I find that most buyers are looking for some optimistic news when it comes to short sales.  They’re talking to family, friends, people sitting next to them in a restaurant about the evils and extended time frames on a short sale. 

 Sellers are told of horrific and earth shattering negotiations that occur that can devastate their world.  In other words, the term doom and gloom is a perfect description for the views that people have on short sales. 

 Having completed almost all my short sales successfully in the last few years, I thought that for the next few months I can help try to calm some of the fears and anxiety if you are looking to short sale your home or looking to buy a short sale by providing you an insiders view of what happens during short sale negotiations.  In this newsletter, I’ll discuss what happens in the beginning of a short sale listing.  Hopefully this series will take away some of the mystery and a load of the anxiety. 

The Short Sale Listing

 The decision to enter into a short sale is a very difficult one for any homeowner.  The concerns that every homeowner have is regarding the sale and the potential release of the deficiency (balance left on the loan once the home is sold for less than the mortgage).  The questions I receive center on the process of a short sale. 

 When I take on a listing, I have to ensure that the homeowner has a qualifying hardship.  Most people do not realize that the “lender” is not the ultimate decision maker.  There is a party called the investor who actually owns the loan who decides the fate of the short sale.  The “lender” may only be the company hired to collect the payments or manage the account. 

The general qualifications for a short sale are:  

-Financial Hardship

-Loss of a Job

-Business Failure

-Death of a family member or spouse

-Severe illness

-Divorce

-Relocation

 It is very important that I obtain a fair and accurate picture of what has caused the homeowner to consider this option so I can best represent this hardship to “lender” for a short sale consideration.  I am your advocate as well as your Real Estate agent.  Your case needs to be clearly and accurately presented to the lender. 

Once the information is obtained, the homeowner and I will sit down and package the file with all the relevant documents.  In addition, I also provide specific market driven data that I secure to ensure a clear picture of the HO’s (homeowner) circumstances along with outlying issues that can have a material impact on the potential recovery for the HO.  Without this key step, a short sale may not be successful. 

Pricing

 I’ve had an array of homeowners who are very involved in the pricing of a home to those that are not as concerned.   Pricing a home is very key in this market from a marketing standpoint.  The home needs to drive in traffic. 

 On the other hand, it is key for me to recognize that price is also important in obtaining a good chance at a short sale.  Too high and the lender may approve but leave the buyer unable to obtain financing.  Too low and the lender may disapprove and cause us to go back to a buyer to ask for more monies, decline potential seller closing cost contributions or basically have the buyer walk away because of the increase over list price.  The relevance in all this is the time lost that may have been necessary to prevent a foreclosure on the property.

Initial Lender Contact

Very rarely have I run across a home that has only 1 loan.  The reason is simple.  Back in the days of  amazingly high supply of loans, most homeowners had multiple loans for anything from purchasing the home to improvements (HELOC).  When it is determined that multiple loans exist, its important to address each one separately and to understand the mechanics of how the lenders work with short sales or to identify what may help to drive the junior lien holders (HELOC’s, second loans, etc.), to approve the short sale.  Without their approval, a short sale cannot continue since they have a “lien” on the home that needs to be lifted.

 Both lenders must be involved and a short sale agent must be able to obtain their participation in a timely manner in order to eliminate as much wait time as possible.  This is done through persistence, continuous contact, and making sure the file is properly packaged.  Without these key items in place, a short sale most often will not successfully close in a timely fashion.

 How do I know I’ve made a successful contact with a short sale lender?  In all cases, when a lender issues a request for a BPO that means the file is in their possession provided some updating or request for additional documents.  A BPO is a price opinion from a real estate agent or brokerage who should be looking at the objective price of the home and comps.  More times than not the lender will not release the value of the home but based on decisions made by the lender, I can fairly tell if we are within the ballpark of where the lender needs the final amount to be. 

Approvals

Short Sale approvals are not automatic. There are quite a few review points in the process from the Lender and the owner of the loan.   Again, there is never a guarantee that the outcome will be positive. However, once an approval is provided, YOU as the seller must agree to those terms BEFORE we can proceed.   The best idea once an approval is obtained is to have a qualified Law firm review the letter along with a CPA. These two parties will help outline your legal and tax consequences (if any) so you can enter into the next phase of the contract with the buyer.