Dealing with a short sale during a financial crisis can be overwhelming, to say the least. One mistake can cause a domino effect –– missing paperwork, lag time, and denied lender requests. The whole affair can quickly become a nightmare for short sellers!
You should avoid several mistakes, such as incorrect home pricing or rushing the short sale when doing a short sale in Charlotte, NC. For a short sale to be successful, you also need to hire a real estate professional to help you avoid some common mistakes.
Keep reading to get an idea of how you can have a fast and positive short sale experience.
21 Mistakes that Make a Short Sale Go Wrong
Here are 21 mistakes you should avoid when doing a short sale in Charlotte, NC.
1. Incorrect pricing of your home
One of the critical steps to selling any house is determining the correct price. It’s not as easy as you think as there are many factors you need to consider.
Risk of Overpricing
While most sellers are afraid of underpricing, keep in mind that overpricing is a bigger mistake. Usually, overpricing is a strategy used in hot markets like Charlotte. However, it’s more likely that a lower asking price can actually attract multiple buyers, starting a bidding war!
On the other hand, a sky-high listing price is one of the most common pitfalls of short sales:
- Scares away qualified buyers in your price range
- Makes your home linger on the market longer
- Listing can go stale, which leads to lower listing prices
- Resorting to a price reduction gives your buyers extra negotiating power
Can a seller reject a short sale offer?
Unfortunately, a seller cannot reject a short sale offer as they don’t have the power to complete the transaction.
With the help of a real estate agent, it will be easier for you to calculate a price that will let you sell your home at a reasonable price in a short amount of time.
Your agent also knows the proper protocol for rejecting and negotiating a fair short sale offer for both parties.
Most real estate agents will provide a comparative market analysis to estimate your home’s value.
CMA’s are based on:
- Similar homes recently sold (size, home type, condition, upgrades)
- Same neighborhood
2. Not hiring an Appraiser
If you’re selling a short sale in a competitive real estate market like Charlotte NC, you will need to hire the professional help of an appraiser. You might think that the extra $500 to $700 is not worth it, but an appraiser will give you the peace of mind of making informed and solid negotiations with buyers.
Your real estate agent will be able to connect you with highly qualified appraisers in your area.
3. Rushing the short sale
Theoretically, making a short sale is a fast way of making money. However, rushing the process can lead to serious and costly repercussions. Short sale sellers should hope for good results but always be prepared for the worst. Doing your homework will help you avoid any problems.
4. Missing the right moment
This mistake might seem ironic after reading the previous point on this list. Here’s the thing, though: there’s a very fine line when finding the right moment to sell your home. Your real estate agent can help you with that.
Taking too long to present your short sale application can lead to lags and delays, which isn’t ideal for you, the lender, and the buyer.
Timing your sale also makes a big difference in the price you can get. Homes listed in the right window can help you make up to $1,500 more.
5. Not keeping your options open
Even if you think you’ve got the perfect deal, a better option might be around the corner. Make sure to consider all options that can help you make a profit. A real estate agent can help you make the most beneficial decision for your home and finances.
6. Not talking to your lender beforehand
If you’re hoping to short sale your house, you’re going to need to run the idea past your lender first.
Can a short sale be denied?
There are times when a short sale can be denied. While homeowners can list their homes and find a potential buyer, it’s ultimately up to your lender or bank to give the go signal. Failing to involve your bank can even lead to a foreclosure.
Make sure you have the guidance of a real estate professional when you’re trying to qualify for a short sale with your lender.
7. Missing short sale deadlines
The short sale process is tedious and involves many deadlines that you’ll need to track every day. To help you manage day-to-day operations, such as paperwork, home inspection, loan pre-approval, and negotiations, seek the help of a real estate professional.
8. Missing documents on your short sale package
One of the common mistakes with short sales is failing to prepare the right short sale package. There are many documents that your lender will ask for, and it can get pretty hectic.
Keep in mind that banks who receive short sale packages with missing items will automatically toss them in the trash. It’s also a common occurrence for banks to lose necessary documents, which can slow up the process.
A real estate agent has the experience and training to:
- Put together the right short sale package
- Deal with any issues with missing documents
9. Showing signs of financial improvement in your hardship letter
Most lenders and banks will require you to write a hardship letter to explain that you can no longer pay for your monthly mortgage. It’s one of the critical documents that will convince your lender to approve the short sale.
If you make your lender believe that your financial condition will improve in the letter, they will not likely approve your short sale.
10. Signs of questionable financial activities
While you should be honest with your lender, it’s not likely that they will approve your short sale if you’ve lost your money on:
- Drugs or alcohol
- Crime-related income loss
- Many short sale prospects have gone through serious financial issues due to job loss or death in the family.
Your real estate agent may help you write an honest hardship letter that still puts you in a good light.
11. Don’t mention other potential sources of money
Another thing to avoid in your hardship letter and conversations with your lender is borrowing money from family or friends.
You might be trying to make a point that you’ve exhausted all means to pay for your debts, but your lender might not approve the short sale if there are other means to get money, even if it is theoretical in most cases.
12. Using pre-made hardship templates
Lenders will want to hear about your unique circumstances. Don’t go with a hardship template that you’ve found online.
The best way to write a compelling hardship letter is to have the guidance of an experienced and trusted real estate agent.
13. Ineffective marketing
For a short sale to be successful, the property needs to be presented to the public positively. Agents who specialize in short sales use established marketing strategies that will extend your pool of buyers.
Two things can go wrong with marketing your short sale home:
- Not enough marketing
- Wrong marketing methods
Once you get the approval of your lender, you should start promoting your property immediately. Short sale real estate agents can use their many connections and online marketing strategies, classified ads, flyers, and real estate listings to attract interest.
Most of the time, sellers won’t reach an audience and a local real estate agent.
14. Not hiring a professional photographer
Almost 80% of home buyers search for homes online. That should give you an idea of how important photographs are to attracting a pool of buyers.
Professional listing photographers will take clear and inviting photos that highlight your home’s best features. Your real estate agent can give you solid recommendations for professional photographers.
15. Poor maintenance and skipping repairs
Even though you’re selling a short sale home, it doesn’t mean you should sell the home without proper maintenance and repairs.
A house that’s falling apart due to disrepair is not appealing to buyers, and they will try to negotiate a lower price to compensate for the repairs. Your lender may not be too keen to lower the price just because you skimped on home repairs, like a loose doorknob or scuffed walls.
Some common home improvements before selling are:
- Painting the interiors
- Replacing or repairing carpet
- Bathroom repairs
Here are estimates of the most common expensive repairs you’ll need:
Carpet and flooring: $2000
Exterior paint job: $4,000
New roofing: $6,500
To up your chances of selling your short sale home, here’s what you can do:
Get a home inspection: completing repairs even before a buyer sets foot in your home can be more cost-effective.
Offer repair credit: another option to convince buyers to close the deal is to offer repair credits.
Lower listing price: if you know there’s an issue with repairs, you can lower the listing price from the get-go, but make sure to explain this to the buyer so they don’t negotiate an even lower price.
16. Not Prepping and Staging
Almost half of the home buyers say that a well-staged home played a huge role in their home-buying decision.
Here’s how you can prep and stage your home for a short sale.
- Clean rooms and appliances thoroughly.
- Eliminate unpleasant odors.
- Fewer items make a room feel spacious.
- Keep your closets and storage spaces organized.
- Depersonalize and declutter to help buyers picture themselves living in the home.
With the help of your real estate agent and a professional stager, you can make your home more appealing to buyers. Remember that investing in staging is money and time well-spent on expediting the short sale process.
17. Letting emotions interfere with negotiations
Most of the time, sellers aren’t prepared for the emotional transaction of a short sale. However, sellers must separate emotional connections from the details of the sale to successfully sell the home.
Taking negotiations too personally
Remember to remain level-headed during the entire selling process. Try to be realistic when issues are uncovered after a home inspection. You indeed put TLC into your home, but not all buyers will likely appreciate your choices.
Since negotiations can quickly turn sour, this is where a real estate professional comes in. Trust that your realtor is a short sale expert who has been trained to deal with an emotional short sale where there’s a lot at stake.
Not accommodating showings
Short sale sellers aren’t very happy at the prospect of selling their home due to debts. Nevertheless, making it difficult for buyers to view your home will only make the situation worse. Your bank may even force a foreclosure if you don’t make an effort to let interested buyers see your home as soon as possible.
18. Too many restrictions
Buyers and buyers’ agents might not be too keen to deal with transactions where there’s a lot of resistance. If there are many restrictions, a listing agent will likely book with a more accommodating buyer.
When a buyer calls, it’s important to be responsive. A real estate agent is an expert at building relationships with buyers and other agents.
19. Skipping landscaping and curb appeal
The first impression that your home will make is through your front lawn. Spending too much attention on the interiors and skipping curb appeal won’t do you any favors in making an impactful and lasting impression. Over 30% of successful sellers will spruce up their home’s landscaping in some way:
- Painting exteriors
- Clearing pathways
- Mowing the lawn
- Raking leaves and trimming bushes
- Seasonal maintenance
- Planting flowers
A local real estate agent can likely help by recommending reliable and affordable landscapers in your area.
20. Failing to account for closing costs
One of the biggest mistakes that can lead to profit loss is forgetting closing costs. Closing costs account for about 8-10% of the home sale price. When it comes to selling a short sale home, every penny counts!
Make sure to seek the advice of your real estate agent when calculating closing costs. Here are some factors you should know about:
Transfer tax or title fee: this is the tax that is levied by the state. It will depend on the sale price of your home.
Commissions: sellers should allot about 6% of the sale price for commissions, 3% for the seller’s agent, and 3% for the buyer’s agent. Take note that the lender will account for these fees with the listing price rather than the home sellers themselves.
Property taxes: keep in mind that you’ll be paying for taxes until the closing date, which often results in a prorated charge.
Advertising costs: if you don’t have a real estate agent, you have to account for all the advertising costs you put out, such as flyers, signage, and online ads.
21. Not hiring a short sales real estate agent
If you think selling a home is difficult, you won’t believe the amount of work in a short sale.
Unless you are 100% confident that you can put in the same level of expertise, time, and dedication to a short sale, going with a real estate agent is the best decision you can make for a short sale.
Short sales can drag on for months without an experienced short sales real estate agent. While you can go with any real estate agent, a short sales agent has the training and experience to deal with the tedious and lengthy short sales process.
Nancy Braun of Showcase Realty – Certified Short Sale Seller
If you’re looking for a local short sale seller in North Carolina, Nancy Braun is the state’s first and only Certified Short Sale Seller.
With the expert guidance of the Showcase Realty team, it’s possible to have a positive and fruitful short sales experience.
For any questions about short sales, call Nancy Braun at 704-997-3794.