The Short Sale Closing Process

The Short Sale Closing Process

Here is a snap shot of what agents may do to process the short sale closing. These items are in addition to the normal escrow closing process.  Each process varies by States, lenders and sellers.

Short sales represents a large portion of sales these days. Processing these closing transactions and escrows for these properties can be a complex task. No two short sales are alike. So each transaction has it own complications.

What Is A Short Sale Closing?   A short Sale closing accompanies a short sale -an event that occurs when the net proceeds from the sale of the home or property are not enough to cover the homeowner's obligations and the lender approves the sale, thereby accepting a 'short pay off'

What are the key components of a short sale closing?

1. Preliminary Report - This is a primary tool used to learn what is recorded against a property. This report helps to verify ownership, confirm the correct legal address and identify trust deeds, taxes, delinquencies, liens and judgments against the property.

2. Letter of Authorization - Securing this from the seller allows lenders to speak with assigned agents, the escrow officer and any assistants about the short sale negotiations.

3. Estimated Settlement Statement/HUD- Prepared by a closing officer, this document shows the disposition of funds in the short sale closing. It is often revised several times during the negotiations and accuracy is critical to avoid delays.

4. Approval letters -  These documents spell out the conditions under which a lender will agree to the short sale. Many have very sensitive time lines and conditions that are critical to the closing process.

5. Expiration Of Approval Letters And Other Escrow Time lines -  Generally, approval expires within 30 days-45 days. First American uses internal management guidelines and proprietary closing software to track specific short sale time lines and close the sale before the approval letters expire. Remember, short sales negotiations do not stop the foreclosure process.

(source: American Title, consult your lender/lawyer for specific details)