Short selling a house can be a complex proposition for homeowners unfamiliar with the process. Here are key questions to ask before signing a listing agreement to help ensure that your agent is working in your best interest.
1. What’s your plan to bring me the highest and best offer for my house?
This is the most important question a short seller should ask. Distressed homeowners usually don’t care about how much their home sells for because they won’t get proceeds from the sale. Instead, many tend to accept any offer that their agent brings them and trust their agent to look out for their best interest. As the seller, however, you still have responsibility to bring the highest and best offer to your lender. In addition to being held liable for higher tax consequences, a mortgage lender could rescind the sale if it feels that fraud occurred in the real estate transaction. Also, do your due diligence if an agent immediately submits an offer from a prearranged buyer on the same day your property gets listed — especially if your agent is representing the buyer as well. Unless your agent can show that the offer is for fair market value, it’s always better to let the property sit in the market a bit to ensure you get good offers.
2. How many short sales have you successfully negotiated?
Short sales are more complicated than your typical home sale so experience counts. Try to get an agent who has successfully negotiated at least 15 short sales, if possible.
3. What is your success rate for short sales?
A good short sale agent should be able to close at least 90 percent of such transactions, preferably over a long period. Don’t forget to ask about their unsuccessful cases and why those did not pan out.
4. What common reasons are given by lenders to deny a short sale?
It’s important to understand why your lender might not accept your short sale and be prepared early on. If you are working with an experienced short sale agent, he or she will be able to go through reasons why lenders don’t accept short sales.
5. What are my tax consequences and how will a short sale affect my credit?
These questions should be referred to a CPA and a real estate attorney. Your agent should have names of good real estate attorneys and CPAs to refer you to.
6. Should I continue to pay my mortgage payment and HOA dues?
Your agent should never tell you to stop making your mortgage payment. Mortgage lenders will sometimes state that a missed payment is required in order to move forward with the short sale process. However, that information needs to be communicated directly between you and the lender. Be cautious of any agent who tells you to stop making your payment.
7. Do you charge an up-front fee to negotiate short sales?
You do not need to pay an agent to negotiate the short sale. Avoid agents who charge fees up front.
8. Who pays the commission?
The mortgage lender or lien holder pays the commission.
9. Is a short sale my best option? What are my other options to avoid foreclosure?
A responsible agent will explain all of your options. Be wary of agents who provide limited information regarding other options and push you only towards a short sale.
10. Have you worked with my lender before?
Each lender operates a little differently, so you want an agent who has experience with your lender. Working with an agent who knows how your bank operates is key to a successful short sale.
Being informed is key when doing a short sale so don’t be afraid to keep asking questions throughout the process.