KW Default Solutions
Last updated
A few terms first. Equity is what the home is worth minus everything owed on it. A short sale is a sale where the lender agrees to take less than the amount owed. Being behind doesn't automatically mean the homeowner needs a short sale. Some owners still have enough equity to sell, pay what's due at closing and move on.
KW Default Solutions (KWDS) helps Keller Williams agents get and handle listings like this one. We also train agents to do it.
Your job is to find out if a regular sale is workable. Don't label the file just by counting missed payments. The answer depends on three things: the numbers, the title and the time available.
1. Ask what the homeowner wants
A homeowner who wants to keep the home needs a different conversation than one who has decided to sell. Explain the real estate work you can help with. Send questions about keeping the home to the servicer (the company that manages the loan account) and a HUD-approved housing counselor. The servicer is the company that collects the mortgage payments. If the homeowner has legal papers or a foreclosure sale date coming up, they need legal help right away.
If the homeowner wants to sell, ask about three things. Is there a current listing agreement? Are there known deadlines? Does anyone else own part of the home? You need that starting point before you talk about a marketing plan.
2. Build a closing estimate with current numbers
Estimate a price the home can really sell for, based on the property and the market. Then work with the closing professional. Together, list the payoffs, liens and selling costs that must be paid. A lien is a legal claim against the home for money owed.
The balance on a monthly mortgage statement isn't always the payoff amount. The payoff is the exact amount needed to pay off the loan on a certain date. It can include interest and fees the statement balance doesn't show. Other loans, taxes or title issues can also change the result.
Fictional example: Here's how a simple closing estimate might look.
- Likely sale price: $300,000
- Current mortgage payoff: minus $240,000
- Other amounts owed that must be paid at closing: minus $15,000
- Estimated selling costs: minus $25,000
- Estimated amount left: $20,000, before any other adjustments
That suggests a regular sale (often called an equity sale) may be possible. It doesn't tell you the final amount the seller will receive.
3. Match the sale plan to the real deadline
A home can have equity and still have a serious timing problem. Marketing, buyer financing, inspections, title work and closing all take time. Don't assume the foreclosure process pauses while those steps happen.
Get the actual foreclosure notice reviewed, and find out who is confirming the foreclosure status. Listing the home doesn't prove the foreclosure sale has been postponed. Neither does signing a contract or sending papers to the servicer. Foreclosure rules and timelines vary by state, so check with a local attorney.
If the timing looks tight, tell the homeowner plainly and work with the right professionals. Don't promise a closing date just because a buyer sounds ready.
4. Update the homeowner as the numbers change
Price cuts, a new payoff date, repair requests and title findings can all change the proceeds. Proceeds are what the seller walks away with. Update your estimate when those change. Show the homeowner what still isn't confirmed.
If the expected sale won't cover what's owed, stop treating it as a regular equity sale. The homeowner may need to bring cash, reach an agreement with a lienholder or look at another option. A possible short sale needs its own review. Don't assume the lender will approve it or release the rest of the debt.
Your one-page worksheet before you suggest a list date
Before you recommend a list date, put these on one worksheet:
- The proposed sale price
- The payoff amount and the date it's good through
- Other amounts that must be paid at closing
- Estimated selling costs
- Deadlines someone has actually confirmed
Mark anything you don't know yet. A realistic plan starts with knowing which questions still need answers.
Practice step: In the fictional example, change the payoff to $265,000 and keep everything else the same. Is there still money left? (Answer: no. The sale comes up $5,000 short. It's no longer a regular equity sale, so it needs further review.)
If you get stuck on a file like this, reach out through the KWDS contact form. We're happy to help.