Frequently Asked Questions
What is a Short Sale?
A Short Sale is a win-win solution for the home owner and the lender. The lender gets the highest price for a quick sale at a market price. The borrowers get their credit restored and generally get relief from possible future legal actions and deficiency judgments. Short Sales occur when borrowers sell their property for a sales price less than the amount owed to their lender(s) after all sales expenses, including brokerage fees. In order for this to take place the lender(s) must accept a discounted payoff; meaning the bank(s) get paid less than the full loan amount owed. In a short sale, the home owners can get complete relief from all of their mortgage debt. The end result is the home is sold, the mortgage is satisfied (paid off) and home owners avoid a foreclosure or a bankruptcy. Perhaps even better, credit ratings will almost immediately improve because credit reports show that the mortgage was settled in full.
Does It Matter Who Does a Short Sale?
Very much so. Traditional real estate agents only get about 15% of their short sales approved. Attorneys sometimes complicate the matter and complete 25 – 30 %. By having experienced processors that handle short sales all day, every day, and, by limiting the short sales we handle, we should get through almost every short sale. Our current approval ratio is 95.2% and our current closing ratio is 91.6%. See testimonials from satisified short sale clients.
What Do We Charge the Home Owner to Do a Short Sale?
Our short sale processing is FREE to the home owner.
What are the Benefits of a Short Sale?
When a Short Sale is achieved, there will not be a foreclosure. A foreclosure damages credit up to 7 years and bankruptcy up to 10 years. Many experts believe that a foreclosure is much worse than a bankruptcy.
Protect credit. Foreclosure damages credit up to 7 years and bankruptcy up to 10 years. Many experts believe that a foreclosure is much worse than a bankruptcy.
Our Short Sale Service is FREE to homeowners; the lender generally covers all the costs involved.
Controlling future costs. If a property is sold at an auction, owners may owe deficiencies and other expenses to the lender. Under most short sales we process, the homeowner will be relieved of this possible future burden.
How Much of a Discount Will the Bank Take?
That is a common question. However, it is the wrong question. The real question for lenders is: What is the house worth today so I can determine how much money lenders can salvage out of a bad situation? Remember that you represent the homeowner and are trying to get the highest price possible for the lender.
Can Investment Properties be Short Sold?
Most definitely. Any type of property can be sold through a short sale.
Can you do Short Sales Anywhere in the Country?
We specialize in performing short sales all throughout the country.
What Happens If I Don’t Do a Short Sale or a Short Sale is Unsuccessful?
The result is the same: A foreclosure. Our goal is for home owners to avoid foreclosure, which will affect credit more than a short sale. Generally a foreclosure is one of the most damaging occurrences in a credit history. Most likely most homeowners will miss mortgage payments through the course of a short sale and this will show on their credit history. But at the end of the day, when a short sale is completed, most credit reports will show that the mortgages has been “satisfied” and typically credit scores should almost immediately rise by 65 points, because of a vastly improved debt-to-income ratio.
What is the Short Sale Process?
Upon receipt of a complete short sale package, (you can download the file here), if like most lenders, the lender does not take electronic paperwork, we will fax the complete Short Sale Package to the lender and confirm receipt in 3 – 7 days. Why 3 – 7 days? This is the amount of time it takes for the bank to upload the packages onto their system. Once they receipt is confirmed, we ask the lender with the first mortgage to order an appraisal or a Broker Price Opinion (BPO), and request that a negotiator be assigned. It is important that agents meet the appraiser to tell him or her why your short sale is a good offer for the bank. This means giving them the listing history, comparables that show that the offer is fair and point out all flows that the property has.
Once a negotiator is assigned they have 30 business days to review the offer. During this time we continue to check back regularly to get a status so that we can keep everyone informed. Once they deem the offer as Bona Fide, they submit the offer to the investor (the actual owner of the mortgage) for final approval. This can take up to 30 business days.
After an Approval is Issued, How Do We Close?
Once the approval is received, the lender’s approval will give the parties 30 – 45 days to get the deal closed. Sometimes, if you cannot close in time the bank will charge a per diem rate which must be absorbed by the buyer or the agents or a combination of both. For this reason, it is very important to close on time. We will give you an indication that an approval is forthcoming so that everything can close in the time allotted.
Neither the lender nor the title company can close overnight. The title company must get the HUD-1 to us for approval 72 hours before the closing. This allows us time to submit the file to the lender so that there are no surprises at the closing table.
How Much Will My Commission Be?
Generally 6%. We ask that you get a 7% commission on your listing agreement, or go back to the homeowner to get the commission increased to 7%. This will generally get reduced to 6 % occasionally 5%. Sometimes, especially if there is dual agency or delays and/or a large number of liens, the commission can, in a few instances, be reduced further.
What is the Most Important Thing that an Agent Can Do?
Price the property correctly and to explain how and why the market responded to that price. The lender will not take anyone’s word that any contract price is a “fair” price. They will verify the price by sending out an appraiser or an agent they hire to do a Broker Price Opinion or BPO. It is imperative that agents research the property value and get the best info on the value. Then meet the BPO agent at the house with your CMA, using low price comparables. As the property is being sold in “as is” condition, show the BPO agent the repairs and improvements that need to be made that might not be so easily seen in a quick inspection. Finally, explain to the BPO agent how you ended at this sales price, and that it NOT an investor flipping the house.
Why Do Agents Have to Use Our Title Company?
Our title company is involved in the process from the start. When we receive the contract, our title company does a preliminary title search to find all the liens on the property. Since many homeowners who do short sales are experiencing financial difficulties, it is not unreasonable to assume that there may be some undiscovered liens on some properties. All liens need to be released in order to close.
By doing a preliminary title search, after a lender approves a short sale and agrees to a pay-off, we do not have to go back and reprocess and take the chance that the short sale fails due to a lack of due diligence. In addition, our title company will figure all fees due for taxes, homeowner association fees and interest costs, in order to figure out how much it costs the lenders not to approve the short sale on a daily, weekly and monthly basis. We have found that lenders have no idea what their holding costs are. In addition, we have fewer problems getting payments to agents by having a title company that understands the short sale process.
How Much Does Title Cost?
The title company charges standard rates, and, the lender generally pays most title charges!
How Do You Get Paid?
We get compensated by charging the buyer a Buyer Processing Fee of $1,500 or 1% of the purchase price or by having the agents pay us 1% of their commission. The Buyer Processing Fee is listed on the buyer’s side of the HUD-1 and is fully disclosed to the lender. We strongly recommend that the seller’s agent put in the Agent’s Remarks of the MLS that the buyer is responsible for paying a 1% Processing Fee at closing (subject to a $1,500 minimum), and that any offers should take this fee into consideration. We will ask the bank for a credit for our fee, but this cannot be guaranteed. We also might get some paperwork administrative fees that will be listed on the HUD-1, which are also paid by the bank.
What Forms do you need From the Seller/Home Owner?
From the homeowner we will need a hardship letter, a financial information form, and the last two years of federal income tax returns (first two pages only), the last two months’ bank accounts, and the last two pay subs of each borrower. If the homeowner does not have any of these statements, they will need to provide a short separate note stating why they do not have these documents. For a letter that outlines what we need from the homeowner, please click here.
What other forms do you need?
From the homeowner(s) we need all the items on the homeowner’s submission form (Click Here). From the homeowner we will need a hardship letter, a financial information form, and the last two years federal income tax returns (first two pages only), the last two months’ bank statements (all pages even if blank), and the last two pay subs of each borrower. If the homeowner does not have any of these documents, they will need to provide a short separate, note stating why they do not have them. For a letter that outlines this, please click here.
From the homeowner(s), we need a Mortgage/Lien information form. This gives us the name, account number and the relevant telephone number of all lien holders. We also need the same information for a homeowner’s association where dues are paid, if there is one.
From the homeowner(s), we need an Authorization to Release Information form for each lien. This allows us to speak on the homeowner’s behalf.
We need a Short Sale Processing Agreement (Revised). This is the basic contract between us and the homeowner. The agreement also explains that a successful short sale is not guaranteed. It also should protect real estate agents if a short sale is not successful.
We need a listing agreement for the property with a 6% commission. You will end up in almost every case with 5 or 6%. In order to get that, we have to start higher and go down.
We need a listing history for the home. Your MLS will allow you to print this out.
We need a clean, executed real estate sales contract – the simpler, the better.
We need to determine whether the buyer is qualified. We need to hold onto buyers. Lenders have toughened lending standards so we need assurance that the buyer is real. For this reason, we do not accept buyer pre-qualification letters where the buyer has not gone through credit review. Instead, we will only accept pre-qualification letters with credit review, pre-approvals or approval letters. If you have a cash buyer, we will need proof of funds. If you cannot get this easily, please click here to get a buyer pre-approved.
From the agent, we also need a contract submission form. When filling it in, please fill in the contact numbers for you, the buyer, the seller, and the buyer’s agent. Also please check off each item to insure a complete package. Remember, we will not process incomplete packages.
Why Isn’t a Normal Buyer Prequalification Letter Good Enough for You?
We need to hold onto buyers. Lenders have toughened lending standards so we need assurance that the buyer is real. For this reason, we do not accept buyer pre-qualification letters where the buyer has not gone through credit review. Instead, we will only accept pre-qualification letters with credit review, preapprovals or approval letters. If you have a cash buyer, we will need proof of funds.
What is an Acceptable Hardship?
- Need to move from a home.
- Reduced Income or Unemployment.
- Inability to work due to health reasons.
- Separation or Divorce.
- Medical Bills.
- Business Failure.
- Death of a Spouse.
- Adjustment in mortgage payment or unforeseen increase in monthly expenses.
- Any other circumstance that cripples someone’s ability to repay their mortgage.