Short Sale Process: From A-Z
LISTING AND FILE PREPARATION for Short sale process
Once we have pre-qualified the distressed homeowner and they are in fact a candidate for a short sale, then it is time to start collecting their supporting documents and list the home. The goal is to accomplish 100% of the paper work at the first meeting. You should of received the short sale welcome package via email before your appointment to allow adequate time for preparation. Read the disclosures carefully, fill out all of the forms and start gathering the following:
(Short Sale Welcome package)
- Financial statement ( Assets/Liabilities and Income/Expenses )
- Hardship letter ( Signed and dated)
- Most recent two years tax returns
- Most recent two months paystubs (If self –employed, fill out a profit and loss statement for the last three months)
- Most recent 2 months bank statements
- HOA Statement (We advise that you continue making the HOA payments)
- Mortgage statement(s)
- If there are any documents the home owner cannot provide, a letter of explanation will suffice to help the short sale process
(Short Sale Listing package)
- Signed Disclosures acknowledging short sale process
- Signed Authorization to contact lender(s)
- Signed listing agreement for a short sale
- List of repairs ( Pictures if noticeable)
- Signed schedule of price reductions ( These occur on the 1st and 15th of the month, there should be a total of three)
MAINTAINING LISTING FOR SHORT SALE PROCESS
We want to create a listing history with the lenders to help the short sale. It is our job to show the bank we are working to get them the highest and best offer in the short sale. Typically, the bank has an idea of what they think the home is worth however, in most cases the lenders value is not in line with our market. We want to start the listing at what is owed on the mortgage and come down slowly. Have two to three scheduled price reductions (1st and 15th of the month). Once you get to your final price reduction you will be at the market and drive in the offers you need in order to submit a complete package. Ideally we want to see 3-5 showings on average per week. This gives us the opportunity to gather everything we need to submit a complete package. At this stage we start the following:
- Make the initial contact with the lender in regards to the short sale, faxing over authorization and ordering payoff statements.
- Request from the lenders their specific short sale requirements.
- Keep communication open with the lender. You should get updated weekly on the progress of the listing.
ACCEPTING AN OFFER in the short sale process
The most common issues with buyers writing an offer on your short sale listing are the following:
- They are not qualified buyers for a short sale or any sale.
- They are putting in multiple offers all over San Diego County so by the time we get the approval; the buyers have purchased another property.
Here is a solution to help minimize the chances of this occurring:
- We have the buyer get DU approval through a reputable lender, preferably a bank or credit union. The lenders we use collect all of the buyers documentation up front to start the DU process. This will tell us if this buyer can in fact purchase this property. Furthermore if the buyer is willing to go through the DU process then we know this is the home they want. Typically the bank wants to see an offer at 80% of the balance of the loan. This is not always the case however our goal is to get as close the number as possible.
SUBMITTING A COMPLETE SHORT SALE PACKAGE
We never want to submit a package unless it is 100% complete. If we do not submit a whole and complete package it will be lost under a sea of other files or it will be tossed in the shredder by a tired representative. This is a complete package;
- Table of contents
- Short sale cover letter
- Signed authorization for the short sale
- MLS Listing sheet to show short sale lender
- Hardship letter (signed and dated)
- Asset and liability sheet
- Expense sheet
- Most recent 2 years tax returns
- Most recent 2 months paystubs or profit and loss sheet for last three months
- Most recent 2 months bank statements
- Comparative market analysis ( with 3 active, 3 pending and 3 sold listing sheets)
- List of repairs (pictures if noticeable)
- List of detrimental factors to help determine short sale marketing issues
- Listing agreement ( no electronic signatures)
- HUD
- DU Approval
- If this is a CASH buyer, provide proof of funds to the short sale lender
- Fully executed RPA ( no electronic signatures)
- Copy of good faith deposit
- Preliminary title report
- Termite report
Submitting the Short Sale Package:
We verify the fax numbers and address and then fax a complete package and mail it to the lender. We then follow up 24-48 hours to confirm receipt. Once a package has been submitted, it takes 7-10 days to get imaged into their system. Please don't ask us why they are not up to 2010 technology...YES we know it would be easier just to Scan and email a PDF to them
Getting assigned a negotiator: in the short sale process
Once assigned, the negotiator typically calls to introduce themselves and sets expectations for the short sale process.
Broker Price Opinion (BPO):
This is a person, typically a realtor the lender sends out to give an opinion of what the home is worth. Once this has been ordered and completed, the value is in review. This can take anywhere from 7-10 days. Once the negotiator has everything they need the file is submitted to the investor for final approval. This can take up to 3 weeks. We have a practice of meeting the BPO agent at the property to help with any questions they may have
Lender follow up:
This is a crucial part of the process. We typically follow up every 3 days to keep the file in front of the negotiator. Lenders have a huge turn-over in employees and sometimes a file can be tossed around. We need to know where your file is at all times.
Buyer and buyer’s agent follow up:
We like to keep the lines of communication open with the buyer and the buyer’s agent. Informing them of any new break through’s in the process once a week. Even if there is nothing new to report we want to make sure the buyer knows we are doing our best to make this a win for all parties involved.
APPROVAL
Once the lender has issued an approval they want to close it as soon as possible. It is crucial to have a team of professionals that is experienced in these types of transactions (Agents, Escrow, Title, Negotiators, and Buyer's Lender) who can avoid pitfalls and ensure closing. Most approvals are good for 30 days. We want to make sure we have the right buyers and are able to move forward quickly. In most cases we can get extensions however we want to avoid that. Some lenders will give an extension but charge a per diem for every day we do not close on time.
The goal is to close your transactions as fast as possible. If we are following a systematic structure, knowing the boundaries to stay in and guidelines to follow:
- Qualified sellers
- Listing history
- 100% complete packages
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