Short Sale Process
Transaction where existing lienholder(s) approves sale for less than what they are owed
"Short sales are paperwork intensive, time-consuming and full of obstacles. This is not the time to hire a friend or relative who is in the business. You need a professional Realtor who has a proven track record dealing with these types of transactions. If the agent you're considering cannot produce names, addresses and testimonials from past short-sale sellers, continue looking until you find someone who can."
Outline of Short Sale Process
- Property owner with legitimate hardship owes more than current market value, gets behind on their payments.
- Predicament: Can't sell without bank approval because there wouldn't be enough to payoff existing lienholder(s), Can't afford mortgage payments.
- List property on MLS with IET Real Estate Agent
- Get offer from qualified buyer
- Submit short sale package to bank, bank orders BPO, approves short sale.
- Open Escrow, from here on the transaction should proceed like any regular transaction
Why Short Sales Can Be Difficult
- Banks: lose paperwork, don't hold themselves accountable to the timelines they give you up front for giving you an answer, make deciscions that don't make financial sense for themselves, want to sell for values that they would most likely cut if it were them being asked to do the new loan
- Overall non-sensical nature of each individual banks policies (a.k.a. - their own unique way of making the process more difficult than it has to be) Example: banks won't look at offers unless they have offers, but then they expect real buyers to wait 1-2-3 months for them to make their approval deciscions. They don't understand that the market doesn't care how swamped they are or how much they are losing. There's no crying in baseball.
- Indefinite waiting periods: Buyers care about getting what they want now, why wait an indefinite amount of time for an uncertain answer when they can move to another property? Buyers want to close, agents want to get paid.
Why you should consider a short sale:
- To relieve youself from the shackles of an over encumbered property.
- You can't afford your mortgage (legitimately)
- You understand that making a good faith attempt to sell the property is ethically more responsible than walking away.
- Fannie Mae underwriting guidelines allow borrowers who have short sales on their credit reports to buy sooner borrowers who have been foreclosed on. There is a good chance FHA and other lenders (outside of housing) may adopt similar attitudes in the future. Remember once the fear of asset prices free falling subsides these lenders will be anxious as ever to start earning lending fees again. If/When we see the rebirth of a Secondary Market for Mortgages I'm pretty sure you'll see mortgage programs that allow buyers with little to no short sale seasoning on their credit profile to borrow again. Don't believe me because I'm a Real Estate Agent? Read Fannie Mae Announcement 08-16 re: when a borrower who has experienced a Foreclosure, Bankruptcy, Pre-Foreclosure Sale (a.k.a.- Short Sale) can be eligible for purchase again.
- Follow this link for more info on credit implications for short sale & foreclosures
Here is what you want to know before making an offer on a short sale:
- Has listing agent closed a short sale before? If your agent has closed short sales they'll know what questions to ask to weed out the liars. Incredible how many short sale/foreclosure/reo/loan modificaiton specialist are out there now...
- Has a complete short sale package been submitted to the bank? Has listing agent received confirmation? When does lender acknowledge the package as being received? What time frame is lender giving you for the following steps: 1) Assignment to Loss Mitigator 2) BPO completion 3) Approval descion (i.e. - when you'll know if you can open escrow or not)
- Who is processing the short sale? Listing agent? Their transaction coordinator/assistant? Another agent/broker in their office? An escrow officer? An outside 3rd party company? What is their experience level?
- You want to have your agent run comps to see if the list price makes sense. If not, ask listing agent what comps they are using to determine value, unrealistic prices can make process take longer or waste everyones time and put the seller in foreclosure.
- Has BPO been done? What did it come in at? If not when is it scheduled?
- Do your due dilligence on the property and make sure you want to buy it. Alot of lenders make changing buyers very difficult, if a listing agent gets your offer accepted and then you dissappear, that isn't cool.
- How many loans are on the property? Which lenders? Any other encumberances? (i.e. - back taxes, IRS, child support, mechanics liens etc., etc.) Is there PMI on the loan? Was the existing loan FHA/VA/Calhfa?
- Is the seller current or behind? If behind, how many months? If in foreclosure (NOD/NTS) when were they recorded?
- If listing agent says they have an approval, ask to see a copy in writing.
Lots of these things you won't know how to interpret, your IET Real Estate agent will. Just a small sample of the value you get when you allow one of our agents to represent you with your purchase.
Want to work with a Los Angeles County based Real Estate Company with proven experience negotiating Short Sales for clients with negative equity?
Take a look at this page for examples of short sale approvals and successful short payoff lien releases in Los Angeles County that agents at IET Real Estate have negotiated with Loss Mitigation Departments of various Major Lending Institutions across the country. (Addresses and Names have been blacked out to protect clients privacy)
Additional services available to clients that use IET Real Estate to complete their Short Sale transaction in Los Angles County
- Credit Repair
- Moving Assistance
- Relocation Assistance: we can assist clients in securing a new rental residence which can be burdensome after the credit damage that can occur from the short sale process
Please don't hesitate to contact us if you have any questions about short sales. Simply fill in the handy form below, or call (562)360-1027 (Whittier Office) or (562)353-4483 (Long Beach) for a quick response.