While the term or concept of a "Short Sale" has become quite common in real estate circles, there is a lot of confusion and frustration understanding the procedure and the process of a Short Sale. This is particularly true with real property owners who find themselves in default on their loan or think they may be approaching a payment delinquency on their loan. When home owners find themselves in this situation, it is very important to: (1) Take action promptly; (2) Seek competent counsel and advise; and (3) Be as positive as possible.
When real estate professionals find themselves in the position of rendering service and assistance to a distressed homeowner, meaning a homeowner in delinquency, default or distress with the loan on the property, it is important for the licensee to understand and always remember the role to be played in the process. In its SFR (Short sale Foreclosure Resource) Certification course, the National Association of REALTORS® reminds its members of the following:
"Homeowners at risk of default or who have defaulted on their mortgage may turn to their real estate agent for guidance. And in these emotional situations, real estate practitioners may be tempted to do everything they can to help owners save their homes. However, in doing so, real estate agents may place themselves, their real estate licenses, and professional livelihoods at risk. When faced with a distressed owner situation, what should real estate professionals do and say? What should they not do and say? As a guiding principle real estate professionals should serve as a resource for their clients."
The NAR then provides the following suggestions to its members:
" * Do:
Assist owners in understanding options they should consider
Recommend in writing that clients seek advice from qualified finance, tax, and legal professionals
Suggest that sellers seek foreclosure avoidance counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD); visit the HUD Foreclosure Web page for more information: www.hud.gov/foreclosure
Don't:
Overstate your knowledge or experience in handling distressed property transactions
Advise on finance, tax, or legal consequences of selling or purchasing short sales and/or foreclosed or REO properties
Make significant changes to approved forms or interpret legal clauses of contracts and addenda
As a reminder, NAR Code of Ethics Article 13 states:
REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it. At all times, real estate professionals must act within the scope of their agency agreement."
Once the agent has a relationship with the property owner, the agent has a duty to act with diligence to serve the interests of the client in expediting the Short Sale process as much as possible. One of the early challenges the agent and the client faces is the preparation of the Short Sale Package, meaning the preparation of the documentation and paperwork to process the transaction. In an attempt to help property owners who may be facing the possibility of a Short Sale, the following is provided as a check list to review with the agent and to get the process started.
* Short sale proposal letter (cover letter)
* Seller's signed short sale payoff application, if available
* Seller's hardship letter
* Seller's financial information
* Supporting financial information
* Supporting hardship information
* Repair estimate for the property, if repairs are required
* CMA with supporting sales history
* Marketing history, showings, and feedback
* Purchase contract signed by both the buyer and seller
* Written proof of the buyer's ability to purchase the property
(completed loan application, lender's preapproval, or bank statement
if the buyer is purchasing with cash)
* Copy of certified escrow instructions, if applicable
* HUD 1 settlement statement
* Preliminary title report, if applicable

It is important to remember that if there are multiple loans, this list and process will probably need to be repeated for each lien holder. If there is more than one lien holder, they will most likely all want payoff information from each other.
In terms of the amount of paperwork required by short sales, one expert notes: "It takes more documentation to get out of their mortgage than it took them to get it in the first place."
The submission of the short sale package will be at the direction of the lender. The lender may want it faxed, e mailed, or delivered via hard copy, or a combination of the various methods. The listing agent should make a copy of the entire package prior to delivery and follow up to ensure it was received.
The unfortunate conclusion to this discussion is that once all the documentation has been appropriately completed and properly submitted, the submitting parties must then be prepared to wait, to wait, and to wait. Here, the Golden Rule is truly put into play: Those who have the gold, rule. It all depends on the lender or lenders as to the response time and any effects, results or decisions and further instructions.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative (ABR), Certified Residential Specialist (CRS), Resort and Second Home Property Specialist (RSPS), Seniors Real Estate Specialist (SRES) and NAR's GREEN designation. He recently completed the Short Sale and Foreclosure (SFR Certification) program. You can contact him by e-mail at Jim@JimColeman4Homes.com. Call: (435) 674-0600; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.WinningTalk.com/articles.