Here is the short sale process in brief… it’s not. It can be long and frustrating to all involved. Definitely a slow cooker delight. However, the rewards to the buyer is a much better price on a house. And the rewards to the seller is an escape from an upside down mortgage or foreclosure situation.
Not every listing agent knows how to do one or cares to learn. Many who do, would prefer not to because they are labor intensive. A very time consuming paper push for the listing realtor.
The reason? Well many would like to know. Generally the bank heloc, or home equity line of credit department is considerably more stream lined. The Bank of America heloc department prides itself on getting an approval letter out 5-10 business days after the required paper work has been submitted.
Their short sale department handling first mortgages… another matter altogether. 30-90 days… if your listing agent is good. And the bank negotiators have fed their minions their required number of donuts. BOA has had some bad press concerning that department, that they were indeed deliberately delaying short sales and driving people to foreclosure. Whether true or not, they have been a time consuming pain.
Short Sale Process Basics
Short sales are granted for limited reasons. Generally two: you as the seller have a hardship number one. And you owe more on your mortgage than the home is worth, which can happen even without a hardship.
Hardship examples considered valid by banks include:
• Reduced income
• Medical emergency
• Job transfer out of town
The seller agent will generally need to assist the seller in preparing a financial package for submission to the short sale bank. that basic procedure is the same from bank to bank with basically different letterheads. Your short sale package will consist of:
• Letter of authorization, which lets your agent speak to the bank.
• A listing contract and copy of MLS listing
• 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
Making the Offer is a Short Sale Process in itself
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. If you follow the sheriffs auctions, they generally require bidding to start at 80% of market value. They like it roughly in that range in the short sale. Short sale pricing may have little bearing on market value and may, actually, be priced below market just to encourage multiple offers. However, most banks only process one at a time.
When the seller signs the offer, the listing agent will send it to the bank with the buyers preapproval letter and copy of earnest money check.
The Banks Short Sale Process… (Inside the belly of the Beast)
As a buyer, you may have to wait a very long time to get a response from the bank. The listing agent must regularly call the bank and keep careful notes of the whole process. As the old term goes, it is the squeaky wheel that gets the grease. You may feel like canceling but patience will when you the deal in the end. Threatening to cancel will not speed up the process. Hang with the short sale process and you will usually get the better deal in a house price.
Following is a typical short sale process at the bank:
• Bank acknowledges receipt of the file and initiates the short sale: 10 days to a month.
• Negotiator gets assigned. This can take 30 to 60 days… no idea why.
• An appraisal or Brokers Price Opinion (BPO) done by an agent, is ordered.
• The file is sent to the investor, such as Fannie Mae for review. This can take 2 weeks to 30 days, but can be sped up considerably by an agent who knows how to escalate the file at both the investor and servicer bank level.
• The long awaited short sale approval letter is at last issued.
Both seller and buyer can get frustrated at the time involved but for the time being, that is the short sale process and can only be sped up by knowledgeable agents pushing the banks from the investor and servicer side with will monitored escalation and just plain pestering them till its done. Some banks are better than others and will knock it out in 6-8 weeks, others will be 90-120 days and a few more. Whether they delay by accident or design, hopefully a lawyer or two will be able to determine some day.
But in short, that is the short sale process, and can be quite profitable to the buyer, and an escape from foreclosure for the seller... when that closing day finally does arrive!
Legal representation or advice is recommended in all legal matters. This site and brokerage represented is not affiliated with the government. If you use our services, your lender may not agree to accept a short sale or change the terms of your loan. We do not advise you stop paying your mortgage.
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? Whats with the doggie? Well, Miss Piggy is a rescue dog taken away from an abusive home by a veterinarian after he treated her for wounds in which she lost an eye. She is now a very happy doggie and I thought, a much prettier face than mine. She escaped her bad home… as will you, escape mortgage, stop foreclosure and smile:)