Short Sale and Pre-Foreclosure 101

We have received numerous phone calls in the last year centered around the same question. What is a “Short Sale” and how does it work?

A Short Sale is a property where the seller owes more on the loan than the selling price or sales price… the proceeds of the sale fall short of what is owed. In the short sale process the bank agrees to accept less than what is owed and in many cases will either discount the original loan amount to satisfy the mortgage or take the difference and have the sellers take a deficiency balance to be paid back over time. This will all depend on the sellers financial picture and whether or not they have the ability to pay back any money judgment from the lender. We have expert experience in negotiating with lenders to waive all deficiency judgments, and have a proven track record for success.
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Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. Luckily lenders now have short sale departments set up internally making the level of communication much better for agents like myself with a great deal of experience dealing with them. I then work with my team of short sale mitigators to submit all of the information the lender will need to review your short sale package. You can expect to provide the following : Tax returns, pay stubs, bank statements, hardship letters…basically the same information you would provide in order to get a loan. We also work with every seller to make sure their short sale package is accurate and the hardship letter outlines their difficulties making payments and being able to keep the property.

From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process – attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, etc. In a short sale scenario, the lender gets their money back faster, so it is able to cut its losses. My team’s job is to convince the lender that it will fare better by accepting less money now.

The lender will want a great deal of information about the property, the borrower and the deal offered. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or “BPO”). We also submit our own appraisal or comparable sales information to help justify a lower price. I also make sure to offer the BPO broker additional information about each property and the surrounding areas sales. Many BPO agents are not familiar with the specific area or property and it is my job to make sure they offer the lender accurate information. This is one area that many other agents who claim to know how short sales work miss the mark. It always pays to go with experience.

Finally, the lender generally wants to see a written contract between buyer and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash” to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, my team and I provide all of this to the lender.

Once the lender receives everything they need to review the short sale, my team continues to contact them daily following up on the file and help answer any questions that may come up. Once the lender gets the valuation information back from the BPO agent and have time to review the data, they will typically either accept the contract and offer a specific set of time-lines to be met or counter the offer and offer counter terms. That is not the end of the line either. If all parties agree to the terms from the lender in many cases it has to be sent to an investor for final approval. From there is can still be accepted, countered or rejected. We have had tremendous success gaining approval from this point and that is why we are the Short Sale Specialists in Charleston SC! If you think you need to expedite a short sale don’t hesitate to call or email me for a free no obligation consultation.

Are you a Short Sale buyer? If so, please call or email me today. You CAN NOT afford to put in an offer on a short sale without a highly experienced agent on your side. Many listing agents will tell customers and agents they have experience processing short sales and do not. You can get tied up in a short sale for months and never get the home! I can save you thousands of dollars and months in time. Time is money and you can not afford to make a mistake with a short sale. Call or email today!

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