Short Sales- How to Avoid the Land Mines

 

Short Sales are unfortunately a way of life these days, especially if you work in the “problem states” like trying to make Florida Mortgage Loans. The short sale approvals are a condition of the Sales agreement between the buyers and the sellers. This is tantamount to a 3 way agreement as nothing happens unless the Lender authorizes it.

Short sales are not quite as difficult as they were in the early days of our housing recession as most of the Banks have departments set up to handle this process. It still is very inefficient and they often do not play fair. As a Florida Mortgage Lender, we handle many of these transactions every month. The sad part is that many transactions of this nature never close because the parties involved do not take the necessary precautions. I would like to offer advice we have cultivated over the past few years so you can get as many Short Sales to the closing table.

The first thing to understand is that even though, taking the short sale is the best option for the Bank, they too often do not get it and either through incompetence or inefficiency get in their own way. We have seen situations where we supply the necessary income information to the Bank and they take over 30 days to review them. Then they call and request updated income Docs!

Another thing to keep in mind: You have nothing unless it is in writing. Until you have a short sale approval in your hand you have nothing. The same holds for extensions. We had a case where the Realtor was told they had a short sale extension; we got the loan ready to close only to find out the property was sold on the courthouse steps the day before. OUCH!

Here are a  few specific tips:

You, as the buyer’s agent should make contact and develop a dialogue with the Title Processor handling the short sale. 

1. Before you write the contract. Look to see if there have been any recent title transfers. If the seller has been in Title less than 90 days before the date of contract you may have a problem. Even though FHA has relaxed the 90 day flipping rule, most banks are either not relaxing it or have special rules that often kill the deal.

Ask the Title processor:

2. Has a BPO been ordered?

3. Did the seller complete the hardship package?

4. When was the last time you spoke to the asset manager who was assigned to the short sale?

5. Has the asset manager assigned to the short sale approved the “hardship” by the seller?

6. Has the “Estoppel Letter” been ordered? There could be $10,000 in past due HOA fees that will need to factored in

7. Have the title processor provide you with the short sale approval letter, not verbal.

8. Ask if the sellers are getting divorced. If this is the case it could complicate matters

9. Ask if there are any unpaid code enforcement violations, delinquent HOA fees, water bills, electric bills. If there are, make sure they were presented to the Bank or they may not agree to cover them. Remember, the seller is not going to pay anything. If there is a shortage, they will be after your commission.

Do your homework, follow these steps and find the right lender and life can be a bit easier.

 

Rob Cosentino

Circle Mortgage Corporation