In a prior post we explain the terminology associated with Short Sales. In order to further clarify the short sale process, this post explains the process a seller must go through if they find themselves facing a short sale.
A Short Sale comes in to play when a seller must sell their home and the value of the property is just not sufficient to cover the balance owed to the existing lender. In order to accomplish this the seller must work with their existing lender(s), and any other existing lien holders, to request approval of the sales price, the sale terms, and payoff of their loan to be at a reduced amount.
The Short Sale process is as follows:
- The owner or their agent/negotiator must contact the existing lender.
- The lender will direct them to their website, or will advise how, to obtain specific forms, instructions and lender requirements.
- This group of documents, along with the lender’s financial forms (Short Sale Package*) is then sent to the lender as per the lender’s instructions.
- After the lender receives the package it is then assigned to a contact person in the lender’s Loss Mitigation Department. This process can take anywhere from two weeks to two months and sometimes even longer.
- At this point the Loss Mitigation Dept then reviews the package and will contact the homeowner to request any additional items that may be required by the lender. This request is usually made verbally to the homeowner or negotiator but can sometimes be found via the lender’s website.
- The lender will then request a Broker’s Price Opinion (BPO) from an agent chosen by the lender.
- Once the lender has received the BPO as well as the Short Sale Package they submit it for final review. Once the lender has completed their final review they may give approval as is or their approval may be subject to changes such as sales price changes. Or the lender, at this time may decide that the seller did not have ample reason for the short sale and therefore deny the request for the short sale.
*Short Sale Package can consist of 100 to 200 pages including, but not limited to, the following items:
1. Listing Agreement
2. Short Sale Addendum
3. Offer to Purchase
4. Proof of Buyer’s funds
5. Owner’s Tax returns
7. Owner’s Bank Statements
8. Hardship letter from owner (explaining why the short sale is needed)
Remember that every lender and every situation is a different story so it will help to keep a handle on each request by staying in touch with the lender constantly through the process.
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