How Not to Sell A Short Sale - - The “No Showings” Approach
Why is selling a home as a short sale without showing it problematic? A short sale is not like a regular sale. Yes, the owner gets to decide what offer they accept and will present to the bank. And yes, the highest offer is not always the best offer. However, in a short sale, the owner must ask the short sale lender’s permission to sell the home for less than the balance owed. As a part of that process, the short sale lender wants to know that they are receiving market value for the home and that the seller will not directly benefit from the short sale. Although the short sale lender will perform a valuation of the property, their valuation does not substitute for true market exposure.
In general, the short sale home has to be sold in an arm’s length transaction, meaning, for example, that the seller’s family members or business partners cannot purchase the home. In fact, most of the major lenders (Bank of America, Wells Fargo, CHASE, GMAC) require that the parties (including agents) sign a short sale affidavit attesting that the sale is in fact arm’s length. If the home has never been shown and access completely denied, it can create a question or red flag to the short sale lender. Lenders want to be sure that the short sale is not an ‘inside deal” and that there was an effort to obtain maximum value for the distressed property.
In agreeing to accept a short sale, the short sale lender expects that the home was properly marketed, and that includes advertising the home, and also showing the home to potential purchasers. Since “no showings” is not how most people sell their home when they hope to profit from the sale, it is hard to argue that it is a legitimate way to sell a home when the bank is being asked to take a loss. Every situation of course is unique, and I can certainly envision a situation where a home needs to be short sold and no viewings are possible. In that situation, at a minimum, full disclosure of the restricted marketing of the home should be made to the short sale lender to protect the short sale seller from subsequent claims that the short sale was an inside deal.
Before deciding whether to short sell your home, it is essential that you obtain legal and tax advice, and consult with an experienced local short sale agent. If you are considering a short sale of your Central Coast home and would like a complimentary short sale consultation, please call my office to schedule an in person meeting or a telephone consultation at (805) 878-9879.
Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She has successfully completed short sales with Bank of America, Wells Fargo, CHASE , GMAC, Seterus, CitiMortgage, Green Tree Servicing, Specialized Loan Servicing, HomEq Servicing, Wachovia, Coast Hills Federal Credit Union, Select Portfolio Servicing, and others. She is a Certified Distressed Property Expert (CDPE), Short Sale and Foreclosure Resource (SFR) and Certified HAFA Specialist (CHS) serving California’s Santa Barbara and San Luis Obispo Counties.
* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement. Tni LeBlanc and MInt properties are not affiliated or endorsed by any lender.
Copyright© 2012 Tni LeBlanc *How Not to Sell A Short Sale - - The “No Showings” Approach*
Tni LeBlanc, Broker
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