Lu,

Tell you friends you can help them.  Doing a short sale is a much better option than foreclosure.  I sold a house a few years ago that was a short sale and 6 months later he had is finances back together and was able to buy a new home.  With a foreclosure on your credit, it could take 2 years or more to be able to buy again.

I have done a lot of Short Sales.  With a variety of banks.  Each bank has thier own procedure so there is no standard proceedure for short sales.  BUT there are some things you can do to protect you and your client.  And you can make it go a little easier if you know what to do.

I am working on a procedure manual for handling short sales.  When I have this done (hopefully by Monday) I will post it here.

If anyone has a specific question, please feel free to email me at Joe@JoeRealEstateFW.com

Make sure the seller can qualify (yours sounds like they do).  Just because the home prices have fallen does not mean a lender will do a short sale.  The seller must have a legitimate hardship.  Loss of job, illness, death of spouse, divorce... The lender will ask to verify this and may ask for paycheck stubs, tax returns, bank statements, etc.  

Lu I would price it at or just below the last sales for that size and condition home.  You are going to get wacky offers, but just remember your client will more than likely than not be given a 1099 for the difference.  A lot of agents don't understand this kind of sale and are treating it like a REO, thinking they are going to get a great deal for their client.  Warn you client about that so they don't get upset.  We have been countering those offers and educating the agents sending them to us.  

They should call the lender and request everything they can (waiver of late fees, early payoff fees if any, and possible forgiveness so no 1099.)  And at this point you seller may be so discouraged and embarrassed they just don't care anymore.  If you explain the process to them you can give them some hope.  The need to contact the lender also.  You would be surprised how many people don't.  The lender will work with them!

You are going to have more questions then answers pop up and Relib is a great place to get some answers.  I think Joe has done the most so far so can give some great advise.

Good luck!

Jana

Lu - Not too long ago I posted a thread titled "How To Do A Short Sale" and posted this link which you may find helpful:

http://www.realtor.org/rmomag.NSF/pages/Feat1200706?OpenDocument

Great article Gene, I read it a couple of weeks ago and just re-read it.  It cleared up a couple of questions that popped up with our buyers offer on a short sale.  Before I was concentrating on sellers end.  Thank you for posting it again!

Lu the article says "In general, most short sale experts say to price the property at or near fair market value, although a few will begin with the total payoff amount owned by the seller. How frequently prices are dropped will depend in part on whether the property is in preforeclosure."

Jana

Thanks for the link, Gene.  And Joe, I am looking forward to your information as well.  I don't have any clients in the short sale situation YET, but awful close.  so being prepared just seems prudent.

thanks for sharing,

shelly

If the lender will not forgive the debt and intends to file the 1099, they can request the lender provide a small loan to cover the difference rather than receive the 1099. This will protect their credit as well as eliminate a tax burden.

Thanks for the link, Gene.

There is also information on http://www.realtor.org., that maybe helpful.  Or, contact your local board for upcoming seminars on short sales.

I am currently handling a short sale for a client ( a seller ). What I am finding is the bank becomes your client as well. Each bank is different and requirements are different from state to state as well. The first thing that I needed in order to get started was a letter from my client stating that I have his permission to contact the bank directly. After that I spoke with the bank and explained the market conditions, we discussed a price that was much below what the client owes and the bank makes a decision.

I invite you to view my interview with CPA Manuel Alvarez on my television show "Let's Talk Real Estate!" as we discus the tax consequences of a Short Sale and Foreclosure. You can view the show online at:

http://www.letstalkrealestate.com/ltretelevision.htm

It is also available in Spanish. Best of luck!

Robert Aldana

REALTOR since 1986 and Host of TV & Radio's "Let's Talk Real Estate!"

www.letstalkrealestate.com

robert@letstalkrealestate.com