What everyone needs to know about short sales

As Edmund Burke stated “all that is required for evil to prosper is for good men to do nothing” 

 

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Love ‘em or hate ‘em, short sales are part of the Real Estate Market for at least five (5) more years. If you have a home loan and need to sell your property for less than what is owed, if you are a Realtor in the US, or if you are a buyer considering purchasing a “short sale”, then you need to understand what is going on in today’s market with short sales.  “Third Party Negotiators” are springing up everywhere but what are they? They are certainly not all the same. Please inform yourself here to avoid unknowingly participating in one of the fraudulent models. 


NLRS, formerly known as RHS was founded in 2004 by Melanie Riekena, a licensed broker, and banker-trained loss mitigator. NLRS is based upon the increasing need for Realtors to marry their excellent traditional skill set with that of trained loss mitigators. We have a close rate that is over 90% of every file we have handled! NLRS is both an outsource firm for Realtors whose seller clients need bank negotiations in order to sell (i.e. the present housing market is such that you either sell a property to pay all loans and liens, or you negotiate because homeowners cannot sell at a price which pays all of their debt in full); and NLRS is an educational resource – not just for obtaining bank approvals, but also to prevent consumers from participating in these  methods which are harmful to them and the housing market in general. In today’s market, there are three primary areas of concern regarding how short sales are being done.

1. Some Real Estate Investors see short sales as a boon to their businesses and prefer to negotiate a seller and prevent any open competition for the property. These are often the “We Buy Houses” or “Cash for Houses” folks with signs at various points in your city. Not all these signs are investors doing short sales, and not every Real Estate Investor is practicing any fraud. The practice that DOES involve fraud oftens happens when a short sale is needed. After getting a property under contract from the seller, and while asking the bank to approve a deep discount, the investor then: 1) re-sells, 2) lease-options or 3)lists on the MLS (see #2 below) the property (without improvements) to an end-buyer;a consumer who wants to LIVE in the property themselves. In simple terms, if an investor can negotiate a bank to sell a property for 200k and then quickly re-sell it for 265k, the investor “earns the spread”, keeping the $65,000 difference for himself.  However, in today’s market, where many properties do not have equity or appreciation, the unique condition about buying by a short sale now is that banks take increased losses, for the investor to earn the spread. This hurts everyone. When the bank must take a larger loss because someone is buying at one price and immediately re-selling for a higher price, the practice is bank fraud. The other victims of this scenario are sellers, who have higher unpaid balances that they needed to resolve, and buyers who pay tens of thousands of dollars MORE for a house than what it sold for a few hours earlier. The whole nation experiences further de-valuation of homes across the country.

2. There are some slight alterations of the above scenario when an investor has gone to the trouble of obtaining a Real Estate license so that they can take advantage of consumers and the traditional Real Estate system. At NLRS, we also view their practices as predatory. However, since traditional Realtors have been hesitant to approach and list the financially distressed homeowner, these consumers/homeowners have been at the mercy of predatory practices of investors or licensed investors who are eager to buy their properties to “make the spread”. THIS is why NLRS has specialized in partnering with Realtors on a NON-predatory model, which is simple: take the property to the open market for the best possible offer the current market will bring and sell only to the end-buyer, not a middle man. There are distinct, recognizable features of this type of short sale listing, that educated Buyers’ Agents can identify and avoid to protect their buyer clients.

3. There is a third predatory practice, which are the fraudulent individuals or companies who tell sellers they’ll do loan modifications or short sales for them and charge a fee up front to do so. Once paid, they are gone and never provide the service. Homeowners – BEWARE! If someone asks for up front fees, let it be a warning sign to you!
   
   

NLRS is attempting to address the models that take advantage of consumers/buyers by offering a legitimate 3^rd party service to sellers, Realtors, and buyers who wish to participate in short sales, but also wish to ensure that they are not participating in one of the above harmful scenarios.

The Website is organized with pages which are labeled for Sellers, Listing Agents and Buyers and Buyer's Agents so you can find the information that is of most value to you fast.  However - please feel free to browse anywhere you wish!

You will find all the downloadable documents you need on the “Resources” page.