Renting a home after a short sale

 

Is your Real Estate Agent doing the whole job for you or is he running away after the sale?

Many real estate agents willingly take short sale listings, but for agents to accept your listing without taking full responsibility for your re-location, is only doing half the job. Our clients have done us a great service by trusting us to handle their sale. As a result, we owe it our clients to help them find a new home; not to walk away after the short sale is completed!

Most people prefer to lease a home in the same community after their home closes

The majority of people who short-sell their home usually lease a home after the home closes, and they still want to remain in the same community. This is where they have lived for many years, where their children have gone to school, and where they have established many friendships. A good real estate agent will always begin by keeping their clients up-to-date on available home leases during the course of the short sale — easy to do through their local multiple listing services. This should always be followed by home showings and working with other agents to find potential  rental possibilities.

Why do some agents neglect their clients after the sale?

Yes, I know this sounds harsh, but it comes down to commission, knowledge, plus the amount of work involved in helping people find a lease, especially if they have credit challenges. A short sale pays a standard sales commission while a lease pays very little;  usually only a few hundred dollars. Many agents prefer to move on to another sale rather than spending their time and energy pursing a lease. They may also lack knowledge about leasing and rental law, since the majority do very few leases each year. Last, they may get discouraged if their applicants are regularly rejected because of credit challenges. 

How difficult is leasing a home after a short sale?

The biggest challenge in renting or leasing a home after a short sale is overcoming the damage to the client’s credit rating. Because a short sale is a distress sale, the sellers may have many late payments (including missed mortgage payments) which will have downgraded their credit scores. Leasing a home with poor credit can be very difficult. Most landlords are wary of leasing to someone with low FICO scores and derogatory items on their credit report.  The best solution is to get a qualified co-signer. Perhaps there is a friend or family member who is willing to help?  There are also professional co-signing services that will assist you for a fee. This is often the best solution for people who want to keep their financial affairs discreet and private. There are also other alternatives like paying more rent up front or paying a higher security deposit. See my web page for additional solutions, here.

Should you look for a lease now or after escrow opens?  Two strategies

For many clients, the emotional strain of the short sale and loss of their home is devastating. In this case, I usually advise them to move out, well before the house sells. Emotionally, putting the old home behind them and settling in to a brand new place might be the best solution. It may also have credit rating benefits, as the full impact of the sale and missed mortgage payments may not yet be fully reflected on their credit report.

For other short sale clients, the goal may be to stay in their home as long as possible. For these clients, we generally start looking for homes shortly before escrow is opened. The advantage is the reduced cost of not having to pay rent until they are close to closing on their home. The disadvantage of course is the shorter search “window”. This means that we will have to aggressively pursue a new home so that it will be secured before escrow closes.

Be prepared to be flexible in your choice of homes

If your credit is poor, you may not be able to lease any of your top home choices.  Instead, consider accepting a home where the landlord is willing to work with you, even if the home is a bit less than ideal. Older, less updated houses, vacant rentals, and homes that have been on the market for a long time are good candidates. In any case, be prepared to show some flexibility in your choice of homes.

Be sure to use a real estate professional to assist you!

It may be tempting to shop for a lease on your own using the newspaper, Craigslist, or other media. Use caution though — there are many leasing scams out there. The first concern is ensuring that the person you pay your deposit to, is in fact the actual owner of the home. Never give cash or a deposit check to someone unless you are certain that he/she is the legally entitled owner of the property. Second, many people who are in foreclosure are leasing their homes out to collect some cash before the bank takes it back.  I have received numerous calls from tenants who have leased a home, only to find out later that the home is in foreclosure. The biggest issue (aside from finding a new home) is the disposition of their security deposit.  To avoid problems later,I recommend that you always use a licensed real estate professional to assist you with your lease. Ask that your agent check all potential lease homes for notices of default (NODs), liens, paid property taxes, and loan-to-equity position, to ensure that the landlord is financially sound.

My team will help you after your sale!

We will never do half the job!  My team are short sale and leasing experts. If you trust us with your short sale, we will work very hard to help you find your new home.  We do this by aggressively screening potential rentals to find landlords who are flexible and willing to consider your application. One of our team members will also be happy to work with you on showing these homes. Please contact me at (949) 290-3263 to see how my team can help you with your short sale  , and with a new lease after the sale.

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Ron Denhaan is a Realtor in Orange County, CA.  He can be contacted at (949) 290-3263 and at ron@rondrealestate.com   Please visit his web site at: www.ronforhomes.com.

DRE# 01728866

Short sale and foreclosure resource

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When you decide to sell your home, do not fall for an agent who “buys” your listing!

 Unethical real estate agent  As an Orange County listing agent, I’m often asked to provide estimates of current market value for people who are considering the sale of their home.  While I am happy to do so, I also do so honestly by proving my clients with current market comparables (also known as, “comps”).  But being realistic sometimes means that I won’t get the listing. Frustratingly, I often find out that the listing went to an agent who promised to list the home for a much higher price! It’s sad for me to watch these listings sit idle on the market afterwards, knowing that the seller will waste months of marketing time and will be forced to make many price adjustments.  How does this happen? Let’s look at a typical scenario:

You decide to sell your home, so your first step is to interview several real estate agents. After the interviews, the winning agent happens to be the one who promised to list your home for the highest price. You are ecstatic as your  home is listed, but as the weeks go by with no offers and few showings of your home, you realize something may be wrong. Your agent phones you and once again suggests that you reduce your list price. After many weeks and several price reductions, it dawns on you that your list price is now approaching the pricing level suggested by one of the other agents you interviewed. At this point you realize that you have been had. You have contracted with an agent who “bought” your listing.

What is “buying a listing”?

 It is real estate jargon for an agent who attempts to secure a real estate home listing by promising the seller an unrealistically high sales price.  A seller’s exuberance and greed often result in awarding the listing to an agent who promises the highest price. Once locked into a months’ long contract, the seller will have no choice but to agree to the inevitable price reductions . In the mean time, weeks and months of prime marketing time have been wasted.  

Why would an agent “buy” a listing?

1) Obviously, to lock down the listing contract and beat the competing agents.  Once the contract has been secured, the agent can then work the seller into agreeing to a series of stair-step price reductions so that home will eventually sell. In doing so, this agent will eventually get the sales commission (instead of his/her more ethical competitors).

2) Second, with a “for sale” sign on the lawn, the agent will get additional calls and pick up buyers who can be “flipped” into other properties (properly priced ones!)

So what’s the downside for you, the seller?

1) Wasting weeks or months of prime marketing time. Most offers occur within the first 30 days if the home is priced right, but for an over-priced home, it may sit for months without an offer, resulting in a “stale” listing.

2) A “stale” listing equals lower priced offers! As your home sits on the market with price reduction after price reduction, buyer’s agents will stigmatize your home as tired and “stale”.  As a result, they may encourage their buyers to make lower offers on the home.

3) Agents may boycott your home if they realize your agent has “bought” the listing. In a given real estate area, agents often know who the bad apples are, and they may choose to punish these agents by punishing you!

4) With many price reductions taking place over several months, you may wind up “chasing the market down”. As home prices in the area continue to decline, you may now find yourself selling for less than you could have, months ago!

How can I avoid the type of agents who “buy” listings?

 1) First, ask all of the agents you interview for a CMA (comparative Market Analysis). Having accurate and current comparables will help you ensure that you understand the true market value of your home. If after viewing these comps, the agent still suggests a much higher selling price, you may be dealing with agent who wins listing appointments by offering sellers an unrealistically high selling price.

 2) Ask each agent for three references. Call these references and ask them about their experience with this agent.

 3) Ask to see the agent’s sales listings for the prior year (they can easily print this out for you from the MLS). Check each listing for the number of days on market and any price reductions. If you note very long days on the market or an excessive number of price reductions, you may be dealing with an agent who over-prices their listings.

 4) Last, do not fall prey to your own greed! We all want to make as much as we can from the sale of our homes, but look at the current market; not what your neighbor sold their home for two years ago. Real estate market conditions change constantly, and the best pricing gauge is a current set of market comparables for your neighborhood.

To recap, work only with an agent who will provide you with accurate market data and who will help you price your home correctly. You will save a lot of time and aggravation, and more importantly, you will be able to sell your home for the highest amount possible and in the least amount of time! I will  be happy to provide you with a fee estimate of your home’s current value. Be assured that I will suggest a realistic price range that will attract buyers and get offers on the table!

To find out more about how I can help you sell your home, visit my web page here or call me for more information at (949) 290-3263.

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Ron Denhaan is a Realtor in Orange County, CA.  He can be contacted at (949) 290-3263 and at ron@rondrealestate.com   Please visit his web site at: www.ronforhomes.com.