STYLE Media and Design

John Simmons, Broker Associate/Partner, The Group, Inc.

Loosely defined, a short sale is a negotiation between a seller, a buyer, and a bank for less than the original loan value. Because of the recession, short sales are becoming more and more common in today’s real estate market.

Short sales benefit struggling homeowners by helping them avoid foreclosure and, in turn, allow buyers or investors to get property at reduced prices. Banks also fair better with short sales because a larger percentage of the loan is satisfied than would be in a foreclosure auction.

“So we don’t lose control of a file, we negotiate for a lower price with the bank instead of hiring out a short-sale negotiator,” says Simmons. “Short sales aren’t easy, but are definitely worth it if foreclosure is on the horizon - the seller avoids foreclosure and the buyer gets a great price.”

While Simmons specializes in all areas of real estate, from residential new construction and resale to relocation, he is one of very few realtors in the area who knows the ins and outs of the short sale and understands the importance of this type of sale in today’s economy. He closes 90 percent of his short sale listings – a far cry from the average Realtor’s 30 percent short-sale success rate. His enthusiasm for the real estate industry is palpable and is undoubtedly what makes him and his selling-licensed personal assistant, Brenna Strait, one of the top listing teams at The Group, Inc.

A lot of Realtors prefer not to handle short sales because they can be extremely difficult to close. Short sales require substantially more preliminary research and work on the Realtor’s end. “Short sales are more complex and many Realtors don’t want to deal with them,” says Simmons. “But we want to help people and in today’s market, short sales are what some sellers need to avoid foreclosure.”

Short sales have been stigmatized in the past and used to incur significant penalties and fees. But the rules in today’s economy are changing. Penalties are decreasing and lienholders are willing to work with sellers to avoid foreclosure.

W/E represents Withdrawn or Expired sales, A/P represents Active or Pending sales. Graph courtesy of The Group, Inc.

“Thirty percent of our business is now short sales,” says Simmons. “There are a lot of sellers in distress right now, whether due to layoffs, divorces, fatalities, or other hardships. Then there are those sellers who are upside down in their homes because of creative financing or because they recently purchased a home and don’t have enough equity or money to bring to the closing table. We want to help those people.”

Helping people avoid foreclosure is the reason Simmons has taken an active interest in short sales. There’s more work involved, and sometimes less money, but he says it’s extremely rewarding. “It’s a great feeling to help someone in need,” says Simmons. “At short sale closings, there are hugs all around the table after the deal is done because a buyer just saved a seller from a much worse situation.”

Simmons is quick to say that a short sale is not for everyone. “If you can hold on to your home by leasing it out or refinancing, that’s the best option. The market will recover over the next few years and home prices will climb,” he says. “But if you can’t afford payments, are upside down in your home, and are forced to sell, a short sale can be a lifesaver.”

As far as a seller’s credit report goes, a short sale does have consequences, and may make it difficult for him or her to purchase a home within the next year. But it’s far better than a foreclosure or bankruptcy, which can take you out of the market for four to seven years. If the seller is able to continue making payments during the short sale process, his or her credit report will be less affected than if he or she was delinquent throughout the process.

For investors, a short sale can be akin to a goldmine. Most short sales average about 10 percent below home value and with today’s low interest rates, it’s a buyer’s market. “Unfortunately, people are losing their homes,” says Simmons. “But on the positive side, investors and buyers are getting great deals and inventory is decreasing which is good for the market. It’s a perfect time to buy.”

As inventory decreases, everyone benefits, including the economy as a whole. “Short sales are satisfying a huge amount of the debt,” says Simmons. “Investors are buying property and decreasing inventory and the long-term forecast is looking positive. As supply goes down, price goes up. Homes are selling quickly right now and prices will soon begin to rise.”

Whether for an investor or a homebuyer, a short sale can be a dream come true. “First time homebuyers can take advantage of an $8,000 tax credit and the lowest interest rates we’ve seen in 30 years. And, there’s still significant inventory on the market,” says Simmons.

So what’s the first step to short selling your home or buying a short sale property? “My advice would be to first and foremost, find a Realtor you can trust and who knows what they’re doing,” he says. “Short sales are do-able but it does take extra work so you need a Realtor who’s committed to the process.”

If you’re struggling with payments, Simmons advises that you act swiftly. “If you know you won’t be able to make a payment, contact a Realtor who specializes in short sales before you’re delinquent or are in active foreclosure,” he says. “You don’t have to foreclose on your home. There are options if you act early.”