We thought we would begin our new site by explaining in as few words as possible, what is a short sale?
Basically, it is an option available to distressed property owners whereby they can avoid foreclosure by selling their home through an “arms length” transaction in the open market for current value with the agreement that their lender will “forgive them” from the deficit or in other words the difference between the amount the bank will net from the sale of the property and the amount actually owed to the bank by the property owner.
Usually, most property owners decide to short sell when their attempt to modify their loan or achieve some kind or loan workout or refinance failed. Hopefully the new HARP program will result in more loan modification applications getting approved because the HAMP program was a dismal failure.
When a property owner decides to short sell, they usually contact a real estate agent whom they hope is experienced in this specialized area of the real estate business. Warning: a certificate, title or affiliation with an organization does not necesarialy mean they are qualified or that in fact they have succesfully closed a single short sale so, seller beware here! In some cases, their lender suggests that they contact a real estate agent to short sell their home. Recently, we have become aware that some lenders actually “recommend” that the property oqner use one of their “approved” or even “affiliated” third party short sale processors or real estate firms to supposedly move the process forward faster or easier. To us, this seems a lot like having the fox watching the hen house and we would not want to be “helped” by an organization that answers to the lender from whom you are trying to get out from under. This seems like it should be intuitively counterproductive as we all know, you can’t serve two masters.
The real estate agent usually starts by listing the property for sale as a short sale which communicates to prospective buyers that the transaction will require “third party approval”. Meaning that even after buyer and seller come to an agreement, the transaction can’t close without the approval of the seller’s lender.
Then, the real estate agent usually requests an authorization to be signed by the seller so that the agent can contact the lender and find out what will be the specific requirements that must be met to apply for and eventually have the short sale approved by the lender. These requirements and the way in which lenders will process the short sales seem to change, A LOT, and very often which keeps us from getting bored.
Once the real estate agents receives the lender’s requirements and the lender agrees to allow the seller to apply for a short sale of their property, the process of compiling and submitting information can start. Some times the lenders use an internet based platform through which the agent can upoload and update information and other times all of the information has to be submitted by fax. This process can be tidious and full cooperation from the seller is necessary to ensure success.
Once all of the required documentation is available and hopefully an offer has been received, it can be submitted to the lender for consideration. If the lender determines that all of the required documentation has been received and it is acceptable, they usually order their own valuation of the property. A form of appraisal they call a BPO, which stands for “broker price opinion”.
With their valuation in hand they usually then submit the transaction to one of their negotiators who will review the information, ask for any updates or additional information they may deem necessary and will then come back with a counter offer or acceptance. We can write volumes about this step of the process but we will assume the short sale is acceptable to the lender here and will continue to the next step.
By the way, the entire process usually takes from two to three months. With a few getting completed in one to two months and in rare cases and due to extenuating circumstances, some short sale transactions have taken more than one year to complete. But, I am proud to say, we did complete them because we remained steadfast and true to the seller’s cause until we succeeded.
Once the lender accepts the short sale, they send a written notification which stipulates the terms of their acceptance and the amount of time allowed to close the transaction. This is when the clock on all of the time lines stipulated in the buyer’s offer usually start running (if the offers documents were prepared properly).
At closing, the seller signs the closing documents very similar to a conventional sale and after funding the buyer gets title to the property.
In later updates we will discuss in more detail each step and the many variations and complications that sellers, buyers and theis realtors must be aware of in order to suceed at short sales.
In the meantime, if you have questions of need additional information, please feel free to contact us at 18557972468 or by email at email@example.com and a short sale specialist will contact you as soon as possible.