Short Sale Information FAQ
Does the Bank’s name go on the Sales Contract or Listing Agreement?
The individual that owns the house is the person that will be on the sales contract and the listing agreement. The person that is on the “Deed” is the seller. The “Bank” is not on the deed.
I hear that an investor has to approve the short sale and not necessarily the bank.
Most banks, mortgage companies, lenders sell their loans to either another bank or other financial entity (investor) and not necessarily a bank. Most times the company that you send your mortgage payment to is just the “service provider" meaning that they collect and process the payment on behalf of the investor. The investor may be an entity that is not in the United States of America. Many times the final decision is made by the investor and sometimes the investor business procedure is to only make these short sale decisions once or twice per month.
The role of the bank’s negotiator is to package a short sale proposal in accordance with the guidelines set forth by the investor or bank (could be Fannie Mae, Freddie Mac or HUD). The negotiator attempts to put the best short sale package together to send out for approval and if the short sale package does not fit the parameters it is not sent to the investor.
What is a Short Sale?
When the amount owed to the bank is more than what the house will sell for.
- This causes a shortage amount.
- This leaves a remaining balance owed to the bank.
- The investor/bank has to agree to take less than the entire balance of the loan.
What happens to the remaining balance?
It is a loss to the investor/bank. The investor may require a cash contribution paid at closing by the seller. Or the seller may be asked to make monthly payments on a portion of the remaining balance. I have had an investor/bank ask for $20,000 as part of the short sale approval agreement at closing from the seller and this led to further negotiating with the investor/bank. The short sale approval agreement terms set forth by the investor/bank must be agreed to by the home owner and if not agreeable we continue to negotiate.
Does the homeowner have to agree to the Short Sale Approval terms?
The answer is no. If the approval asks for a cash contribution from the seller, the seller can make a counter proposal. Part of your sales contract should include a “Short Sale Approval Contingency”, spelling out that the short sale approval terms must be agreeable by the seller. In other words never give up your negotiating position until you and your agent have exhausted all avenues.
Short Sale Selling Process
First off, no two short sales are alike. First, start out by looking at foreclosure alternatives as quickly as possible. Waiting until you have received a foreclosure notice, “Lis Pendens”, makes it more difficult to execute a short sale. Once the foreclosure process is started it continues even if you have a purchase agreement from a buyer. It becomes a race between the short sale being approved before the foreclosure sale date. TIP: Pick up the phone and call your short sale specialist now.
The second step is to put your home up for sale with a short sale specialist. You are looking for an experienced agent and not just an agent with a short sale designation (there is a difference). Get the home up for sale. Put the home in the best possible condition as you are able to financially afford. House presentation is important. TIP: Do Not Put a “Short Sale” Sign in the Front Yard as it tends to scare buyers away!
The third step is to monitor the number of showings per week. Make price adjustments as dictated by the market and any showing feedback. TIP: The first 30 to 45 days on the market are critical. The longer the home sits on the market the less likely it is to sell.
Finally, get an offer on the home. Negotiate the highest price as possible. All parties involved in the sale must sign the agreement. Typically electronic signatures are not acceptable for short sales. TIP: Take backup purchase agreements. Have your short sale specialist have these backup agreements in file at a ready to send in if the first agreement falls apart.
The first step is to get a buyer under contract to buy the property. The short sale approval process can range anywhere from 30 days to a year. I have had some take as little as 30 days and one that took 15 months. You and the Buyer (and buyer's agent) must know that this is long process. You should plan on waiting at least 90 to 120 days for a decision from the investor/bank. Once we receive short sale approval it is normal that the approval letter will give us 30 to 45 days to close the transaction.
- Be prepared to continue to submit financial documents throughout the process.
- The time frame is many times determined by the knowledge of your real estate agent.
- Your real estate agent also needs to set the expectations of the buyer and or buyer’s agent.
How do I Pay Seller Closing Costs and Commission?
All typical seller closing costs are paid by the short sale investor/bank. This includes the professional fee/commission. The typical costs are: deed documentary stamp tax, owner’s title policy, pro-rated property taxes, professional fee, county recording of corrective documents, and any seller relocation assistance money if applicable.
Do I Need to Make Repairs to the Home?
The answer is no. The “short sale” is an “as is” condition sale.
Short Sale or Foreclosure
A foreclosure will have a more negative impact on your credit report. The missing of mortgage payments is what causes the credit score to be negatively impacted. It is possible to do a short sale while your mortgage is current (financial hardship must be substantiated).
Some homeowners get to a point of just giving up on a short sale thinking that if they just hand over the house to the bank that their worries are over. The loss that the bank will take is greater in a foreclosure therefore causing the shortage amount to be even greater. This leads to a greater “Deficiency”. After the foreclosure there is a possibility of a greater “Deficiency Judgment” filed against the seller. In a foreclosure there will be the attorney fees, late fees, penalty fees, accrued interest, etc., that will be tacked onto the amount of the deficiency. Just giving up is not in your best interest.
Teamwork Includes YOU…..Your Agent and You Must be able to Work Together from start to finish. I never give up and I expect my clients to never give up.
YOU, the seller must be willing to cooperate with their agent throughout the process. This is probably the most important aspect of the whole process that can be controlled.
- Surety Land Title - Preliminary Title Work to find if there are other liens attached to the property. Other liens attached to the property can be auto loans, credit card debt, contractor bills, etc. The closing agents at Surety Land Title are also a wealth of short sale knowledge.
- Cash Paying Investors
- Home Staging Professional
- Electrician, Plumber, Handyman, Roofer, Landscaper, and Cleaning Crew.
- Real Estate Attorney
Cell: (850) 554-9543
Office: (850) 912-4123
Email: [email protected]
Have Faith, Hope, Action, Desire, Belief, and an Expectation of Success
All information deemed reliable but not guaranteed
Please Seek Financial and Legal Advice from Licensed Professionals
Joaquin Alberto Lara, LLC, Broker-Associate Main Street Properties, Inc. 1313 Creighton Rd Pensacola, FL 32504