Tips & Tricks On Handling Short Sales

Real Estate Sales Representative with #1 Advantage Realtors

The things I find the most help in doing short sales.  PERSISTENCE. You have to babysit the L&M people to make sure they are doing their job.  Don't ever leave them a msg.  You need to hang up and call again. 

These banks all have a different procedures on how to handle them so it is a little bit complicated.  I have worked with a lot of different banks and some are better than others.   When you start a short sale, here are the things I do first.  

*Get an authorization to release information signed by the client

*Go over with the client what the bank is going to expect from them. (w2's, bank statements, hardship letter and breakdown of monthly expenses.)  I will tell them to get this stuff to me asap.

*Call the bank and get a direct number for the L&M department and get their fax.

*Fax them the authorization to release info

*Follow up in 2 or 3 days to make sure the got the release

*Ask the L&M how the bank handles a short sale and what they need to get the client approved for a short sale.

*Ask them to order an appraisal or BPO ASAP (some banks won't do it until there is an offer)

*Get with the client to make sure they have all the paperwork the bank will require to approve the short

*Fax the info (hardship package) to the bank.  Make sure you put the loan number on EVERY paper you fax to the bank

*Order preliminary title work to make sure there are no lien's against the property to keep it from selling.   Once you get an offer it is a hurry up and wait game with the bank. Here is how I handle that  

*Submit the offer to the bank (don't forget to put the loan number on the offer)

*Submit a estimated closing cost with the offer detailing all the cost the bank will be paying.

*If the appraisal hasn't been ordered make sure they do it now.  Follow up daily to make sure they do.

*Follow Up Follow UP Follow Up   The bank will probably drag their feet in hopes of getting more than one offer.   

Once the bank gets the appraisal back, you should be good to go.  The bank is going to look at the appraised value, not what is owed on the house to determine its lose.  A lot of banks want to get back 80% of the appraised value NOT the mortgage owed.  That 80% has to be their net, including commissions.  Now depending how close you are to the Sheriffs sale will determine their motivation.  They will take less than the 80% if they do not want the home back.  

Another thing you will run into is the bank telling you that they will not pay you a full commission and that you need to take a 1% or 2% or more off.  There are 2 ways to handle this.  One is when you list the home, list it for 1% higher than you normally do so that when the bank ask you to take less, you already built it in.  The other option is to tell them NO.  But give them a bit of time before you do so.  Tell them you have to speak with the other agent involved or your broker.  They might tell you they are rejecting the offer!  Tell them that they need to counter the offer first.  This way the buyer will offset your commission expense to the bank.  

One more issue you will probably run into.  The bank is going to negotiate forever and waste a ton of time.  THEN when they do decide to approve the offer they will want you to close NOW.  This is something you need to make the buyers aware of.  Let them know that when the offer is accepted they will have to rush things.  If they want to do an inspection, have them do it withing 2 days of acceptance.  Let the buyers lender know that they need everything approved but accepted offer and appraisal.  When the lender tells you they are willing to take the offer, get the buyers lender to order the appraisal.  

Once the bank has approved your offer you need to get a letter from them that states they are approving the short sale and make sure it has the agreed upon net on this letter.   They will also have a time line for you to close by on this letter.  This will need to go to the title company for closing.  

Here are a few miscellaneous things:  

*Do Not have the seller sign the purchase agreement until the bank has sent you the letter of acceptance of short sale.

*Make sure you have a contact in the L&M office that is your regular contact

*When everything has been agreed upon between the bank, buyer and seller you need to have the sellers sign a counter offer stating "Closing is subject final approval of final HUD by sellers lender.  Sellers lender may terminate contract anytime up to closing"  

I am sure there are more things I am forgetting or have not run into in my experiences.  This is not a definite manual, every bank has its own procedures and every sale is unique.  If you have anything to ad, please do so.

Comments (8)

Christina Bennani-Persechini
Keller Williams Realty Boston North West - Lexington, MA
Realtor - The House For You
Thanks for the advice, short sales are not for the faint of heart. I handle foreclosures as a division of my business, my buyer's agent hates making deals on short sales as many of the listing agents are not as knowledgeable as you are. 
Sep 05, 2007 10:17 AM
Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission.
Florida List For Less Realty, Inc. Broker/Owner. - Cooper City, FL


Prepare a HUD statement as well.

Sep 05, 2007 10:29 AM
Susan Milner
Florida Future Realty, Inc. - Cape Coral, FL
Cape Coral Real Estate Broker, FloridaFutureAgents

Good suggestions. We have been working on many of these & find each lender to be a little different but the good news is that the past couple of months the banks seem to be moving quicker & we're getting more approvals. I also agree with Christina, we often times discourage our buyers from making offers on short sales listed with agents who are not as knowledgeable with short sales. It can be a real headache dealing with some of these when the listing agent doesn't have a clue. There are too many agents out there saying they know how to do it but only a handful who are actually closing these type of transactions. Having a system in place, being orderly, the bpo & following up are all critical to a successful closing.

Sep 05, 2007 10:36 AM
William Benzel
Semonin Realtors - Louisville, KY
Thanks! Very Informative!
Sep 05, 2007 10:42 AM
Joe Leksich
#1 Advantage Realtors - Fort Wayne, IN


That is true.  You will have to have a detailed HUD/closing statement for the bank to review so that they know exactly how much they will net.  Make sure you don't screw up the closing cost because they will want you to make up the difference out of your commission.


I see so many agents get short sale listings and SCREW them up royally because they have no idea what they are doing.  I had a deal fall apart last year where I had the buyer and the sellers agent did not know what he was doing and the bank would not do a short.  If you don't know what you are doing, you are better off referring it to someone who does.

Sep 05, 2007 12:40 PM
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

I am amazed how many realtors are now writing about short sales :) that's good and I like it,  I focus on short sales too and I have learned a lot duging many transactions, I have done some blogs with great information for consumers / fellows,   welcome to active rain and you are added as my associate, keep it good :)

Ray Saenz
Sep 05, 2007 03:15 PM
Bruce Mullen
Carolina One Real Estate - Charleston, SC

I have never done a short sale, and not so sure I'd feel all that comfortable doing one at the moment.  We have a newer agent in our office that is considering a short sale, and the seller is already filing for bankruptcy.  It just sounds complex.  I should forward this to her so she has a clue of what she might be dealing with.  Always great to read on many topics are covered that are sooo relevant!



Oct 11, 2007 08:10 AM
Elena Saldana
Prudential - Vancouver, WA

Thank you so much for the information. It will be useful to guide me through such a difficult process.

Oct 11, 2007 02:21 PM