The PHUR Arguments

In negotiating short sales, there are many points that a negotiator must argue to the bank.  In my experience, these fall under four main categories, which you can remember as PHUR:

• Price - A negotiator must argue the purchase price of the offer being submitted.  The bank is looking for a net at or above that which they would obtain from a foreclosure auction.  Since the bank has the authority to foreclose and collect on this money, they want to see that they can be offered as much by the negotiating team.
• Hardship - Detailed more in the article "On Hardship," the negotiator must argue that the homeowner is facing circumstances which negatively affect their ability to pay.  While a house need only be worth less than what is owed on the mortgage for a short sale to be necessary, a bank will not accept that reasoning alone.  They are looking for a compelling hardship which can be proven through documentation.
• Urgency - Often times it is necessary to communicate to the bank that the request for a short sale is urgent and needs to be dealt with quickly.  Since the foreclosure and short sale processes happen largely independently (a phenomenon which I will expand upon in an upcoming article) your negotiator may have to emphasize to the bank that they are running out of time to review the short sale.  Urgency can also be tied in with the hardship, as some hardships may be exacerbated by the prolonged review process.
• Responsibility - Arguing that even from the bank's perspective, a short sale is the more responsible option.  As a short sale essentially achieves the same ends as a foreclosure sale, the bank needs to be convinced that the short sale is the more responsible option.  Some key facts that the bank needs to consider:
• In a short sale they are getting market value without having to incur the cost of hiring a foreclosure firm (if they haven't already.)  They do not have to pay the fees associated with actually conducting the auction.  This means that a short sale nets them more money in the long run, while doing the listing and selling work that the bank would otherwise have to hire someone to do.
• The bank does not have to assume ownership of the post-foreclosure property as real estate owned (REO.)  They are not interested in owning the house, as it makes it makes them responsible for selling it.  To put it simply:  If they foreclose, all they get is a house.  They then have to deal with selling it.
• The bank has a fiduciary duty to the investor who actually owns the loan.  Combining the first two points, it needs to be argued that the bank must entertain the option which nets the most money for the investor.  The bank needs to be reminded that a short sale often fetches much more money than any foreclosure option could hope to.

The handy acronym (sounds like "fur") can help you remember the key aspects of what your negotiator will argue on your behalf.  With a full coat of PHUR, so to speak, your negotiator greatly increases the chances of pushing a short sale though.