You’re a Utah realtor, and you thought that in today’s real estate climate, handling Utah short sales was the way to go. You took a few classes and thought you were ready to go. “How hard could it be?” you asked yourself. “Hey, I’m already trained to sell homes; short sales aren’t exactly rocket science!”
Well, you’re right, short sales aren’t exactly rocket science, but if you are unaware or unprepared, there are several big pitfalls that could bite you and your client for some real money.
Here are some short sale pitfalls to look out for:
Pitfall 1 – Money in the bank is not safe
One of the first things you may want to recommend to your client is that they immediately close out any accounts they may have at any bank that services or holds their mortgage and second mortgage. The reason is that many banks have a clause in their bank account agreement documents that allows them to take funds from one account to pay for another account. This clause is in the fine print of most bank’s account agreements that hardly anybody ever reads.
So if your client has a checking account and their mortgage with Bank X and they are late on their mortgage payment with Bank X, then Bank X may sweep their checking account to get money for the mortgage payment. Banks have even gone so far as to extend overdraft protection on a checking account to cover the mortgage payment. And depending on the bank documents this all may be done without notification. Huh, not the kind of situation I want my money in.
Pitfall 2 – Don’t forget about the cash contribution
This little pitfall can come in several places and cost you any further referrals from your client. If you don’t pay attention cash contributions could bite you and your client hard when it comes time for settlement.
Pitfall 2a – Second mortgage holders are tending to want to be paid something now when there is a short sale involved. Your home seller’s goal when they sell their house should always be to have nothing to worry about after the short sale is final. For second mortgage holders – in many cases – they want to be paid some percentage of their balance say: 5-10% to have them satisfy their lien position. Make sure you prep your home seller for this increasing possibility.
