The Short Sale Process
The short sale process is still a mystery to most homeowners who are upside down on their mortgage and need a solution for selling their property for an amount that is less than what they owe the bank.
Unfortunately for sellers, and the housing market in general, many real estate agents are not as familiar with the short sale process as they should be.
Even though the process has become more streamlined within the past couple of years, there is still an overwhelming uncertainty and fear about how, what and why a short sale works for some sellers.
To start out, banks grant short sales for 2 reasons: the seller has a hardship, and the seller owes more on the mortgage than the home is worth.
Here Are A Few Examples Of A Hardship:
- Unemployment or Reduced Income
- Medical Emergency
- Job Transfer
If you are facing a hardship, the first step is to prepare a financial package for submission to the bank for an initial short sale approval.
Homehelper Consultants has submitted hundreds of hardship packages, so we are very familiar with each bank's guidelines and procedures.
Here Are A Few Things Most Short Sale Packages Require:
- Letter of authorization, which allows your agent speak with the bank.
- HUD-1 or preliminary net sheet
- Completed financial statement
- Seller's hardship letter
- 2 years of tax returns
- 2 years of W-2s
- Recent payroll stubs
- Last 2 months of bank statements
- Comparative market analysis or list of recent comparable sales
Writing the Short Sale Offer and Submitting to the Bank
Before a buyer writes a short sale offer, a buyer should ask his or her agent for a list of comparable sales. Banks are not in the business of giving away a home at rock-bottom pricing. The bank will want to receive somewhat close to market value.
The short sale price may have little bearing on market value and may, in fact, be priced below the comparable sales to encourage multiple offers.
After the seller accepts the offer, the listing agent will send the following items to the bank:
- Listing agreement
- Executed purchase offer
- Buyer's preapproval letter and copy of earnest money check
- Seller's short sale package
If the package is incomplete, the short sale process will be delayed. In this event, the bank might even shred the package.
The Short Sale Process At The Bank
- Bank acknowledges receipt of the file. This can take 10 days to a month.
- A negotiator is assigned. This can take 30 to 60 days.
- A BPO is ordered. The bank probably will refuse to share the results of the BPO.
- A second negotiator may be assigned. This can take another 30 days.
- The file is sent for review or to the PSA. This can take 2 weeks to 30 days.
- The bank may then request that all parties sign an Arm's-Length Affidavit.
- The bank issues a short sale approval letter.
HHC has successfully negotiated and closed over 1,000 short sale transactions since 2006, and we fight hard to protect our sellers from deficiency judgments or owing money at closing. Contact us today for a strategy session.