Feb

Understanding the Short Sale Process (for your sellers)

A short sale is not a foreclosure. And the process for a short sale is different than a foreclosure.

Short sales are still owned by the seller and NOT the bank. However, most short sales are at least 90 days behind in house payments. So the seller hopes the bank will agree to let them sell it at a loss with no money owed at closing (or in the future).

The bank is NOT obligated to work with a buyer and seller to see that the house is sold. Most sellers do not have enough equity so the bank is usually taking a loss. Making their motivation even less.

The bank could foreclose at any moment. There are no grantees.

Here are some steps to help your seller and you get through the process:

Talk to your broker. Make sure your commission is negotiable. Most banks will try to reduce your commission know up front what you can do.
Know how close the seller is to being foreclosed on (tell the seller to save the notices). You need to have an idea of a time frame that you have to get the house sold.
Advertise it in the Multiple Listing Service as a short sale.
Know the rough outstanding balance.
Find out how many banks you are dealing with (if they have two loans).
Contact the bank(s) to find out who is the loss mitigation supervisor assigned to the seller’s loan. Side tip: Be VERY nice to these people. They have a pile of short sales on their desk. Being rude or upset is not going to help your seller.
Get title work up front (in title states) before you get a contract. This will help speed up the process.
When the offer arrives, protect your seller. Get the correct language to write in the contract so they do not have to bring money to closing. It should also include information that states the sale is contingent upon lender approval. This language needs to be obtained from an attorney. Your title company will be able to help you with this (have the language before the offer comes in).
Make sure close date is realistic. You need time to negotiate with the bank.
Send the contract over with Comparative Market Analysis to help bank determine value (most will perform an appraisal before accepting an offer).
Make sure that the bank is forgiving the debt if not the seller may still have liability after the sell. Make sure they are aware of what ever is coming their way. (Banks can also issue a 1099 for that forgiveness of debt. In which case, this could also show up as income on their tax statement).
Once agreed tell everyone (seller, buyer, and title company) that they will obtain a formal short sale payoff statement and can begin moving forward with closing.
Continue to keep in touch with everyone periodically until closing (including the bank)!
Pat yourself on the bank, congratualtions you did it!