Short sales: Getting creative

It's no secret that short sales are a lot of work and the reason why many real estate agents don't bother with them.

However, for the ones that do, it's frequently a challenge to get a reasonable offer to start the process with the lender.

One Solution : Some agents are turning to technology, by marketing a short sale through an online auction so they can get the highest & best offer within 2 weeks or less. This approach leverages the auction process to drive the demand and price up while also providing an offer that can be easier to justify because it was determined in an competitive bid situation.

Here is a simple overview of the process...

1. The property is marketed using an online auction platform (in coordination with the MLS) for as little as 1 week. It includes holding at least 1 open house preview, preferably 2. In the auction terms it MUST be clear that the high bid is subject to lenders approval. The online auction makes it simple for buyers and their agents to submit offers and it's all automated (No more juggling multiple offers and all the paperwork involved).
   
   
2. When it ends, the high bid is written up as an offer and presented to the lender. In addition, the agent also explains to the lender how the property was marketed through an online auction, and they provide stats such as number of people who visited the property, number of bids, number of people bidding, etc.
   
   
3. The short sale process is managed as normal, but the agent can also follow-up with the non-winning bidders and sell them other properties.

This is a very simple overview as there are a several other details that make an online auction successful.

If you are involved in short sales, you're welcome to come learn more about this progressive sales strategy. Real Estate Auction Webinar - Click Here

Short sale - Need an offer

In order to avoid foreclosures, lenders are often willing to discount what is owed on a home. This is known as a short sale and it is offered in situations where the homeowner can no longer afford to stay in their house.

The reason lenders are willing to do this is because it can be less expensive than foreclosing and taking the home back.

This situation happens a lot and the homeowner is usually told by the lender bring me the best offer you can and we'll see what we can do.

What's the best way to get an offer?

Many agents list the property in the MLS and in their description they indicate it's a short sale situation. Then, they wait. They usually need to lower the price several times before someone finally makes an offer. Many times taking several weeks and even months. This can be a big problem because the lender will not wait very long before they proceed with the foreclosure.

Is there a better way? Absolutely!

An agent can market a home using online bidding.

The process can take as little as 3 weeks and the result is a solid offer backed by statistics of bids and property showings which can be presented to the lender.

Real estate agents owe their clients a solid market process to get them the best offer in the least amount of time and online bidding/online real estate auctions do just that.

Technology has provided the tool, congratulations to agents taking advantage of it!

How many bids did you say?

It's no secret that the real estate market is being challenged with a lot of foreclosures as well as a growing number of homeowners facing foreclosure.

Lenders don't want to foreclose and take back properties because it's a big liability for them. One option they offer is to give a discount on what is owed to them so it's easier for the seller to find a buyer. This is commonly known as a "short-sale".

The challenge is for the lender to figure out how much a property is truly worth. They usually pay for BPO's (Broker Price Opinions), but as the title suggests it's still just an opinion.

There is a solution that is gaining popularity quickly. Real estate agents with clients facing foreclosure, are starting to use online bidding to help the lender determine true market value of a property while also finding a buyer.

As a lender, there isn't anything more convincing than being presented an offer in a short-sale situation for a property that has been marketed for 2-3 weeks and has received over 100 bids.

The lender, homeowner, seller and Realtor all benefit from this process. No wonder there is a growing number of agents using this process.

Auctions good for short sales?

As lenders become more desperate to avoid the growing number of foreclosures, I see another good use of auctions.

Typically a homeowner facing foreclosure contracts with a real estate agent to sell their home. If the homeowner has equity, they have a better chance to sell fast by giving a discount.

However, if they don't have equity they are forced to try and sell their house at or above market value so they can pay closing and agent fees. This leaves them in a tough situation which usually ends in foreclosure.

Fortunately, some lenders will consider a "short sale". A "short sale" is when the lender agrees to take less than what is owed so they don't have to go through the foreclosure process and take the house back. Lenders do this because they do not want to own property.

If a lender is willing to consider a "short sale", it would be a great use of an auction. You can market the property through an auction for 2-3 weeks and make the high bid subject to lenders final approval. Then you can take the high bid and present it as an offer to the lender. When you present it you would also explain how you marketed the property. You could provide stats such as number of people who visited the property, number of bids, number of people bidding, etc. I think most lenders would seriously consider accepting an offer presented in this way.