Why You Must Secure Cooperation from ALL Your Sellers!

In this edition we discuss working on short sales in divorce or multiple seller situations and how more lenders are now requiring yet another bit of information in certain situations.

But first, we’ll begin with one of the challenging aspects to short sales. But don’t fear, because this is certainly something that can be overcome, it just requires that extra special touch of negotiating skill that we as short sale specialists possess! And this aspect would be when we must deal with properties that have multiple sellers on the mortgage note. To first give a little insight into the nature of this situation – when there are multiple sellers on a note, it requires that we obtain financial information (pay stubs, bank statements, etc) from EACH of them. The reason for this is because both of their incomes were factored in to determine if they’d qualify for the loan originally. And so, in order to determine if they qualify for a short sale, the same review must occur.

Now, in most cases, this isn’t a big deal, because in most cases the sellers are motivated by the fact that they both equally want the burden of the property off their backs. And so they are both equally cooperative in doing what it takes to get the short sale done. However, there are some cases when they are not fully cooperative. And this is where the challenge comes in. We often deal with cases where there is divorce, or couple that chose to buy a house together, and then have since split up. This is the scenario we encounter the most, but any time there are multiple sellers there is the chance that they may be at odds and not willing to help each other out. This is common, because this is also often the reason for the hardship in the first place.

So with this, the first thing to clarify with the agent and sellers is that they will BOTH have to provide financial information. They’ll try to claim that the divorce decree or other written agreement leaves only one of them responsible for the house, but you’ll have to establish right from the start that since they’re both on the mortgage note outweighs any decrees. Anticipating that you probably won’t get cooperation from both sellers, you’ll need to find a way to motivate each person. This can be tough, since the common sentiment in these cases is to bury the other one, even if it means burying themselves. But the best thing to do here is to approach each person individually and really lay into them about what they’ll have to deal with if they cooperate this one last time. And to assert the fact that this will be the last thing they’ll have to do together. So if they can just cooperate this one last time they’ll be far better off. It’ll make you feel like you’re a divorce mediator for a bit, but will help you to close the deal!

Our other tip this week pertains to a new requirement that a couple lenders thus far have started requiring when reviewing their short sales. Chase, and now Wells Fargo, are requiring that buyers provide a proof of funds to verify the source for their down payments…if they are coming to the table with large down payments (typically 10% or more). The proof of funds must be a checking or savings account statement, and will be required in order for these lenders to approve the short sale. It may seem a bit excessive to most of us, but think of it as these lenders wanting to see proof of ALL the funds that will be used for the purchase, which is not far gone from what they’ve already been seeking to do!