Short Sale Negotiating Process of 2009
I am sure that you have heard the horror stories of short sales and how they can seem like a never ending process. While they are definitely more tricky than a normal sale they can even be confusing to other agents who have dealt this short sales in the past. It seems that every short sale transaction is different and that every bank has a different procedure to move the file closer to a closing date.
This has been my experience with short sales in 2009:
My first short sale transaction took place in January of 2009. I represented the buyer who found a house that was new construction where the builder was going under. The list price had already been approved by the bank and the transaction was very fast and smooth. Since, the banks have been swarmed with short sales and foreclosures and it seems that the process has changed a lot....at least with the banks I have been dealing with.
Since my first short sale closing I have obtained several short sale listings. 2009 was a learning experience for all agents in the short sale category but while many agents steer away from them I am looking to obtain more. I would be lying if I said that short sales are easy but they are another piece of the pie that all agents should be chasing.
When you take a listing as a short sale you should start by notifying your lender that you will be attempting to sale the property for less than you owe. The lender will give you a list of information to send to them. This usually includes a hardship letter explaining your loss of income and your reason for being unable to continuing to pay your mortgage, 2 years of tax returns, income statements, tax bills, pay stubs, bank statements and anything else the banks think may be useful in getting a full picture of your financial status. Once the banks have received this information, they will keep it until you receive an offer. Some banks will give you an idea of what the property should be listed for in order for them to do a short sale but many will just allow the agent to list the property to try to obtain multiple offers. If it is several months before you receive an offer the bank will ask for updated financial information.
So now that you send the offer to the bank, what's next?
It could take days or months for the file to be looked at depending on the bank. Some banks are definitely harder to work with than others. Once they start to work on the file they will either order a broker price opinion or a full appraisal of the property. The bank will want to have a pretty good indication of the current market value before they will allow the property to close. Again this process can take several days or several weeks.
The banks I have dealt with will only look at the highest and best offer. The other offers are still there incase the buyer of the best offer decides the walk. The bank will ask the sellers to sign the highest and best offer but this does not form a contract because the MLS should state that the closing of the property is contingent upon 3rd party bank approval. Until the bank approves the offer and approves the short sale, a contract is not formed between the bank/sellers and the buyers.
Once everything has been approved, the buyers will begin obtaining financing and will perform all necessary inspections and the property will move towards closing like a normal sale.
I hope this helped somebody understand what is going on with short sales.