Here we are again. In case you missed them, and need to get caught up, here are the first three parts in this series.
Today we want to take a step by step look at the process of a short sale. Now, if you’ve looked at my Arizona Foreclosure Help Page, you know that a short sale may not be the best option for you. But if it is, here’s how the process goes.
Sell Means Sell
To do a short “sale” the home has to be up for sale first. If you’ve already determined that you are a great candidate for a short sale, you next have to find an agent who will put your home on the market. Just like any time you put your home on the market, choose the best agent you can find. Choosing the wrong agent to do a short sale can cost you dearly. This agent should also be someone you trust, or comes with a good referral from a friend or relative, as they’ll become intimately familiar with your situation and your financial life. The first step is to hire an agent and get him or her authorized to speak on your behalf with your lender. You should contact your lender and ask them how to get your agent affiliated with your account. They will either provide the documentation you need, or tell you what to send to them. Usually, the lender will want a note from you that authorizes the agent to speak on your behalf, with the appropriate data included, like the agent’s name, company, contact information, you loan number, your signature, and the date. This should be the last time that you are in contact with the bank, as the agent will take over from here.
What’s Wrong With This Picture?
I recently began working with a client who was attempting to do a short sale with another agent in town. I’ll not reveal the name of this agent, so as to protect the ignorant, but here’s what happened. This home has been up on the market for 4 months as a short sale. Now, you might be thinking that, in a market like this, 4 months isn’t too bad. Actually, 4 months on the market, for any seller, even in this market, is bad. For a short sale to be on the market for 4 months is absolutely wrong, and is a serious detriment to the seller of the home. The agent in this case was trying to get the seller “top-dollar” for the home. Consider this (and we’ll cover this more thoroughly in our next installment): what good is “getting top dollar” doing for the seller? He’s already upsidedown on his mortgage. By leaving his home on the market for 4 months, the agent is not doing him any favors, and is doing serious damage to his credit rating! Short sales need to happen fast in order to be protective of the client. Protection of the client’s interests is the only reason to do a short sale. Not only was this home on the market for more than 4 months, the agent in question was actually having the client doing his own negotiating with the bank! The agent would actually call the client for news on how the short sale was going! Incredible! (If you want referrals from me about agents in your area who are experienced in short sales, just drop me a line. I’ll give out my information at the end of this post.)
Savour The Sensation
If you have a good agent, ad the marketing is done well, you should have an offer on your home within 30 days. Unfortunately, this is a difficult time for sellers, but they can actually relish the idea that their home actually has a potential buyer! There are many a homeowner who would love to have an offer on their home. Any offer. Now, here’s what’s gonna happen:
Getting It Together
Your agent, being the fabulous agent he or she is, has already spoken with the bank, and has a list of documents that the bank will want to accompany the offer on your property. This will undoubtedly include:
a.) a hardship letter that explains why you can no longer repay your mortgage
b.) all of your fiinancial documentation which demonstrates the hardship; this will include your pay stubs, all of your checking and savings account ledgers, your w-2s, your 06 -07 tax filings, any IRAs, 401Ks, everything.
c.) the fully executed offer on your home, along with the buyer’s qualification letter, and any and all addenda, counters, etc.
d.) an estimated HUD-1 settlement statement from a title company (or an estimated net sheet)
e.) a copy of your and your agent’s listing agreement
f.) a copy of the MLS plano sheet
g.) any comparable sales and tax documentation that supports the value of the offer on the home, along with a letter explaining such from the agent
So, there you have it. A mountain of about 50 pages that need to be faxed to the lender.
The Waiting Game
Now, because everybody and their dog is going into foreclosure, you’ll have to wait your turn to get assigned to a loss mitigator to review your file, check for file completion, and make a decision about whether the bank will accept the short sale. Your agent should call the bank the same day, or the day after, the documents are sent, in order to confirm receipt. Many agents will simply wait for the bank to call them with a decision. This is not the best idea an agent ever had, as I am personally convinced that unless you call them periodically (like once a week), they tend to forget you exist. When I call, I don’t expect a dicision. I’m just letting them know that I still exist, and that we are waiting patiently. Kinda. I’ll also want to make sure that they don’t have any more documents that they need, or questions they need answered. Expect that an actual dicision will not be made on the short sale for a minimum of 45 days. Sometimes in can take 60 days.
Milestones To Watch For
There are a few things that need to happen before the bank can make a decision, and things which your agent will want to watch for. First, you’ll want to confirm that the lender has ordered, or will order very soon, an appraisal or BPO, or Broker Price Opinion. This is done for the simple reason that the bank is not going to take your agent’s word that the home is worth what they have suggested. They’ll want 3rd party confirmation. If your agent has suggested that the property is worth $300,000, and your offer is for $280,000, great. But, if the bank does an independent review and finds that the home is actually worth about $375,000, they will not accept the sale. Your offer is too low.
Another milestone to watch for is that your case has actually been assigned to a loss mitigation negotiator. It will take about two weeks for your case to be assigned to someone. Once this happens, it will usually be a fe more weeks before this person makes a decision.
The final milestone is the actual negotiation. When the loss mitigator begins to call your agent and talk about the terms of surrender, you’ll know you’re close. The end is in sight.
Crossing The Finish Line
So, all the negotiations are done, the bank has agreed to the short sale, and the property now goes into escrow for processing. This will take an average of 30 – 45 days to complete. At the end of this period, you have moved out of the home, the new buyer has moved in, and your ordeal is over. Or is it? Tune in next time for the consequences. You didn’t think this was over did you?
For specific questions about your situation, or if you need help, please call me direct at (602) 499 – 4798, or email your questions to email@example.com. Finally, the disclaimer:
This information is for educational purposes only. Seek attorney, tax, and residential legal help for your specific situation.