9 Steps Of Every Short Sale
How To Process A Short Sale That Gets A Lender-Approval .
If you are unable to avoid foreclosure any other way — loan modification, refinancing, etc. — getting your lender’s approval for a short sale may be your best option. The process, however, is complex and varies somewhat depending on the lender’s requirements and the seller’s specific situation. Here are the basic steps you will need to go through. When you hire us (Step 3), we will guide you to prepare all the documents your lender requires and follow-up directly with the lender.
Step 1: Contact your lender. Call your lender and indicate you want to conduct a short sale of your home. You may be referred to a loss-mitigation department or other representative for further information. Ask the lender’s representative to send you their short-sale package, which will include your lender’s forms and requirements.
Step 2: Gather information and documents. Your lender will require that you submit a short-sale package, including a variety of financial documents, such as tax returns and account statements, along with a hardship letter detailing why you can no longer make your mortgage payments. Gather all the items listed by your lender. When the time comes, the package you submit to your lender must also include your sales contract with a buyer and an estimate of net proceeds from the sale of your home, based on that contract. Of course, we’ll be happy to help you prepare these documents and any others your lender requires.
NOTE: Be sure to ask your lender/loan servicer if you qualify to conduct a short sale under the government’s Home Affordable Foreclosure Alternatives program (HAFA). If you qualify, the short-sale process will proceed somewhat differently than as described below – according to the program’s terms and requirements. (See the article “HAFA Short Sale Help” for more information.)
Step 3: Contact us. We’ll meet with you to estimate your home’s current market value and discuss your financial situation to determine whether you meet your lender’s requirements for a short sale. At this meeting we will review the gathered documents, and any additional items needed. If your situation appears to qualify for a short sale, we’ll discuss how together we can put you on the path to lender approval.
Together we’ll sign a listing contract that assigns us as your representative for the sale of your home. Before your lender/servicer will share information with us about your mortgage situation, you will need to provide a letter of authorization allowing them to do so.
Step 4: Prepare your home for sale. We’ll advise you on how to put your home in the best condition possible so as to attract a buyer quickly. The very minimum preparation of your home should include a thorough cleaning and removal of clutter and excess personal belongings that could turn off prospective buyers. We may suggest other improvements such as fresh paint, lawn/yard care, etc. to ensure your home appeals to buyers.
We may also suggest you order a home inspection. Having your home inspected before listing allows you to make repairs before buyers arrive. Showing interested buyers a good inspection report, with repairs made as needed, will give them confidence that your home does not come with any hidden problems they would have to pay for later.
Step 5: Price your home to sale. Price is key. A critical element to short-sale success is setting a listing price that is just right – low enough to attract buyer interest and encourage a purchase-offer AND high enough to be acceptable to your lender. To find the right price, we’ll prepare a Comparative Market Analysis (CMA), factoring in recent sales prices of comparable properties (including distressed, bank-owned and equity sales), current list prices for comparable homes and other relevant factors. Don’t worry. We’ll consult with you and help you find the right price to sell.
We’ll list your property with photos and a description of its features on the multiple listing service and alert our network of contacts about the sale of your home. We’ll also prepare a comprehensive marketing plan to give your home sale the widest exposure possible.
Step 6: Negotiate with buyers. When a buyer makes a purchase offer, we’ll negotiate the price and terms of the sales contract on your behalf. It is critical, at this step, to educate buyers about the short-sale process to ensure they have the patience and commitment to weather delays and complications — and get to closing/settlement.
Step 7: Submit your short-sale package to your lender. We’ll help you gather the offer and all required documents for the comprehensive short-sale package to submit to your lender. If the lender is open to your short sale, they will contact their foreclosure department to put a hold on foreclosure proceedings.
In evaluating your short-sale request, the lender will order an appraisal or a broker’s price opinion (BPO), asking a knowledgeable real estate professional to render an opinion on the market value of the property (by looking at sold prices of comparable properties, the cost of making repairs and any other factors that might impact the property’s value).
Assuming everything is to the lender’s satisfaction, if the buyer’s offer meets or exceeds the lender’s net-proceeds requirement, chances are the lender will accept the short-sale offer and “forgive” the difference between the offer and the outstanding mortgage. If the buyer’s offer is too low, the lender may contact us with a counterproposal. In this case, we would work to negotiate with the buyer for a higher offer.
Step 8: Fulfill the terms of the contract. As your lender is considering approval of your short sale, we will help you and your buyer stay on track fulfilling the terms of the contract, such as scheduling inspections, surveys, appraisals, etc.
Step 9: Closing. If all goes according to plan, you’ll reach the closing where you will sign final documents transferring the property to its new owner and satisfying your obligation to your lender.