The
Basics of a Short Sale
I’ve heard it said that “patience is a
virtue.” Nowhere is this more true than in a short sale situation. Some banks
are better than others, but none really get in a hurry. To further complicate
things, if your home has an FHA insured loan, which most are, you not only have
to deal with your bank, but also have to get approval through HUD. Quite
frankly, paint dries quicker in the rain!
The main point to remember with short sales
is to lower your expectations, and the expectations of anyone involved,
especially early on. Most short sales take at least 6 months from the time the
process is started, to the time where the bank approves the best offer, and
sets it up for closing.
The
Short Sale Process at the Bank
Buyers may wait a very long time to get a
response from the bank. It is imperative for the listing agent to regularly
call the bank and keep careful notes of the short sale process. Buyers may get
so tired of waiting for the short sale approval that they may feel the need to
threaten to cancel if they don't get an answer within a specified time period.
That type of attitude is self-defeating and
will not speed up the short sale process. If buyers are the type with little
patience, perhaps a short sale is not for them.
Following is a typical short sale process
at the bank:
- Bank acknowledges receipt of the file. This can take
10 days to a month.
- A negotiator is assigned. This can take 30 to 60
days.
- A Broker Price Opinion is ordered.
The bank probably will refuse to share the results of the BPO.
- A second negotiator may be assigned. This can take
another 30 days.
- The file is sent for review. This can take 2 weeks
to 30 days.
- The bank may then request that all parties sign disclosures.
- The bank issues a short sale approval letter.
Short
Sale Seller Basics
Banks grant short sales for 2 reasons: the
seller has a hardship, and the seller owes more on the mortgage than the home
is worth.
A few examples of a hardship are:
- Unemployment / reduced income
- Divorce
- Medical emergency
- Job transfer out of town
- Bankruptcy
- Death
The seller will need to prepare a financial
package for submission to the short sale bank. Each bank has its own guidelines
but -- with the exception of Wachovia, which is the best short sale bank in the
world -- the basic procedure is similar from bank to bank. The seller's short
sale package will most likely consist of:
- Letter of authorization, which lets your agent speak
to the bank.
- HUD-1 or preliminary net sheet
- Completed financial statement
- Seller's hardship letter
- 2 years of tax returns
- 2 years of W-2s
- Recent payroll stubs
- Last 2 months of bank statements
- Comparative market analysis or list of recent comparable sales
Avery is proud to help home sellers and home buyers in the following communities: Carmel, Fishers, Noblesville, Westfield, Cicero, Sheridan, Lebanon, Zionsville, Brownsburg, Avon, Danville, Plainfield, Mooresville, Camby, Greenwood, Bargersville, Martinsville, Franklin, Shelbyville, Southport, Beech Grove, New Palestine, Greenfield, Lawrence, Greensburg, Nashville and beyond.
