Can’t Sell because the Property is Worth Less than is Owed

The last 10 years have been tough for the property market. The Global Financial Crisis changed everything and it’s simply not that easy to make money any more in property. They say properties should double in value every 10 years, however that is certainly not the case for the last decade. There is a good chance that if you bought a house ten or twelve years ago, it still isn’t worth what you paid. There are however, as in most cases, exceptions to the rule in some suburbs. For some, this is not a train smash as they will just stay put until the market recovers. However, there are a lot of people who have no choice, they have to sell for one reason or another.

Since I have been professionally coaching, one of the biggest challenges for agents is having to face traumatic situations in the business such as people falling behind on their mortgage and being forced to put their properties on the market with the realisation that the property is worth less than what they owe.

This is a dire situation because agents are also staring down the barrel of potentially not getting paid. But we are not the only professionals that are having to face these kind of situations, think about it, accountants have to deal with families and businesses going broke all the time, lawyers have to deal with litigation and law suits, doctors have to deal with illness and life threatening situations. Whether we like it or not, we have a huge responsibility to tell sellers what they need to hear rather than what they want to hear. Sometimes this even means coaching them through it and giving them solutions.

Here are some of those solutions to help get the property sold and help the sellers move on.

  1. Get a loan – If there is a difference of $50k between the sale price and what is owed, including your commission, the best course of action is to get a personal loan from someone or somewhere to assist in ensuring the sale proceeds. While some people may be able to ask family, the bank is obviously the first choice. Providing the borrower has a steady income, acquiring a loan should not be that big of a deal. The last thing banks want to do is foreclose on the loan and take the property into mortgagee-in-possession. This is a lot of work and effort and in most cases, everyone loses, not just the seller. Therefore, the banks will do anything to help prevent this from happening.
  2. Get help from family or close friends – Nobody likes to ask for help from family or friends, but let’s be honest, if my family need help and I’m in a position to help, I would gladly help out as best I could. Especially if it prevents a family member from going belly up or having their property taken away from them.
  3. Rent out – Sometimes renting out the property will cover a big portion of the mortgage, therefore giving the seller the option to rent somewhere a little cheaper and top up the rent to pay the mortgage. We are also living in the era of Airbnb, meaning the seller could rent one or more of the rooms out to top the mortgage this way. Obviously, this is not going to be an option if the sellers have lost their incomes.

Whatever the situation, there is always an option you can suggest to the seller to assist in the move and avoid drastic repercussions that will materially and physically affect them. Remember, agents have a duty of care to sellers to give the best advice that is in the seller’s best interests. If you gave great advice and helped a seller retain their property, when the time comes for them to sell the property again, you will be the agent of choice no doubt about it. They will also become your raving fans and refer you loads more listings and sales.

It’s all about building relationships with your clients and working in their best interests. If you would like to discover how to build lasting relationships which lead to repeat and referral business, make sure you register for my upcoming FREE half-day Real Estate Brilliance webinar where I cover this exact topic. I look forward to seeing you there.

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