Complete Short Sale Process For Sellers
The short sale and short sale process is still a mystery for a huge number of people. A great number of buyer’s agent mess up the process and puzzled buyers are looking for directions and not every short sale listing agent knows how to do a short sale and how to carry the process of short sale?
What is a Short Sale?
“Any sale of real estate that generates proceeds that are less than the amount owed on the property. A real estate short sale occurs when the lender and borrower decide that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan. It is, therefore, an alternative to foreclosure.”
The Basics of a Short Sale
Short sale is process of convincing the lender and short sale bank to accept the less than owed on the home. Banks are always trying to maximize the profit and infrequently allow a short sale. Banks grans short sale fort two main reasons.
- The seller owes more on the mortgage than the home is worth
- The seller has financial hardship
A few examples of a hardship are:
- Reduced income
- Huge Business Loss
- Physical Disability
- Medical emergency
- Job transfer out of town
The seller is required to submit the short sale package to the banks. Every bank may have different guidelines except the Wachovia that is considered the best shorts sale bank in the world. The basic procedure of short sale similar for all banks. The seller’s short sale package mostly contains:
The seller will need to prepare a financial package for submission to the short sale bank. Each bank has its own guidelines but – with the exception of Wachovia, which is the best short sale bank in the world – the basic procedure is similar from bank to bank. The seller’s short sale package will most likely consist of:
- Letter of authorization, which lets your agent speak to 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 writing a short sale buying offer, a buyer must ask his or her short sale buying agent to get the list of comparable sales. Banks are not giving away a home at rock bottom pricing. They always try to extract as much as they can. The bank will try to recover somewhat near the 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
The short sale process will be delayed in case the package is incomplete. In this situation, the bank might even scrap the short sale package.
The Short Sale Process at the Bank
The short sale is really a long and time taking process. The buyers may have to wait a long time to get a response from the bank. It is critical for listing gent to keep in touch with the short sale bank and keep careful notes of the short sale process.Buyers may get so tired of waiting for short sale approval that they may feel the need to threaten to cancel if they don’t get an answer within a specified time period.
- Bank acknowledges receipt of the file. This can take 10 days to a month.
- A short sale 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.
- The buyer cancels.
Short sale is time taking process and it may take days to months and during the time shorts sale buyer may get angry and even think to cancel buying a short sale.
Some short sales get approval in 2 to 8 weeks. Others can take 90 to 120 days, on average. The length of the short sale generally depends on the investor, not the bank.