REVISED EDITION
Breakthrough to Mastery
An Agent’s Guide to
Short Sales, Foreclosures, and
REOs
Master the Market of the
Moment
An Agent’s Guide to Short Sales, Foreclosures, and REOs
Main Ideas
1.
2.
3.
4.
5.
6.
Perspective
The Foreclosure Process
Short Sales
Foreclosures
Real Estate Owned Properties (REOs)
The Bottom Line
2
An Agent’s Guide to Short Sales, Foreclosures, and REOs
3
Perspective
Opportunity Exists
 Dropping home prices can lead to defaults
and foreclosures
 Foreclosure creates needs
»
»
»
»

Homeowners
Investors
Financial institutions
REO listing agents
Look to your local market
Pages 7-8
An Agent’s Guide to Short Sales, Foreclosures, and REOs
4
Perspective (continued)
Are You Able, Ready, and Willing?
“These skills can be mastered—
but they will take time.”
Dave Jenks
Keller Williams Realty International
Page 10
An Agent’s Guide to Short Sales, Foreclosures, and REOs
5
Perspective (continued)
Short Sales, Foreclosures, and REOs
Require
» Leveraging systems, tools, and people
» Time
» Acceptance of risk
Page 10
An Agent’s Guide to Short Sales, Foreclosures, and REOs
6
The Foreclosure Process
Three Phases of Foreclosure Process and
Three Areas of Business Opportunity
Preforeclosure
Short Sales
Public Auction
Foreclosures
Postforeclosure
REOs
Page 11
An Agent’s Guide to Short Sales, Foreclosures, and REOs
7
The Foreclosure Process (continued)
4. Notice of
Intent to
Foreclose
publicized.
1. Homeowner
misses loan
payment.
2. Late
charges
begin
accruing.
6. Redemption
Period
3. Lender
sends
Notice of
Default.
Phase 1:
Preforeclosure
Short Sales
7. REO
5. Auction
Phase 2:
Public Auction
Foreclosures
Phase 3:
Postforeclosure
REOs
Pages 12-13
An Agent’s Guide to Short Sales, Foreclosures, and REOs
The Foreclosure Process
8
(continued)
Defining the Three Areas
1. Short sale
2. Foreclosure
3. REO
Page 14
An Agent’s Guide to Short Sales, Foreclosures, and REOs
9
The Foreclosure Process (continued)
Why Do Properties Go into Foreclosure?
1. Subprime loan
2. Unable to refinance
3. Zero-down loan
4. Loss of income
5. Unexpected events
6. Market shifts
Pages 15-16
An Agent’s Guide to Short Sales, Foreclosures, and REOs
10
The Foreclosure Process (continued)
Potential Challenges and Rewards
How can you set yourself apart
from the myriad of ads and calls
proposing questionable
schemes?
What challenges and rewards
do you foresee?
Page 16
An Agent’s Guide to Short Sales, Foreclosures, and REOs
11
The Foreclosure Process (continued)
Other Options
1. Forbearance
2. Mortgage modification
3. Refinance with an FHA-backed loan
Advise the homeowner to contact their
lender immediately.
Page 17
An Agent’s Guide to Short Sales, Foreclosures, and REOs
12
Short Sales







The Win-Win
Six Key Sources
Qualifying Short Sale Candidates
Additional Considerations
Eight Steps to a Short Sale
After the Short Sale
Are You Able, Ready, and Willing?
Page 18
An Agent’s Guide to Short Sales, Foreclosures, and REOs
13
Short Sales (continued)
The Win-Win
Truth
A short sale can be a win-win for the agent,
the homeowner facing foreclosure,
and the lender.
Pages 19-20
An Agent’s Guide to Short Sales, Foreclosures, and REOs
14
Short Sales (continued)
Six Key Sources
1. Your Solutions-Based Unique Selling
Proposition (USP)
2. Notice of Default Lists
3. FSBOs
4. Listing Appointments
5. Lenders
6. Public Notices of Auction
Pages 21-23
An Agent’s Guide to Short Sales, Foreclosures, and REOs
15
Short Sales (continued)
Qualifying Short Sale Candidates
1. Market pricing must be less than the loan
amount.
2. The homeowner must be financially
insolvent.
3. The homeowner must demonstrate a
hardship.
4. The homeowner must be cooperative.
Pages 24-26
An Agent’s Guide to Short Sales, Foreclosures, and REOs
16
Short Sales (continued)
Additional Considerations
1. Bankruptcy
2. Private Mortgage Insurance (PMI)
3. Imminent foreclosure date
Page 27
An Agent’s Guide to Short Sales, Foreclosures, and REOs
17
Short Sales (continued)
The Eight Steps to a Short Sale
Step 1
Gather Information
Step 2
Open Communication
Step 3
Develop the Proposal
Step 4
List the Home
Step 5
Obtain an Offer
Step 6
Submit a Proposal
Step 7
Negotiate the Deal
Step 8
Close the Deal
Page 28
An Agent’s Guide to Short Sales, Foreclosures, and REOs
18
Short Sales (continued)
“The selling and communication cycle
in a short sale is long and tenuous. You
cannot wing it. But if you stay with it, if you
nurture this skill set, you can become
an Opportunity Warrior in
a challenging market.”
Dave Jenks
Keller Williams Realty International
Page 28
An Agent’s Guide to Short Sales, Foreclosures, and REOs
19
Short Sales (continued)
Step 1: Gather Information
1. Proof of income and assets
2. Proof of hardship
3. Property information
4. Loan information
Pages 29-31
An Agent’s Guide to Short Sales, Foreclosures, and REOs
20
Short Sales (continued)
Step 2: Open Communication
1. Obtain and submit authorization
2. Initiate communication with lender
a) Short sale application packet
b) Name and direct number of decision maker in
Loss Mitigation Department
c) Information about their policies
3.
Systematize communication
Pages 31-33
An Agent’s Guide to Short Sales, Foreclosures, and REOs
21
Short Sales (continued)
Step 3: Develop the Proposal
1. Information from “Step 1: Gather
Information”
2. Business case for accepting a reduced
price
Pages 33-34
An Agent’s Guide to Short Sales, Foreclosures, and REOs
22
Short Sales (continued)
Step 4: List the Home
 Develop a pricing strategy
 Educate the seller
 Considerations
»
»
»
List home “as is”
Enter “Short Sale” in the agent remarks on the
MLS (if optional)
Indicate “variable commission–split with
buyer” on the MLS
Pages 35-36
An Agent’s Guide to Short Sales, Foreclosures, and REOs
23
Short Sales (continued)
Step 5: Obtain an Offer
 Determine lender’s requirements
 Ask potential buyers for their best offers
 Give the lender the best offer
 Seller should approve offer
 Lender will order a broker’s price option
(BPO)
 Educate the buyer
Pages 36-38
An Agent’s Guide to Short Sales, Foreclosures, and REOs
24
Short Sales (continued)
Step 6: Submit a Proposal
 Add the offer to the proposal
»



Create a proposal for each loan
Send it by registered mail to all appropriate
contacts
Follow up
Be persistent
Page 38
An Agent’s Guide to Short Sales, Foreclosures, and REOs
25
Short Sales (continued)
Step 7: Negotiate the Deal
 Balance negotiations between
lenders if more than one lender
 Create systems for communication
 Consider leveraging help
»
Services are available to negotiate
Pages 39-40
An Agent’s Guide to Short Sales, Foreclosures, and REOs
26
Short Sales (continued)
Step 8: Close the Deal
 Complete the deal within thirty days of
lender acceptance
 Prepare so there are no surprises at the
closing
»
»
Seller cannot bring cash to the closing
Alert the closing company
Pages 40-41
An Agent’s Guide to Short Sales, Foreclosures, and REOs
27
Short Sales (continued)
After the Short Sale
 Ask the seller for a testimonial
 Put the seller in your Met Database
 Put the seller on a 33 Touch
Page 42
An Agent’s Guide to Short Sales, Foreclosures, and REOs
28
Short Sales (continued)
Are You Able, Ready, and Willing?
What systems, tools, and people
can you leverage to master
short sales?
Page 43
An Agent’s Guide to Short Sales, Foreclosures, and REOs
29
Foreclosures



Develop a Criteria Filter
Buying at Public Auction
Are You Able, Ready, and Willing?
Page 44
An Agent’s Guide to Short Sales, Foreclosures, and REOs
30
Foreclosures (continued)
Develop a Criteria Filter
1. Location
2. Type
3. Economic
4. Condition
5. Construction
6. Features
7. Amenities
Pages 44-45
An Agent’s Guide to Short Sales, Foreclosures, and REOs
31
Foreclosures (continued)
Buying at Public Auction
 Benefits
»
»

Great deals
Possibly one lender
Challenges
»
»
Pay at sale or soon afterward
Sold “as is”
Pages 45-46
An Agent’s Guide to Short Sales, Foreclosures, and REOs
32
Foreclosures (continued)
Are You Able, Ready, and Willing?
How can you leverage systems,
tools, and people to increase
your knowledge of foreclosures,
and to solidify your relationships
with investors?
Page 47
An Agent’s Guide to Short Sales, Foreclosures, and REOs
33
REOs






Breaking into the Business of REOs
Services That Listing Agents Provide in
Working REOs
Leverage Great Administrative Help
Break into the Business of Servicing REO
Buyer Leads
Educate Your Buyers
Are You Able, Ready, and Willing?
Page 48
An Agent’s Guide to Short Sales, Foreclosures, and REOs
34
REOs (continued)
Breaking into the Business of REOs
1. Apply to a lender or asset management
company
2. Leverage relationships
Pages 49-51
An Agent’s Guide to Short Sales, Foreclosures, and REOs
35
REOs (continued)
Services That Listing Agents Provide in
Working REOs
1.
2.
3.
4.
5.
6.
7.
8.
Put a notice on the front door
Negotiate “cash for keys” or CFK
Accompany the sheriff on evictions
Secure and rekey the property
Clean the house
Repair the home
Pay utility bills
Manage the property
Pages 52-53
An Agent’s Guide to Short Sales, Foreclosures, and REOs
36
REOs (continued)
Services That Listing Agents Provide in
Working REOs
 Complete tasks quickly
 Watch your accounts receivable
Pages 53-54
An Agent’s Guide to Short Sales, Foreclosures, and REOs
37
REOs (continued)
Leverage Great Administrative Help
“There is a lot of pressure in REO that you
might not get in the residential side. We have
very demanding clients who are always
threatening to take our business away. But we
love it .… Once you get your name out there,
the business just starts coming.”
Angela Larson
Roseville, Minnesota
Page 55
An Agent’s Guide to Short Sales, Foreclosures, and REOs
38
REOs (continued)
Break into the Business of Servicing REO
Buyer Leads
 REO listing agents focus on REO listings
 Get into relationships with REO listing
specialists
Pages 56
An Agent’s Guide to Short Sales, Foreclosures, and REOs
39
REOs (continued)
Educate Your Buyers
 Buyer may have to be patient
 Lenders don’t consider emotional letters
 Lenders are looking for the cleanest and
easiest deals
 Contract requires additional paperwork
 Title will be clean
Pages 56-57
An Agent’s Guide to Short Sales, Foreclosures, and REOs
40
REOs (continued)
Are You Able, Ready, and Willing?
What systems, tools, and people
can you leverage to master
REOs?
Page 57
An Agent’s Guide to Short Sales, Foreclosures, and REOs
41
The Bottom Line



Some markets have a growing need.
You can succeed!
Prequalify yourself first.
» Can you leverage systems, tools, and people?
» Can you devote time to developing these skills?
» Can you accept a level of risk?
Page 58
An Agent’s Guide to Short Sales, Foreclosures, and REOs
42
Productivity Boosters


Market With Your USP
Stay in Touch After the Short Sale
Page 59
An Agent’s Guide to Short Sales, Foreclosures, and REOs
43
My Action Plan



Don’t put away this guide without developing
a plan to put what you have learned into
action!
Refer to the Action Plan on pages 60-63 of
the guide to assess your strengths and
areas for improvement.
Write down steps you will take to improve
your skills—complete it, share it, and
commit to it!
Pages 60-63
An Agent’s Guide to Short Sales, Foreclosures, and REOs
44
Take the other courses in the
Breakthrough to Mastery Guide series!

Gaining Mind over Market
Upshifting Your Lead Generation
Seller Pricing Strategies
Seller Staging Strategies
Lead Capture and Conversion
Internet Lead Capture and
Conversion
Creating Urgency to Buy
Bulletproofing Transactions
Expense Management
Effective People Leverage

Financing Solutions









An Agent’s Guide to Short Sales, Foreclosures, and REOs
Thanks for being here!
Please complete an
evaluation for
this session.
45