Short Sale Answers

Understanding the Short Sale Process

The short sale process is a labyrinth for most people, even though short sales have been around and talked about for many years. If you’re considering going through the short sale process, it’s important to understand the entire process.  Short sales can result from a variety of different circumstances, including unemployment, reduced income, divorce, medical emergencies, bankruptcy, job transfers and more. Banks will grant short sales for one of two reasons: a hardship on behalf of the seller, or the seller owing more on the mortgage than the home is worth. Here is an overview of the short sale process to better familiarize yourself with the ins and outs of this complicated real estate transaction.

The Seller

As a seller, in order to be considered you need to prepare a financial package to submit to the short sale bank. Every bank has their own guidelines, but the basic process doesn’t vary widely from bank to bank. Generally speaking, a seller's short sale package will include:

  • A letter of authorization, which allows your agent to speak to the bank
  • Completed financial statement
  • Seller's hardship letter
  • Tax returns for the last two years
  • W-2s for the last two years
  • Recent payroll stubs
  • Bank statements from the last two months
  • Comparative market analysis or list of recent comparable sales
  • HUD-1 or preliminary net sheet

 

The Buyer

Prior to writing a short sale offer, the buyer should sit down with a real estate agent and ask for a list of comparable sales. The bank will be much more likely to accept your offer if you come to them with something that is close to market value. Too many people make the mistake of trying to “steal” a home from the bank, and that will land you in a large pile of paperwork.

Once the bank accepts your offer, the listing agent will send the following items to the bank:

  • Executed purchase offer
  • Listing agreement
  • Buyer's pre-approval letter and copy of earnest money check
  • Seller's short sale package

 

It’s critical to make sure the package is complete, because if it isn’t, the short sale process can be delayed. Additionally, some banks won’t even consider incomplete packages and could shred your offer.

The Bank

Historically, banks have not been in the business of selling homes, but after the housing market fell apart in 2007, banks found themselves as the owner of numerous properties. Because selling homes isn’t their number one priority or function, buyers can often wait a long time to get a response from a bank. The listing agent will want to continually check-up on the process and keep detailed notes, but if you don’t have a tremendous amount of patience, a short sale may be more stress than it’s worth.

This is a typical timeline for a short sale at a bank:

  • Bank receives the file, which can take between 10 days to a month
  • A negotiator is assigned, which can take 30 to 60 days
  • A Broker Price Opinion is ordered
  • A second negotiator may be assigned, which can take more time
  • The file is sent for review or to the Pooling Servicer Agreement, which can take 2 weeks to 30 days
  • An Arm's-Length Affidavit may be requested
  • A short sale approval letter is issued by the bank

 

If you’re a buyer, be prepared that the sellers can still back out even after the short sale approval letter is issued. Many sellers become frustrated because of how long the process takes. The duration of a short sale will vary, so patience is of the essence whether you’re a buyer or a seller who is considering a short sale.

If you’re looking for a short sale property in Palm Beach or perhaps you need to do a Boca Raton short Sale, for example, we hope you will give us a call. Our team of expert real estate agents are short sale specialists and we would love to help you discover everything that this amazing part of South Florida has to offer.

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