SHORT SALE PROCESS
Short sales are becoming more and more common in the real estate industry. A short sale is the sale of real estate in which the proceeds from the sale are less than the balance of debts secured by liens against the property and the home owner cannot afford to pay the liens in full. In “Layman’s Terms,” the homeowner owes more on the home than the market would “allow” for the home to be sold for.
A short sale can be frustrating for everyone who is involved in the real estate transaction including buyers, sellers, real estate agents, attorneys, and other professionals. If not handled properly, a short sale, can take many months and still may not be approved by the lender! While it’s virtually impossible for the short sale “mystery” to be completely solved, there are many things that can help improve the probability of a successful short sale!
Creating a Meaningful and Well Thought Out Hardship Letter
Many times before a bank will approve a short sale, they require a letter of hardship. Hardship is not always directly related to financials. Hardship can include things such as (but not limited to) unemployment, a death in the family, illness or medical emergency, divorce, or reduced income. This letter is the home owners opportunity to “win over” the lender. Lenders are not under any obligations to grant a short sale to a home owner. Make sure this letter is meaningful and well thought out as it may be the only opportunity to get a short sale granted.
Select a Successful Short Sale Real Estate Agent
All real estate agents are different! What type of properties do you list? What “type” of sale do you normally take part in? These are just a few questions that should be asked to ensure the “right” real estate agent is selected. There are lots of real estate agents out there that have no idea when it comes to successfully handling a short sale. Making sure that the real estate agent has successfully handled a short sale in the past is important. A short sale can take lots of effort and follow-up and there are many real estate agents out there who don’t and won’t make the extra effort!
Authorize the Real Estate Agent to Discuss with the Lender
Lenders will not speak to anyone about an account except the mortgagee. This is of course unless the home owner authorizes the lender to discuss their account with others. Some lenders have forms (commonly known as an authorization to disclose information) that the home owner must fill out, others don’t. Whether the lender has the document or not, it can be a simple letter from the home owner to the lender. It is absolutely critical that the real estate agent is authorized to discuss their clients account with the lender. If the “right” real estate agent is selected to handle the short sale, he/she should know exactly what questions to be asking.
Keep Everyone Engaged and Updated
As mentioned above, a short sale can be very frustrating to many different parties involved in the real estate transaction. A buyer who is looking to potentially purchase a short sale must know first and foremost that patience is a must! It can be weeks and months until some lenders will approve or disapprove a purchase offer. It can be even more frustrating to everyone involved if there is no dialogue or communication. A real estate agent who is a short sale “specialist” should be able to keep all parties engaged and updated, often times, even if the update is something very minimal.
Having a Cooperative and Responsive Lender
Having the best short sale real estate agent and allowing that agent to discuss with the lender is important, however, if the lender is not cooperative and responsive it means nothing! Phone calls, e-mails, and mailed documents not being responded to will all but ensure that the short sale is unsuccessful. One common reason for uncooperative and non-responsive lenders is that they do not have the resources to accommodate a high volume of short sales.
Be Prepared to Close Once the Lender Approves the Short Sale
Once the lender approves the short sale, if at all possible, everyone involved in the transaction should be prepared to close! Some lender approval letters can expire quickly (30-60 days) and a short sale extension is not guaranteed. It is important that the attorneys’ have reviewed documents (title, survey, abstract, etc) and the buyer has been approved (appraisal completed, inspections completed) and that everyone involved in getting the transaction closed, has completed their responsibilities. Since closings can take 60-90 days from contract, if the bank approves with only a 30 day approval letter, it can be an issue.
Once again, it’s virtually impossible for the short sale “Mystery” to be completely solved. The above are some things that can help successfully complete a short sale! What other tips and/or advice would you provide to a home owner considering a short sale?