Your short sale has made it through the weeks-long paperwork processing obstacle course. Congratulations! You finally have that coveted Approval Letter in hand and are ready to head to the closing table. What could possibly hold you up now?
In most cases, you way is clear and short sale success in in view. But, there are a few possible scenarios concerning closing escrow that might cause further delays in your quest for mortgage freedom.
How does an expert short sale agent keep all parties engaged and cooperating while navigating that final stretch of the short sale process?
Experience and preparation are the expert’s tools during the all-important Escrow Period, when both buyers and sellers may discover various challenges.
Buyer issues: Your lender required written proof of the buyer's ability to purchase the property, i.e., a completed loan application, pre-approval by a lender or evidence of cash on hand (a current bank statement). You’ve long since dutifully submitted these articles along with a very fair offer. But now, many weeks later and time to close, you discover that the buyer’s previous ability to close has been compromised. Maybe they created new debt by purchasing new furniture in anticipation of closing on your house. It happens. In fact, it could be any number of things that might change in the buyer’s financial picture just enough to knock their previous loan approval out of the box. Even if they can fix it, there will likely be a delay in closing.
Also, short sales often lose their initial buyers. Buyers get angry and annoyed because the process is so lengthy, and some will cancel without telling anyone. Even if you have a back-up buyer on board, that’s an escrow period surprise nobody wants and one that will definitely prolong the closing.
Closing office issues: Sometimes the delays happen at the closing table. Always review the good faith estimate and approval letter with your closer and your lender. Make sure the closing costs that you and the buyer agreed agreed upon are authorized by the short sale lender in the approval letter.
If there is a shortage, you’ll either have to renegotiate with the short sale lender and get a new approval letter issued or you’ll have to figure out who will pay what. If it is you, the seller, will your lender allow you to pay it? Maybe, maybe not. You must make sure that the closing costs approved in the letter match the costs agreed to in your purchase contract. This can be a huge issue that might delay closing.
Lender issues: Sometimes, after all the paperwork has been processed, the lender rejects the offer, usually because they want to get a better price. If this happens, we must try to determine the net proceeds the lender would accept, go back to the buyer and see if she will raise the offer, as in any counter-offer situation. But because the short sale lender is in the middle, it will take more time. If the buyer cannot raise their offer, the short sale expert must obtain a cancellation and go her back-up buyers. (The expert agent always makes sure to market the property strategically so as to have back-up buyers lined up and under contract.) Otherwise, you’ll have to ask the lender(s) to extend the listing period, allowing you to place the property back on the market as an “approved short sale” at the price and terms the lender will accept. Note that any new buyer will require new approval letters to be issued.
Multiple Lender issues: Often short sellers have more than one purchase loan, as in an 80/20 split. Or they may at some point have taken a draw against their property with a HELOC loan. If your short sale involves two lenders or more, make sure all the short sale approval letters match term for term. Details such as the names of the approved buyers, closing dates, seller contributions to closing costs and more must all match perfectly in all lender’s letters.
Foreclosure Department issues: You’ve heard the expression, “The right hand doesn’t know what the left hand is doing.” Sometimes a short sale closing can be derailed by an attempted foreclosure. Loss Mitigation and Foreclosure Departments are often different entities, and are staffed by different individuals. When the Foreclosure Department is not aware of what the Loss Mitigation Department has agreed to, they might proceed with a foreclosure even after the Loss Mitigation Department has agreed to a short sale and sent you an Approval letter. The expert short sale agent makes sure everybody is in the loop at all times, avoiding such last minute blow-ups.
These are just some of the scenarios we've seen played out, and have overcome, during our years of helping Atlanta homeowners successfully short sell their underwater homes. Helping all parties stay the course in these crucial stages and helping them maneuver through and overcome any challenges is what separates the real short sale pros from the rest of the field.
Need to short sell your Atlanta area home? Call or text us at 678-855-5238 today for a confidential consultation.