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How to Sell a Short Sale to the Seller
| | Tuesday, April 13, 2004 @ 08:00 AM EDT
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Contributed by: The ShortSalePro
The ShortSalePro Properties
Read more archived articles about Short Selling
Why would a Homeowner even consider a short sale? What's in it for them?
We know that one of the conditions of short sale approval, a nonnegotiable provision, is that the Seller receive ZERO PROCEEDS from the sale. So if the Seller gets nothing, why would they agree to do it? Why would they go through all that trouble when it would be just as easy to file bankruptcy and walk away, or, deed back the house to the bank and walk
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away, or simply walk away, closing the book on that portion of their lives....
[Kurt and Joanna (from Chapter One: Just what is a short sale?) already were resigned to the fact that they couldn't keep the house, had a mindset that they wanted to sell, and their situation just fell into place and into the laps of the broker and the Investor. Kurt and Joanna knew that they had lost their down payment, and wouldn't see a nickel (they would, but I'll get to that later on). But, they were cautiously optimistic that a Short Sale was in their best interest.]
Most homeowners in distress have to be identified, solicited, informed, and persuaded before they agree to participate in a short sale. It's a tough sell because you really can't promise them anything tangible... yet have to warn them about the possibility that their lender would pursue a deficiency (difference between what was owed, and what was repaid) or, if the lender forgave the deficiency, the lender would likely report the forgiven debt as income to the IRS, and issue the Seller an IRS form 1099, exposing them to possible liability to pay income tax on the amount of the forgiven debt....
What could motivate the Seller to work toward a goal that would result in no monetary reward? It would have to something worth more than money. So, the question is, "What's worth more than money?"
Losing a home to mortgage or tax foreclosure is a process that includes a series of emotional, financial, and legal setbacks. Losing a job or experiencing a dramatic life altering reduction of income is a setback. The realization that the inability to earn enough money to pay bills on time is another setback. Having collection clerks call and berate them for unpaid bills can be (and is designed to be) humiliating. Each setback takes it's toll upon the homeowner, stripping away his/her self confidence while raising insecurities and self-doubt. They feel embarrassed, ashamed, and hopeful that their friends, neighbors and family don't find out.
When I meet with a distressed homeowner for the first time, we cover a lot of ground in a short time. While sipping coffee (I always accept coffee, tea, a glass of water, or, better yet, a bottle of unopened anything) and listening carefully to their highly personal, emotionally charged story, I review their mortgage/foreclosure/bankruptcy documents, marking them with yellow highlighter, and making notes in the margins... As the meeting draws to a close, I am frequently asked, "Can you keep this (the foreclosure/Sheriff's Sale) from the newspaper? I would just die if my mother/father/sister/brother/neighbor/co-worker found out!"
Getting back to what would be the homeowners' motivation to voluntarily participate in a short sale. What's in it for them? To a family that's in a heightened emotional state, what's really important? Self Respect? Dignity? Integrity? Reputation? Pride?
Are these feelings worth more than money? Yes, you bet they are!
But how can the Investor help restore their self respect, or their dignity?
He/she can begin by gaining their trust. How can the Investor, a total stranger who wants to purchase their property and give them nothing in return, gain the homeowners' trust? Empathy is a good start. Empathy is defined as understanding, or being on the same wavelength as another. In this case, the Investor must try to empathize with the Seller about the series of events leading to the mortgage foreclosure, and their pain. Whether that be loss of job, loss of a spouse or child, a divorce, a predatory mortgage loan, or whatever the reason. "My cousin lost his job/health and couldn't pay the bills either. He faced losing his house and it almost cost him his marriage. It was rough." You get the idea. And make sure that you let the homeowner know that you know your stuff... If you've got credentials... use them. If you've got experience... let them know. Whatever is your particular area of expertise... use that as a footing to establish your credibility.... and be able to link your credibility and expertise to the ability to help resolve the homeowners' problem.
The distressed Homeowner must be told that their choices include allowing their home to be auctioned off at a public sale, a sale anyone could learn about, attend, and possibly become the winning bidder... then endure further humiliation by being subject to a forcible eviction.... Or, the homeowners can act responsibly, participate in a mutually beneficial, proactive process to mitigate potential damages, and maintain some degree of control by moving on their own terms.
After accurately painting a worst case scenario (public auction/forcible eviction/financial consequences) the Investor must articulate to the homeowners that he/she is confident that a successful short sale will protect their future creditworthiness, and imply that by acting responsibly and participating in a viable solution...they will experience a renewed feeling of self worth.
What's worth more than money? Self respect.
Note: AShortSalePro has written 'A Short Sale Primer' EBook which can give you a head start in short sales in your area. The printed version of the A Short Sale Primer comes with one hour of E-Coaching.
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