- A net sheet
- A title search
Before taking a listing, I would do a “net sheet” for the seller. The simple formula is this:
Approximate sales prices - (commission) - (mortgage payoff) - (other lien payoffs) - (back taxes) - (seller settlement costs) = seller net proceeds.
Obviously you are relying on good faith, cooperation and estimates, but in many cases you can get a sense before you take the listing as to what a sale will net (if anything) and if your "foreclosure radar" needs to be up.
Let’s say that you are in a short sale situation – or anywhere close to it (remember, the seller may not realize they are upside down), I would order a title search from your friendly neighborhood title guy.
While it is the buyer’s job to evidence title (at least in buyer-controlled markets like ours), as listing agent you don’t want to put work into marketing a property the seller will lose rights to own/sell. A title search may cost you/the seller something ($150 maybe?), although it is possible that the buyer will select that title company or buy the search in which case it would cost you nothing.
In the case I heard about, a Home Owner Association (HOA) lien was foreclosed upon, thereby wiping out the mortgage. Had a title search been done in advance, it may have revealed the existence of the lien. If you were aware of it, you could have done some legwork on your own to determine that the HOA was about to foreclose on their interests. You or the seller could have asked them to hold off until settlement, at which case they'd get paid.
Again, these are not fail-proof methods to avoid all pitfalls that come with listing in this environment, but they just could save yours.