About Short Sales. Guide to understanding the process.
With short sale real estate negotiations on the rise it is imperative you understand the process. A basic understanding will help to eleviate confusion and minimzie stress. Today, 1 out of every 6 homeowners in America is behind on mortgage payments. These are tough and frustrating times. Now more than ever, it's important to identify your options.
Through my experience handling distressed properties, I've found that homeowners today have more questions than answers about their circumstances.
As Realtor with the CDPE, SFR, A-REO™ & BPOs Designations, I have a strong and unique appreciation of the factors affecting the
What is a short sale
A short sale in the most basic terms means the seller owes more to the bank than what the home will sell for in the current market.
Work with a Realtor
Properties that are listed should note something similar to "3rd party approval required" or "lender approval required" etc. This is noted in the agent only or private remarks and not in the public display. Potentially the mls will require that change in the future.
The Short Sale Offer
Traditionally, a buyer makes an offer to the seller. The seller then accepts, counters or rejects the offer. This process takes less than 24-48 hours. The buyer and seller come to terms and the home is sold. In a short sale situation, the seller receives the offer and negotiates with the buyer. Once the seller has accepted the offer it is then sent to the lien holder (bank).
The bank can take weeks to respond. They are getting more systematic these days in their processes. But still true is offers that are unrealistically low may not have any response of a rejection or counter offer. In many cases only the offer that is accepted will even receive a response. Additionally, while the bank is reviewing your offer, they will continue to market the property. Your offer may be one of several the bank will review. And in some cases the bank is reviewing not only your offer on this property, but has many other properties and offers to review as well.
Remember, the bank is trying to limit their losses. They legally have an obligation to get reasonable market value.
Submitting a quality short sale package
Today most, if not all lenders will not entertain a price discussion without an offer that is written, has earnest monies and pre approval letters included. The "package" is submitted to the seller first. If accepted by the seller, it is then sent to the lender. The seller can accept an offer, only to be rejected or counter offered by the bank.
Banks do want good quality buyers; Many banks will require the buyer to be pre approved by them. The buyer does not have to make loan application with that institution (by law they cannot require this), but this is a safety net for them. Should your other financing fall through you would still be qualified with them and they can move forward to close the transaction.
Short Sale Acceptance and Counter offers
Short Sale Timelines
Misconceptions in Listing Prices on Short Sale properties
The bank has given no indication they would settle for that price. The list agent may be just trying to get the ball rolling with the lender. The seller and sellers agent may be inexperienced in the short sale process and themselves not understand. The seller and sellers agent have steps to follow to position the property for a short sale acceptance.
Conveyance of Short Sale Clear Title
Often financially distressed sellers do not realize the extent of their obligations. The seller may have back child support, alimony, tax liens, or other attachments to the property, they all must be paid off to give clear title.
The seller may not understand the process and that they most convey clear title. This is why it is important to work with a real estate professional that understands the process.