Understanding the Procedure of Short Sale
November 19, 2011 | 
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The short sale procedure still puzzles a lot of people, even if it was practice by many homeowners for several years now. Even agents are confused about the method. Some of them don’t even know how to explain to their clients the reason why they need to short sell their most treasured property.
Other agents don’t even know that banks act as lender in this kind of method and some don’t know short selling exists because of two things; Hardship and the seller owes more on the mortgage than the true value of the home. But what are the procedures of this method?
Check them out below;
1. Find a good realtor who can help you out with your deal – Finding the best realtor will definitely help boost your chances of qualifying for this method. They will let you figure out how you can qualify for it and will explain to you the primary reason(s) of a homeowner before they can short sale their properties.
2. Prepare an authorization letter that will be used by your realtor in all bank transactions – You will indicate in the letter that you are allowing your realtor to do all real estate transactions (including short selling) for you.
3. Make a seller’s hardship letter – Prepare a letter that says you are broke and can’t pay of your loan mortgage anymore. As what I have said above, being broke helps you qualify for this method.
4. Have a photocopy of your financial statement / Tax returns / Payroll stub – Banks will verify if what you have written in your hardship letter is accurate through your financial statement, tax returns and payroll stub.
5. Let your realtor do the talking – When you have completed everything, you may give all the documents to your realtor. Your realtor will be your mouth and even your ear until the end of the deal so just let him do his or her job and don’t be a bother, they know the real estate industry more than you do so just relax and trust your realtor all the way!
Additional Short Sale Tips
1. Don’t forget to hire a realtor – Always remember to hire a reputable realtor if you want to have a smooth sailing transaction. Ask friends and family members, perhaps some of them know a trusted realtor who can help you out. You can’t expect a great outcome on your transaction without a professional who can assist you.
2. Patience is a virtue – Processing of this method takes very long before they let your property undergo through it. But be patient and let your realtor do his job without destructing him or her, it is recommended to stay away from your realtor so he or she can concentrate freely on his job.
3. Make the most out of your time by enjoying your property while you are still the owner – While you are waiting for the result of this method, you may enjoy the last moments you will be in your most treasured home. Allow yourself to savor that wonderful moment until the very end.
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What Is The Short Sale Process?
First, I must share with you a disclaimer. Anything you do with your house can have serious financial, tax, and legal implications. If you are considering a foreclosure, deed in lieu, short sale, or even just a regular sale you should contact a licensed person (tax lawyer, CPA, etc) to help determine the positives and negatives of any action.
What is a short sale? In the simplest definition is when a lender(s) accepts the sale of the house that is less than the remaining balance(s) of the loan(s) as payment of that loan ‘in full.’ Even in that simple definition there are all kinds of ‘but if…’ scenarios. A real estate agent with advanced training in short sales can be very beneficial to protecting you and helping you with all the ‘what if’ scenarios.
Do to the subprime (loosy-goosy) lending practices and the troubled economy many good people are finding it hard (or impossible) to continue to make their house payments. There are many options a person could take and my site can give you more information on the ‘Hope 4 You’ page. I will be discussing just one option here and that is the short sale.
There are 3 main criteria to be a candidate for a short sale:
In default (i.e. missed at least 1 payment pass the grace period. Recently you can also be ‘near default’ meaning default is imminent. Little to no equity: the home is worth less by 8% of more than what you owe Legitimate hardship
The legitimate hardship is critical. Some situations that qualify for a hard ship are:
Loss of job or reduction in pay Divorce Illness, medical hardship, or death Increase of property taxes Increase of monthly payment due to an ARM (adjustable rate mortgage) resetting
If you meet the 3 criteria you may consider a short sale rather than a foreclosure. While neither is beneficial to your future credit ratings the short is typically less harmful and easier to recover from then a foreclosure.
What you should look for in an agent to help you with a short sale:
Certified Default Resolution Specialist (CDRS) or similar certification Knows how to calculate (not guess) what the lender will require in a sale price Knows how to protect you as much as possible from a deficiency judgment Knows that Conventional, FHA, and VA loans are handled very differently from each other – some very critical differences A REALTOR who is committed to honesty and integrity
WARNING! Beware of the many short sale scams out there. There are people promising the moon. In fact they may just be trying to rip you off. I have written several articles on scams; you can find them on my site.
A short sale is a win-win-win situation:
You are relieved from a debt that is harming you financially, mentally, and physically The lender is saved from a costly foreclosure and resale process that will only hurt the economy and the recovery The buyer gets a new home at a very favorable price
The short sale process is very challenging. There are many things to consider throughout the process. I have seen and heard about many short sale transactions hit severe bumps because care was not taken to make sure the process would run smooth. Extra work on the front end will help make the process go right.
The Short Sale BPO Agent Evaluation Model and Perspective – Everything You Thought You Knew
It is good to understand the general perspective of the agent conducting a BPO. Did you know the BPO Agent usually only makes $40-50 for each BPO the lender orders? Consider that for a moment. The BPO Agent has to drive out to property, spend 30 minutes or more inspecting it, take 10-20 pictures, drive back to their office (which many work from home), spend ANOTHER two-three hours putting together all the data they collected and uploading the pictures and information to company the lender used to order the BPO. All of that work for $40-50 buckos. The reality is the BPO Agents do not make any money if they have to spend A LOT OF TIME with one BPO. They have to burn thru as many BPO’s as possible to at least make a few hundred bucks every two weeks. This doesn’t mean they do not do a good job conducting one. In my opinion they are simply not motivated enough to spend the required time to produce an accurate value on the property every time. Hence, here is where investors can make more profit.
Many banks typically are not looking at just one property when they consider a short sale transaction. They are considering the entire portfolio and YOUR property may be .25% of a 50-100 million dollar portfolio. Banks for the most part do not make time or spend enough money to really care if they lose MORE on ONE house than what it is worth. They spend as little as possible to have some type of paper trail to present to their superiors and Senior Lender/Credit Officers, so they can sign off for compliance with standard operating procedures for the short sale approval. The incredible part of their story is this. Even though banks spend as little as possible to obtain a value on a property and short sale it when a Loss Mitigator writes a letter of recommendation. They still SAVE MORE MONEY by accepting short sales and not let their properties go into foreclosure and complete the auction process. Can you believe that? With all the mistakes and lack of due diligence on THEIR part…they STILL SAVE MONEY! That is astounding to me, but hey… it still makes great opportunities to profit in short sales. …so carry on with the bad habits banks….carry on.
Here are the basic factors that are considered in a BPO for the lender.
o What is the condition of the property?
o What have similar properties in the area sold for on the MLS?
o What does the home need to be sold in 90 days or less?
Serve One Another Better,