Steps of a Short Sale (in a nut shell)
- Determine the value of the property. A real estate agent can provide a “ market analysis “. This will give the seller and the lender a good idea of the property value. The lender will usually order an independent market analysis when an offer is presented. Be aware that in the current market conditions certain areas continue to decline, which should be considered when pricing the property and also noted to the lender.
- Acquire the full payoff: All loans
against the property and estimated
selling costs. NOTE:
In a short sale, typically the
seller is not liable
to pay the closing costs, including
commissions, however, may be added to the “short fall”
figure.
- Contact the lender (lenders) : Ask for someone who has the authority to accept a short sale. This individual is usually assigned to either a “Loss Mitigation Department”, “Workout Department” or the “Collections Department”. The seller will explain the situation and if the lender agrees to the short sale, a “short sale package” must be completed and submitted to the lender. Most lenders require the package to be submitted in a certain format using specific forms . It is extremely important to ask each lender what they specifically require in the short sale package, including any “ special addendums” .
- Information normally required in a
short sale package: Cover letter,
authorization to release information(required for anyone
who will be calling the lender on behalf of the seller,
such as a real estate agent), hardship letter, sellers
financial information, 2 months of bank
statements and pay stubs, last 2
years w-2’s,
documents supporting the hardship, comparable sales for
the property, listing contract (if applicable),
estimated net sheet (cost to sell the
property including loan payoff).
- Find a buyer and sell the property. Even though the seller accepts an offer, the lender has the final approval and will basically take over the entire process for the seller. Depending on the expertise and persistence of the individual representing the seller, the entire process , after finding a buyer, could take anywhere from 30 -90 days (pre-work and immediate completion of the “short sale package” is critical to a timely closing). NOTE: The clock is still ticking towards a foreclosure but on the bright side, many lenders will extend the foreclosure process if a buyer has been approved and the property is in escrow . DON”T count on the lender’s short sale negotiator to be aware of the foreclosure process. They are two different departments and DO NOT communicate to each other.
In Closing: The information provided is only a brief summary of the short sale process. Each situation , each lender, each state , will require special attention to specific needs. Again, depending on the individual situation, other options, such as a “deed in lieu of foreclosure” and “forbearance” could prevent the harsh effects of a foreclosure. A “loan modification” is also a possibility as well. Above all, “TIMING IS CRITICAL”. The clock is ticking and taking action “NOW” is imperative.