Do It Yourself Short Sale

A couple of days ago, someone found this blog using the search term “do it yourself help +short sale“.

Yikes.

Here’s the deal. If you want to “go FSBO” — ie: sell your home “For Sale By Owner” — more power to you. As a real estate agent, of course I’d prefer for you not to go that route. I don’t think selling your single largest asset on your own is a good idea, but that is a whole ‘nuther post.

But doing a short sale on your own?!? That’s a really scary proposition. Short sales (where a home is sold for less than what is owed on it) are jammed packed with potential pitfalls, and really need to be handled by someone with experience doing them. Even many agents out there have never done a short sale. They are painful to the point that every time I do one I swear it will be my last.

And for the life of me, I can’t understand why someone would even consider a “FSBO short sale”. When homeowners FSBO, invariably they do so because they think they will save on real estate commissions, thereby putting more money in their pocket.

But a short sale is a zero-sum game for the seller. In a short sale situation, the seller isn’t going to walk away with a dime. They can’t pocket a plug nickel. Think about it, the lender is taking a loss of thousands (often tens of thousands) of dollars. Do you think they are going to let the seller take away any money?

Reducing (or eliminating) the commission on a short sale only puts that money in the lender’s pocket, not yours. (Hence the reason many lenders whack the commissions on short sales from the get go.)

So why in the world would anyone even think about doing a short sale on their own? Maybe I can see trying to offset some of the forgiven debt with a commission savings, but with the recent passage of the Mortgage Forgiveness Debt Relief Act, that doesn’t make sense — the potential tax liability is gone. I don’t think getting the bank a few extra grand is going to salvage your credit score — it’s going to get hammered regardless.

A do-it-yourself short sale just makes no sense, unless I’m missing something completely.

[tags]short sales, FSBO, things that don’t make sense[/tags]

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Lane Bailey

Even as a reasonably experienced real estate agent, I don't to short sales. They require extra care, planning, and knowledge. The care and planning I can cover, but I haven't taken the time to learn the knowledge.

It is just foolhardy to attack a short sale without having experience. Jay is right on the money when he says that there really isn't a good reason for a consumer to play this game on their own.

I also would point out that i think there are plenty of consumers that are perfectly capable of handling a real estate transaction on their own. An agent isn't a requirement for all people in all markets... but just like the difference between representing yourself on a parking ticket and representing yourself on a real crime, there is a MAJOR difference between handling a "normal" sale and a short sale.

Chris Lengquist

I would comment on this blog but I'm removing my own spleen at 5:00. So I have to get ready for that. :)

Jay - The Phoenix Real Estate

Chris - hope everything works out!

(That was one of the funniest comments I've seen in a long time!)

Jermon Sims

I am a real estate agent, that has exteme experience in short sales in Georgia, and I must agree, why the hassle if no benefit, and the lenders are tricky............LOOK OUT, THEY ARE IN TRAINING, AND SO AM I!!!!

CHECK OUT MY BLOG AT www.simsjermon.blogspot.com and email a response to simsjermon@yahoo.com...........Happy Selling !!!

Darla

And they think the industry is screwed up now? ... lol. Just becuase you can doesn't mean you should.

Athol Kay

Well when you're smart enough to buy an overvalued property with a teaser ARM, you're probably smart enough to... oh, what?

Also...

I can't decide which of Jermon Sims three posts I like the best.

Jermon Sims

Thanks Athol pass it on www.simsjermon.blogspot.com..............Jermon Sims

Sandi Bauman, Chico CA Real Es

I also don't see any benefits for the homeowner. In fact, I see two additional points that haven't yet been discussed.

1. A good Realtor is a marketing EXPERT. Typically, they do the marketing at their own expense, not the sellers. Why would a homeowner take this chore and expense into their own hands, when the bank will pay a Realtor to handle it professionally?

2. If the homeowner fails in his attempt to market, negotiate, and close the deal, he then has a foreclosure on his hands. Why not hire a professional to give yourself the absolute best chance of selling the home before that happens?

The dollar amount that hits the credit report for the forgiven debt doesn't seem to matter. Bottom line is, if you have a short sale showing on your credit report it's not going to do you any favors. I can't see that saving money on a commission is going to make it any less damaging.

Jay - The Phoenix Real Estate

Great points Sandi! Thanks for stopping by!!

John Hunter

Ignoring the merit of doing a short sale on your own or not, of course the seller has to pay the realtor if they use one.

> Reducing (or eliminating) the commission on a short sale only puts
> that money in the lender’s pocket, not yours.

If, for example, someone sells the house and the total proceeds after everything has been taken out for fees, paying of the mortgage etc. is -$8,000 then they owe that. If it is -$12,000 they owe that. Granted there might be cases where other deals are struck with the bank to avoid foreclosure but in the case where the owner is just selling it themselves then any costs they chose to take on they pay. The difference is not in whether they pay but the form of paying - in one case any costs reduce the check they receive. In the other the costs increase the check they have to write.