A Survey and Best Practices
From the United States Conference of Mayors, a best practice guide to working with vacant and abandoned properties. Flip to page 38 for content from Alexandria, VA: Blighting Influences Program/Spot Blight Abatement Program.