Sometimes, the best way out of a difficult situation is through a strategic plan. Michelle, a homeowner in Scottsdale, AZ, was facing foreclosure after being laid off from her corporate job. With over $861,000 owed on two mortgages and the market value of her home nowhere near that figure, Michelle had few options left.
That’s when she was referred to me by Marcus, an investment partner, and we worked together to create a path forward that involved negotiating a short sale and helping Michelle avoid foreclosure.
The Seller's Challenge:
Financial Hardship and Exhausted Resources
Michelle was experiencing severe financial stress. After losing her corporate job at Wells Fargo, her income was significantly reduced, and she soon found herself unable to keep up with mortgage payments.
Housing prices had fallen drastically, and Michelle owed over $861,000 on her two mortgage loans, while the home could only be sold for a maximum of $450,000 to $500,000.
Her expenses were also increasing—credit card interest rates went up, monthly payments doubled, and her credit lines were reduced, leaving her with no safety net for unexpected costs like car or home repairs.
Michelle had exhausted all potential sources of funds, including taking loans against her 401K, but nothing worked out. Even her application for a loan modification under the Home Affordable Modification Program was denied.
"I tried everything to keep my home, but I just couldn’t make it work. Rafael stepped in and made a stressful situation manageable, giving me hope."
michelle sarocka
Distressed Homeseller
She knew that avoiding foreclosure was her only option if she wanted to protect her credit and move forward. With no other alternatives, Michelle chose to pursue a short sale, and she trusted me to help her through it.
A Glimpse Before the Short Sale
These photos capture the condition of Michelle’s home before we began the short sale process. It’s an honest look at what we were working with, and why taking swift action was so important.
Our Approach:
A Step-by-Step Plan to Tackle the Short Sale
Michelle was comfortable with the idea of a short sale, especially after hearing about the success I’d had with similar transactions. We agreed to list the property initially for $510,000, and I began by crafting a strategic approach to get the lenders on board and find a suitable buyer.
To expedite the process, I and a partner initially got the property under contract. This allowed us to begin negotiations with the lenders early, setting us up to move forward as soon as we listed the property formally.
I also conducted sales comparisons, assessed the local market trends, and planned out a strategy for negotiating with the lenders and attracting interested buyers.
Once the short sale package was ready, I drafted the listing contracts, and we listed the home. We started receiving inquiries shortly afterward and worked diligently to respond to offers while keeping negotiations with the lenders progressing smoothly.
Step 1.
Initial consultation with Michelle to discuss options and short sale process
Step 2.
Ran sales comparisons and inspected the property
Step 3.
Developed a listing and negotiation strategy for lender approval
Step 4.
Drafted contracts and short sale package for execution
Step 5.
Listed the property and began marketing efforts
Step 6.
Negotiated offers and worked with lenders for final approvals
The Paperwork That Got Things Rolling
This is the qualification form we had to submit just to start the negotiation process with PennyMac. Every short sale starts with detailed paperwork, and this form set the wheels in motion for the successful outcome we achieved.
The Results That Made the Difference
After three months of negotiations with Michelle’s lenders, we formally listed the property on the MLS. Within 219 days, and following a $20,000 price reduction, we received an acceptable offer from a qualified buyer who had proof of liquid funds. This offer was for $417,000.
Despite the initial hurdles and lengthy timeline, I successfully negotiated a significant reduction in the payoff amount—over $90,000. This allowed the sale to proceed, saving Michelle from foreclosure and the negative impact it would have had on her credit.
Although the road was long, the outcome gave Michelle the ability to move on without the burden of a foreclosure on her record.
Three Months of Talks: Getting Lender Buy-In
We negotiated with Michelle’s lenders for three months before even listing, making sure we were all set to move fast when the right buyer came along.
$90K Reduction: Making the Short Sale Happen
Our negotiations led to a $90,000 reduction in the mortgage payoff, which was key to making this short sale work for Michelle.
$417K Sale: saving Credit, Avoiding Foreclosure
We sold the property for $417,000, which helped Michelle avoid foreclosure and saved her credit from taking a huge hit.
The Green Light: Short Sale Approved
This is the short sale approval letter we received from PennyMac. It was the pivotal step that allowed us to move forward to closing. Seeing this document makes it clear how our persistence paid off.
“Rafael and his team handle complex deals seamlessly!”
Rafael’s team managed the entire short sale process, securing significant lender discounts and approvals despite multiple extensions. Thanks to their persistence, my buyer purchased a property at a reduced price, and the transaction was hassle-free. I highly recommend Rafael and his team to anyone navigating short sales or complex real estate transactions!
Top Tips for Successfully Negotiating a Short Sale
Short sales can be challenging, but there are ways to ensure the best outcome for everyone involved. Here are some key takeaways from Michelle’s case that could help others in similar situations:
top tips for
sales success
Be Prepared to Negotiate with Lenders
Getting a lender to agree to a reduced payoff can take time and persistence. Start negotiations as early as possible.
List Strategically
Starting negotiations before formally listing the property can help speed up the process when the right buyer comes along.
Stay Patient
Short sales are rarely quick, but staying patient and focused can lead to a positive outcome, even when challenges arise.
The Hardship Story That Made a Difference
Here’s the hardship letter that Michelle wrote and we submitted to the lender. A well-crafted, emotionally honest letter can make all the difference in a short sale negotiation—it shows the lender why they need to help.
This letter did just that, helping us gain approval.
Lessons Learned:
Persistence and Strategy Win the Day
![Lessons Learned Icon [v4]](https://rafaelcarrasquillo.com/storage/2024/12/Lessons-Learned-Icon-v4.png "Lessons Learned Icon [v4]"){kind=icon}
This transaction highlighted the importance of persistence and having a clear strategy in place. By initiating negotiations early and adapting our approach as needed, we were able to overcome numerous obstacles and achieve a successful outcome for Michelle.
Flexibility, combined with a thorough understanding of the short sale process, was key to making this transaction work.
The experience also underscored the value of clear communication with both the seller and the lenders. Keeping everyone informed and working toward the same goal ensured that the transaction stayed on track and ultimately succeeded.
Need Help with a Short Sale?
Short sales can be overwhelming, but you don’t have to go through it alone. If you’re facing financial challenges and need an experienced partner to guide you, my team and I are here to help. We’ll handle the process from start to finish, so you can focus on moving forward.