In Part 1 of this series on Elkhart Real Estate Agent Evelyn Johnston Shares-Short Sale Homes-Everything You Need To Know, I spoke about the very basics of a short sale and in Part 2 I talked about the Hardship Package and little known facts and beliefs about Short Sale Homes. If you haven't read them, please take a few minutes to go back and catch up.
Okay, so now you have found a Real Estate Agent who knows all about Short Sale Homes, has successfully closed on Short Sale Homes, and you have listed your home with that experienced Real Estate Agent. An offer comes in! We have a Home Buyer that is:
- Educated On Short Sales
- Gives Earnest Money
- Agrees to Wait for the Process
The Listing Agent now needs to review all documents that concern this property. If more than 30 days have gone by the REALTOR(r) should have gotten updated financials, pay stubs, bank statements and so forth. Your loan number(s) must be on each and every page, just in case the Mortgage Lender looses a page or two, when it is found it can be attached to your loan(s). This entire package must be sent to each and every Mortgage Lien Holder that you owe. They must all agree to take less than the amount owed, or you do not have a deal.
Once this entire complex package is delivered to the Mortgage Lenders, usually by fax machine, it is the Listing Agents job to keep in touch with the Mortgage Lender at least once weekly for a status update on the process. Most large Mortgage Lender's receive so many short sale requests that it is left up to the Real Estate Agent to train them on how to process it. At least that is what I have found with dealing with the big guys, They aren't even taking the time to train their own employees. This is also why it is so important for you, the Home Owner to make sure you are working with an experience Short Sale Expert, who knows how to negotiate with your Mortgage Lender. This is vitally important!
These weekly phone calls are time consuming, it can take anywhere from 15 minutes to get an update to waiting on hold for 30 minutes to an hour before you ever get to talk to the first person. If your Agent is not a patient person, they will become one before to long or get out of the Short Sale Homes business...
The first thing the Negotiator will do is verify the Letter of Authorization, and that they have received all the paperwork that consists of the Hardship Package and that the information provided is the absolute latest available and up to date. In some cases the Negotiator is first in a string of decision makers. At Bank of America/Countrywide there are 3 Negotiators, one who gathers the information, one who reviews it and makes a recommendation to the Investors and then a Closing Negotiator. The Investors can be Freddie Mac, Fannie Mae or private. Once this information has been verified a BPO (Broker Price Opinion)will be ordered from an Independent Broker (One who is not affiliated witht he listing agent.) hopefully in the same market area so that they are familiar with local housing. Sometimes the Mortgage Lender orders an exterior BPO, sometimes an interior BPO and then sometimes a full blown Appraisal is ordered. What is a BPO? It is another Real Estate Broker's report as to what they believe is fair market for that home in today's market. What it is worth right now, and that is not related to what you owe for the property. Usually the Broker's Opinion has the same rules and regulations as does the Appraiser, just not as much detail, and the fee to the Mortgage Lender is much less. They like to see comparable sales within the subdivision or one mile, and not less than 6 months ago. In the country it is within 5 miles and six months. The Mortgage Lender does not like to use other Short Sale Homes in comparison, however, sometimes that is all there is.
Freddie Mac and Fannie Mae backed Mortgages will have a formula that they go by when negotiating a Short Sale Property. They are likely to accept as low as 80% of the appraised value, however, they do not reveal to the Listing Agent what the appraised value is according to the BPO/Appraisal. All of the expenses covered by the Mortgage Lender must be in a window of about 17% of the 80% in order for them to work with it. If it doesn't fall within their criteria, they will either reject the offer or counter it. At this point the Listing Agent should be able to market the home with a new acceptable price if the original Home Buyer is not willing or able to pay what they want. If you have a Conventional Mortgage, the Investors will be the deciding factors as to what they will accept for full pay off.
The biggest problem with Short Sale Homes are Real Estate Agents who know nothing of the process but want to jump on the bandwagon, and Real Estate Agents who don't properly educate their Home Buyer on the process and wait time. If you are willing to wait, in most cases you can get a good deal on a home in good condition.
If you or someone you know needs to consider a Short Sale on their home, please, advise them to choose their Real Estate Agent with care. Talk to several Agents before picking who you want to represent you based on their experience and education on Short Sales. Get the best local Elkhart Real Estate Expert and Certified Short Sale Expert you can find. I am Evelyn Johnston with Prudential One Realty and can be reached at 574-304-7148 to answer all your questions...