Hi Fellow Bloggers!
My BLOG from yesterday was reposted on an online newspaper that prides itself on supplying the public with honest and frank information about short sales, TCREG could not be more proud to have been noticed and recognized as doing the same. Thank You to the CHARLOTTE SHORTSALE R E REPORT ( http://paper.li/CLTShortsales/1302359566 )
Today’s already planned BLOG follows the same theme but from a sellers perspectiove…The short sale process as it relates to a seller is in a word…Stressful! There are a lot of companies offering short sale help for a fee…When you see this, RUN! There is NO FEE that should be paid up front to ANYONE for a short sale to begin! The short sale is essentially selling your home SHORT of what you owe and to do this the seller needs their lenders permission.
Your Realtor, if they have short sale experience will have one or possibly many TITLE COMPANIES that are poised to assist in all aspects of the short sale from the moment a fully executed contract package comes together.
As a seller you list your home for sale just like normal and the process of selling begins. Your Realtor should price the home based upon recent sales (comps) and not drastically below although some unscrupulous agents may do this! Later we’ll discuss why that’s an issue that can waste everybody’s time. The contract to sell has the contingency built-in that requires your lender approval however it is VERY important to note you have a fully executed sales contract at this time. You are bound to the buyer and the buyer to you…
For a short sale to be submitted correctly to the lender a number of things need to be provided.
- Sales contract and all addenda
- Hardship Letter explaining the reason for the short sale attempt
- Seller bank statements
- Seller Pay Stubs
- Seller Profit & Loss
- Preliminary HUD statement
- Exterior photo of the home
- Recent sale comps
- Listing agreement
- Copy of MLS showing property was marketed and pending date
These items get sent into the sellers lender and now the waiting begins…During this time the title company (or whomever is managing the process for you) will and should call multiple times per week just to see how close to file assignment you may be. Once a negotiator is assigned and the file is reviewed for accuracy and completeness the process of valuing the property begins. BTW to get here likely took 2-4 months.
The seller’s lender will order multiple BPO’s (Broker Price Opinion) and this is where having undervalued the home will catch you. The BPO’s will establish a value higher than the contract and most buyers won’t or can’t go over their offer price. The buyer believes they made a fair offer based on list price! However the seller’s lender will “counter” the buyer based upon these BPO’s. This is the point where a lot of buyers walk as they feel they are getting mistreated by a lender who is being unreasonable. The truth is the listing agent caused this with the low asking price…ALL that time has now been wasted only compounding the seller lender loss and the sellers frustration level. This counter offer will also have terms that the seller must abide by to allow the short sale to close. To get to this point may have taken a total of 3-5 months. The terms from the seller’s bank may include one or both of the following:
- Cash Contribution at close (From 2-3 thousand to tens or hundreds of thousands)
- Promissory note for unpaid balance
Even if the sellers lender agrees to a deal the seller at this point may choose not to comply with their lenders demands and the short sale is cancelled. Here, foreclosure is the likely next step. A short sale can impact your credit score by as many as 150 points, while a foreclosure has the capability of hitting much harder…200-250 points!
If the counter (or acceptance) by the sellers lender is acceptable to the buyer and seller then this is where the sale takes on a much more normal course…Inspections, appraisal for the buyers lender and so on. Most short sales are as-is sales as the seller usually isn’t in a position to make repairs financially. Normal transaction duration with a mortgage needed for the buyer is between 45-60 days so on top of the 3-5 months to get through the short sale negotiating process…Tack on an additional 1-2 months of NORMAL time to complete the sale.
You can hopefully see that even a quick short sale can take 2-4 months to complete…Nothing about the short sale process is short but if you find yourself in need of selling and you owe more than your home is worth…If you don’t simply walk away and allow the home to be foreclosed on…The short sale is your only option. Call an experienced Realtor and list your home at a competitive price…Maintain the property per your original note and mortgage and hope someone is willing to wait with you!