You’ve finally made it through one of the biggest hurdles of your life. You are probably renting or staying with a friend or a relative. You have a ding on your credit score from the short sale and you may be worrying about tax implications from short selling your home. What should you do from here?
Once the seller and all other parties agree to the terms on the approval letter, the lender typically gives 30-45 days to close. This is a deadline, not a suggestion although in some cases, you may be able to request extensions. If it is a HAFA file, the approvals are usually around 60 days and the banks state that there are no extensions (yet to be verified as we have always closed within the deadline).
A short sale approval letter is issued by the lender approving the terms of agreement in order to close the short sale transaction. This letter supersedes language written on any other documents. If you have two lienholders, a 1st and a 2nd Mortgage/HELOC, then you will receive two separate approval letters. If the letter is agreeable to the seller, it would be the final agreement between all parties and the short sale transaction may initiate its closing process. Be very vigilant for the verbiage used on the approval letter regarding deficiency.
After all the information for the short sale is given to the servicer (short sale package with offer, Brokers price opinion, and all other information) this is when the file is reviewed by the investor. In this period, your negotiator utilizes his/her skills to acquire desirable terms on the approval letter.
As stated in my previous post on the importance of appraisals in short sales, it is pivotal for your property to receive an accurate appraisal for your home. Lenders have rejected short sale offers due to inaccurate short sale appraisals because they believe they deserve more for the property than offered.
Lenders are all about the numbers. They know that late payments and foreclosures would be detrimental for them financially so upon providing proof via financial documents that you are in fact struggling or will be struggling with your mortgage payments, they will consider an approval for the sale. However, servicers are extremely particular about complete short sale packages (i.e. updated documents, missing documents or signatures) and many short sale files have closed due to insufficient effort and organization in this area.
Contacting your lender. For your short sale, your agent should obtain authorization to speak with the lender on your behalf. This can be done in various ways but typically done in a written letter (called authorization form) from the borrower giving consent for the agent to speak on his/her behalf.
Your agent should then contact the loss mitigation department. This will be your agent’s direct contact thus, it is important for the agent to build rapport with this contact to streamline the short sale process.
Do not simply find a realtor and execute a short sale. If you do not want to be another failed short sale statistic, prepare yourself for success by taking the right steps leading up to the short sale. Your initial steps to pursuing a short sale is a crucial one as this largely affects the outcome of your financial future.
What is a short sale? A short sale is an alternative to foreclosure where homeowners have the option to “short sell” when their properties are worth less than what they owe to their bank(s). For example, your house is worth $500,000 but you owe your bank(s) $550,000 in loans, home equity lines of credit, etc. If you qualify for a short sale, you may be able to sell your property for less than what is owed, avoid foreclosure and walk away from the property with little to no remaining debt.
Although lenders are now more prone to giving approvals, short sales are still a challenging transaction to execute. Throughout years of trial and error exposed by other realtors, I’ve found there are 5 main reasons why a short sale would fail. In contrast, by observing the continuous success of my team of agents, I am adamant that an expert negotiator is crucial for a short sale to succeed.
