Short sales arise when a homeowner owes more on their home than they can sell it for. This is called being “upside down”. The homeowner then attempts to make an agreement with their lender to sell the house for less than is owed. Learn more about Short Sale Agreements.
A short sale negotiation is extremely complex and time consuming. The homeowner is placing themselves at risk without experienced professional help. When contacting the bank, the homeowner will experience the “run around”. The bank employee uses a script to get you to refinance, then loan modification, and then finally they begin to channel you to the right department. The homeowner should attempt contact with the Loss Mitigation Department. The homeowner should understand that these bank representatives have one job…collect a debt. They may sound helpful but the mission is to collect any arrears from you.
Negotiating with the bank is only the first step. The homeowner must also set the correct market price and sell the home. The contract and disclosure documents are not standard and require the attention of legal and tax counsel.
The Bank’s Short Sale Process
Most banks have similar methods of processing short sales. FHA short sales are processed following HUD guidelines and may differ significantly from conventional shortsales.
The typical short sale process goes like this;
- Bank acknowledges receipt of the file. (10-30 days)
- A negotiator is assigned. (30-60 days)
- A Broker Price Opinion (BPO) is ordered. This is an opinion of value from a non-interested 3rd party Realtor. The bank will probably refuse to share the results.
- A second negotiator may be assigned. (30 days)
- The file is sent for review or to the PSA. (14-30 days)
- The bank may request that all parties sign an “Arms Length Affidavit” which stipulates that all parties are unrelated in business or personally with the transaction.
- The bank issues a short sale approval letter or offers alternate terms to the buyer.
- If the bank does not approve the buyers offer, the buyer may cancel or modify terms.