Advice on Short Sales From a Licensed Realtor

Brent Pittman —  09/21/2012 — 9 Comments

my headshotThis is an interview conducted via email with California Realtor Lauri Trapp (License #01265988) regarding short sales. No compensation was exchanged for the purpose of this interview. 

1. Briefly describe how you became a professional Realtor and your experience dealing with short sales. 

I became a licensed Realtor in 1999. When the market began adjusting in 2008 I starting working with a broker that dealt primarily in the short sale market. I worked for this broker for about a year and learned how to advise distressed homeowners in their options and negotiate with their banks to obtain short sale approvals.

2. In your opinion, who should consider a short sale? 

I would say that anyone struggling to keep up on their mortgage payments or unable to make ends meet due to high payments should consider a short sale. In addition, it can be a great option for anyone who is significantly upside down on his or her home value.

I (Brent) would not advocate a short sale based solely on being underwater on your home, nor would I suggest a strategic walk away if you can make the payments. I believe a short sale should be used as a last resort to a foreclosure or in a case of extreme financial hardship.

3. Can you briefly describe how the short sale process works? 

In the short sale process the transaction is basically the same as a standard sale, except we must get lender approval to close the sale. Once a buyer is secured it is necessary to request approval from the lender to forgive the difference between the sales price and the amount owed on the loan.

Generally speaking the bank may request your last 2 months bank statements, 2 recent pay stubs, 2 years tax returns, a financial worksheet and hardship letter. The short sale is not contingent on any one of these items but is taken into consideration. The lender will evaluate the value of the home and If the offer is in line with the lenders value, the short sale should be approved.

The time frame for this process varies from lender to lender but can take anywhere from 2 to 4 months from the time the offer is submitted to the lender to close of escrow. Additionally the seller will not be required to pay any fees or closing costs and could qualify for a relocation fee of about $3000 or more from their lender to be paid at closing.

4. What are the major obstacles with a short sale? 

Since I began closing short sales over four years ago, I have seen a huge improvement in the process. In the past lenders were overwhelmed and understaffed and were unable to keep up with the request for short sales.

The process has become more streamlined and standard. Since we are waiting for lender approval, patience is required on everyone’s part. During the approval period there is a constant need to stay in communication with the lender in order to assure the process goes smoothly.

5. What advice do you have for someone considering a short sale? 

There’s no need to go through a foreclosure when your lender is willing to work with you to sale your property.

Be in communication with your lender so you know all of your options. If you feel you have exhausted all your options for keeping your property then start the process of the short sale. Hire a Realtor that has a proven record of bank negotiations and short sale approvals. They should take care of the entire sales process and help you to have a positive experience.

There’s no need to go through a foreclosure when your lender is willing to work with you to sale your property. If you are in a position where you are constantly struggling to stay afloat and make your mortgage payments and there is no equity in your home, a short sale is a great option.

Having little to no equity (being underwater) in your home is scary, yet irrelevant if you don’t have plans to move.

6. What is the role of a Realtor during a short sale?

The role of the Realtor is to bring the buyer and seller together just as in a standard sale. The added layer is negotiating with the lender for their approval. Some Realtors do their own negotiating with the lenders and others hire negotiators to work with lenders. I do all my own bank negotiations because I like to stay connected and involved directly with the lender throughout the process.

7. What else do you want to tell the readers about short sales?

If you are at a point that you cannot make your payments and it’s a constant struggle or if your house is significantly upside down, then you are no longer reaping the benefits of homeownership. Homeownership should not be a struggle or a stressful situation.

To contact California Realtor Lauri Trapp (License #01265988) about short sale questions or for help in a short sale in the Los Angeles area, email her at lauritrapp at gmail dot com.

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
  • Veronica @ Pelican on Money

    My mom was facing a foreclosure and instead did a short sale. Times are tough, but I’m glad she didn’t go through foreclosure.

    I’m not sure if it’s just me, but sharaholic is not working for me. I wanted to tweet your article but it shows up a blank page?

    • http://www.ontargetcoach.com/ Brent Pittman

      Glad your mom was able to get out of her home. I’ll check on the Sharaholic, thanks.

  • Franci

    Great interview. Thanks for sharing. Not really knowing anything about short sales this helps in my understanding.

  • http://www.moneylifeandmore.com/ Lance@MoneyLife&More

    I bought a short sale… it was a relatively quick process as far as short sales go (offer to closing was only 60-75 days I think) but it was the exception not the norm. I did get a great deal though :)

    • http://www.ontargetcoach.com/ Brent Pittman

      Awesome! If we end up buying anytime soon, I think finding a short sale is the way to go. It’s worth the wait to find the right price.

  • http://twitter.com/barbfriedberg Barbara Friedberg

    We bought a short sale home. It took forever, but the great price made it all worthwhile.

    • http://www.ontargetcoach.com/ Brent Pittman

      I think I could wait for a low price also.

  • AverageJoe

    I think there’s a hidden message here: because the short sale process can be such a pain, find a good realtor like Lauri who really knows the process in and out. An inexperienced pro in this area can cost you plenty of time and money, I’d think.

    • http://www.ontargetcoach.com/ Brent Pittman

      People often trust their biggest asset with their cousin who’s had a license for 3 months. I’d only use someone who has experience with real estate and when short sales come into the equation—only one with vast short sale experience. A good agent will save you money in the end.