Understanding Motivations in a Short Sale Transaction. One of the main differences between successful investors and agents and those who struggle factor in is simply that you put yourself in the shoes of all parties involved and find common ground. You should think about the rationale of the bank or lender. The homeowner, the real estate agent, the buyer(s), and any 2nd pledge guide the decision-making process. Understanding how these motivations conflict can help you find common ground for closing deals. Understanding Motivations in a Short Sale Transaction.
The bank or lender (primary pledgee)
This is it – the great Kahuna. The bank has the keys to the castle. So don’t underestimate their motivations a short sale transaction. The bank’s short sale decision-making process is driven by single factor money. Remember the ideal situation for the bank is that you continue to make your payments according to the agreed schedule.
Let’s get back to motivation. What motivates a short sale transaction the bank to accept a short sale offer? If you guessed money, you’re right! However. It is a bit of a reverse situation – banks take out loans with the expectation that they will be paid back the principal plus interest. In this case, you’re asking them to take less money – and the only way that’s going to work is by showing a short sale transaction that the alternative is, even MORE, less money.
In other words, the burden of proof is on you to motivate the bank to accept your offer by proving to them that their financial position will be worse if they do not accept the short sale.
Let’s summarize how to motivate the bank –
Prove that foreclosure is more financially damaging than a short sale and back it up with evidence!
Evidence that foreclosure is imminent and cannot be prevented and back it up with evidence!
the homeowner’s understanding of Motivations in a Short Sale Transaction
The homeowner is in a different situation. They are behind on their payments, hopelessly underwater and there seems to be no way out!
Just as the bank limits their losses on a short sale, the homeowner also wants to limit the damage to themselves and their families. The motivating factor for a homeowner to pursue a short sale is to get themselves out of a bad situation that is going to get worse. The interesting thing about a short sale. From a homeowner’s perspective, is unlike a typical home sale transaction. The homeowner/seller really doesn’t care about the sale price of the home anymore. This is because they are already underwater – and for them, It’s not important to get out of $50,000 or $75,000 – it’s getting out that’s important.
The only time this changes is when the lender is looking for the homeowner to assume a default. In that case, the homeowner will still be motivated to minimize the loss as he will be responsible for it after the sale is completed.
Use the homeowner’s motivation to get out of their situation to let them play their part in the transaction — including providing necessary supporting documents about their financial situation and a good, strong hardship letter. It is best if you can negotiate away any judgment of deficiency properties. to keep the homeowner’s motivation strict when leaving the property.
But recognize that this is directly contrary to the motivation of a short sale transaction from the bank – money. Our recommendation in this scenario is to try to. Work in favor of the homeowner – carrying a deficit without any asset to back it up is not a fun situation to be in.
The real-estate agent
Like any real estate transaction, brokers want to close the deal and make commission guidelines. After all, It’s their job!
One motivating factor for agents is definitely the time involved in a transaction. Time is money, and many brokers despise working with short sales because. They take more effort than a standard trade. Being in the middle of a real estate transaction is enough work. Now you have to throw in the multi-month bank approval process. And due diligence phase and deal with extra red tape. For the same commission.
Motivating a short sale transaction brokers can then be done by improving their processes. Or by saving time. If you are the broker. Your motivation should also.