When a homeowner calls you, they usually don’t know if they need a short sale or not. What we commonly hear is:
I need to sell my house or
I can’t afford to make my mortgage payments. The initial questions you ask the homeowner have a big influence on both getting the listing and successfully closing the sale.
We recommend conducting an informational interview, and you can do it right there when you have them on the phone. By asking some key questions, you can discover how difficult the transaction will be, set proper expectations for the seller and position yourself as someone who can successfully solve their problem. Here are 10 key questions you should ask potential short sale clients.
1) How many mortgages do you have and how much do you owe on each?
Since homeowners often don’t know if they need a short sale or not (initially, most of our clients don’t even know what a short sale is), your first task is to determine the total amount of mortgage debt they have.
2) If you were to put your home on the market today, what do you think the price would be?
If the value the homeowner estimates for the home is less than what they owe, you know they’re underwater. Keep in mind that most homeowners tend to overestimate the value of their home, but their opinion will give you a point to start your assessment.
In addition, the homeowner’s estimate of the home’s value is a valuable piece of information in managing their expectations and tempering your discussions. If a homeowner has a highly inflated view of the what their home is worth, you’ll need to take some time to help them understand its current market value.
3) Are you current or behind on your payments?
If they’re current, qualifying for a short sale is more difficult, though there are circumstances where it’s possible. If they’re behind, you can start to evaluate whether they will meet the criteria for financial hardship that lenders require for short sales.
4) Who are your mortgages with?
Because each lender has their own short sale process, knowing who the lenders are will help you determine potential recourse and timelines for approval. Knowing upfront how long the approval process takes will drive your marketing. For example, if Bank X is the lender and they take an average of 90 days for approval, you’re looking at a five month process for closing. That timeline helps you define the type of buyer you need to find. If a buyer needs to move into a new home within 60 days, no matter how much they like the house, they’re the wrong fit.
5) Have you received any notices from your lender?
This will help you determine the potential for foreclosure and the timeframe available to you to attempt a short sale. A Notice of Default is a private notification from the bank to the homeowner. It’s the start of the foreclosure process. Generally, once your client has received a Notice of Default, you have less than four months to come to an agreement with the lender on a short sale. A Notice of Trustee Sale is a public notification from the lender indicating when the home will be put up for auction. If your client has already received a Notice of Trustee Sale, your timeline for finding a buyer and selling the home is significantly shortened.
6) Who is on the title?
It’s surprising how many times homeowners aren’t aware of who is on the title. A common scenario is a title that lists an ex-spouse, in which case that individual will need to be involved in the process as well. Pull the paperwork so you know who is legally obligated in the transaction.
7) Has the home been listed recently?
If it has, that listing price will help you determine what the market has established as its value.
8) How many beds and baths are there?
You want to gather information so you can accurately assess the value of the home. It’s not unusual for a 2 bedroom/1 bath home to show up in the county records as having 2 bedroom/1-1/2 baths. This is also the time to ask about other qualities of the home that may negatively affect the value, such as a less than desirable location next to a freeway or a basement that floods regularly. It’s important to gather information about the home beyond the square footage and bed and bath count the lender will be relying on to value the property.
9) Does the home need any structural repairs?
If the home needs a new roof, you’ll want to get bids that you can submit to the bank to help them set an appropriate price for the property that the market supports.
10) What’s the best way for me to contact you?
Some clients prefer phone calls; others text or email. Calls during work hours are fine for some people and not for others. By respecting their preferences, you let your client know that communication is a priority for you. (Note: Lack of communication is one of the top complaints sellers have about the short sale process.)
If you are working with a buyer or seller on a short sale and have any additional questions, I’d be happy to provide you with advice free of charge. My name is Richard Eastern, and I’m a Windermere real estate
broker and a partner in Washington Property Solutions, a short sale solution provider. Our goal is to help brokers like you provide the best possible service to their clients in the short sale process. If I can be of any help, please give me a call at (206) 612-5541.