How To Do A Short Sale
While the short sale process is quite complex when compared to a standard real estate transaction – to an experienced short sale Realtor – the short sale process is actually quite simple despite the many potential complications that can arise along the way. Below, we’ll guide you through a short sale transaction and show you how an experienced Realtor can be crucial to a successful short sale.
Step By Step Guide To the Real Estate Short Sale Process
1. Hire an Experienced Short Sale Specialist
Perhaps the most important decision you’ll need to make in the short sale process is the Realtor you will hire. Even though selecting and hiring a short sale Realtor is only the first step of the short sale process, your Realtor will be making many important decisions during the real estate short sale process. The right Realtor can make or break your sale. Because short sales are significantly more complicated than regular transactions, it is important to hire not only a talented Realtor, but one who has a vast amount of experience in short sales. In order to hire the right listing agents, here are a couple questions you should ask any potential Realtors.
- How many short sale properties have you successfully sold?
- How much experience do you have working with my lender?
The first question gives you an accurate idea of the Realtor’s experience in short sales. You don’t want to ask how many years experience they have in short sales, as that can leave itself open to ambiguous answers e.g. 5 years experience could mean 1 short sale listing 5 years ago. You also want to ensure that your Realtor has experience selling rather than buying short sale property, as these roles are extremely different.
The second question is particularly relevant if you’re working with a major lender. An experienced short sale specialist should have experience working with the majority of the major lenders. This is very important as each lender can have their own internal policies and requirements. If your Realtor has successfully closed short sales with your lender, their experience can be a tremendous benefit to your own short sale.
2. Qualify For A Short Sale
With the advice of your real estate short sale specialist, you can determine if you qualify for a short sale. An experienced short sale agent will have a good idea of whether or not you qualify for a short sale, though there can be no absolute guarantees when it comes to short sale approval. However, an experienced Realtor who has worked successfully with various lenders will maximize your chances of a successful short sale.
Generally speaking, you’ll qualify for a short sale if your property is worth less than the value of your outstanding mortgage, if you experienced a hardship that affected your ability to make your mortgage payments, and you have insufficient assets and income to make your mortgage payments.
3. List Your Home
Once you’ve hired your short sale specialist, he will list your home on the market and start to solicit interest and offers from qualified buyers. To your neighbors, it will look like any other real estate listing. This is one of the major benefits of a short sale, as it allows the homeowner to avoid the public spectacle and embarrassment of a foreclosure auction.
4. Accept an Offer
Your Realtor will look for an offer that is at or near market value. This is another area in which an experienced short sale Realtor can make a tremendous difference to the success of your short sale. While the goal in a standard real estate transaction is to get the highest offer possible, in a real estate short sale, it is far more important to get an offer that the lender will accept. While you’ll still want to solicit the highest offer possible, the goal is not necessary to extract as much value as possible from the buyer as it is in a standard real estate transaction.
A Realtor with experience and expertise in short sales will be able to gauge whether a particular offer will be sufficient to satisfy a lender. This can be extremely important as an offer that is too low can result in a rejection of your short sale application after months of waiting, while holding out for an offer that is too high can result in an unsold property.
5. Put Together Your Short Sale Package
Another crucial aspect of your short sale is the short sale package. Your Realtor will assist you in putting together the necessary forms and documentation for your short sale package. While each lender will have different requirements for their short sale package, there are certain basic documents that must be included in every package. The documents commonly included in your short sale package will include:
- Short sale hardship letter– This letter will indicate the hardship that affected your ability to meet your debt obligations.
- Letter of authorization– This letter authorizes your lender to disclose information about your mortgage and file to your short sale specialist and any other third parties working on your short sale.
- Annual Tax Returns
- Recent Payroll Stubs
- Recent Bank Statements
- Comparative Market Analysis
6. Submit Short Sale Package, Executed Purchase Offer, Buyer’ Financing Pre-Approval, Earnest Money Deposit, and Listing Agreement for Short Sale Approval
Once you have accepted an offer and all your necessary documentation is assembled and ready, your short sale realtor will submit it to your lender.
7. Await Short Sale Approval
Now begins the longest part of the short sale process, the short sale approval process. While you will largely be waiting anxiously during this process, your short sale specialist should be busy working with your lender to push your short sale through and negotiating a suitable short sale agreement. An overflow of short sale applications and bureaucratic red tape can often hold up a short sale, and the approval process can take several months. However, a good short sale Realtor will be doing everything they can to move your short sale approval along.
8. Receive Short Sale Approval – Deal Closes & Lender Releases Lien
Although it will likely have been a few months since you submitted your short sale application, if all goes well, you will eventually receive approval from your lender for the short sale. Once you have the short sale approval, your buyer will deliver the funds as agreed, the lender will release their lien, and you as the seller will deliver the deed to the home. Depending on your situation, your Realtor may also have negotiated debt forgiveness, or you may live in a non-recourse state, meaning that you are now legally free from your mortgage debt.
Steps to A Short Sale
As you may have observed, every step in a short sale should be managed carefully under the watchful eye of your Realtor. For this reason, it is absolutely vital to hire an experienced short sale Realtor who knows the process inside and out. Perhaps the best part is that your lender will cover the fees and commissions of your short sale Realtor, so whether you hire an experienced veteran or a novice, it will cost you the same. Choose the right Realtor for your short sale, and every step to a successful short sale will be a breeze. It's time to stop foreclosure, so contact us now, and let's get your short sale moving in the positive direction!