Most of the sales going on in today’s market are short sales and REOs (bank-owned properties). While they have become quite common, short sales are still a long and complicated process that is sometimes hard to understand. I thought I would clear it up a little for anyone who is confused as to what exactly a short sale is.
According to Realtor.org: A short sale is a sales transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. Basically, a seller cannot pay his mortgage usually due to a hardship and wants the mortgage lender (the bank) to accept a payoff less than what is due on the loan. Examples of a hardship include: bankruptcy, unemployment, death, divorce, etc.
What is needed from the seller and listing agent for a short sale:
-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
The following is a typical short sale process at the bank (by Elizabeth Weintraub via About.com):
-Bank acknowledges receipt of the file. This can take 10 days to a month.
-A negotiator is assigned. This can take 30 to 60 days.
-A BPO (bank’s appraisal) 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 (Pooling Servicer Agreement). 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 accepts or cancels.
As you can see, it is quite a long process. Short sales are going quicker with the online transaction systems that are being put in place by the banks. Some banks are also quicker than others. However some banks, such as Bank of America, have halted all of their foreclosure sales. Read more about this here
There is a bill in the works that would speed up the short sale process if passed and require banks to give an answer within 45 days. Read more about this here.
You can often get a good deal on a short sale as long as you are patient enough to wait it out and understand that it is a long process that does not always work out.
There are also bank-approved short sales which move much more quickly because, the bank has already approved the property at the proposed selling price. I have worked with short sales that take a few months to one that took a year! The listing agent and I took it to the banks CEO’s office and corporate headquarters to get the short sale approved at the price that the property appraised for. I always want to make sure that my buyers are paying a good and fair price of what the property is worth and no more. I will not stop until I get the job done. It take a lot of following up and staying on top of things. I am a Certified Short Sale Professional and have worked with international buyers on short sales as well.
If you have any questions about short sales, please do not hesitate to contact me.
