There is nothing fast about a short sale. A home is a “Short Sale” when the owner of the home owes more to the bank for their property then the property can sell for on the open market and the owner needs to sell. The owner can’t bring additional cash to the closing table to pay off their loan, so they are asking the bank to forgive the difference.
Short Sale Timeline?
Make sure a short sale is the right choice for you.
Before you list your house as a short sale you want to talk to someone about all of your options. Make sure that you have done everything you can to stay in your home – there are programs out there to help you like HARP, HAMP, etc.
Sometimes there is no other option but to leave the home, and if that’s your case then you can still avoid foreclosure by asking your bank for a short sale.
Marketing your home and finding a buyer is the next step.
You will need to keep your house clean and tidy, and people you don’t know will come in to look at your home. Eventually someone will make you an offer. You can check this Brian Willie interview to understand other steps to get started on selling the home. After you get the potential buyer you can get a contract and once you agree on the terms you have a contract!
Getting the approval from your bank is crucial to the success of your sale closing so I work hard to get this to happen in a timely manner, with a systematic approach to the process.
Once we have the contact and all your documents together, we submit it all to the bank. The bank reviews your package, orders what is called a BPO, and then determines the price they will accept for your loan. They also make sure that you are having a financial hardship to qualify for a short sale approval.
The bank evaluates the package and decides how to respond.
Remember, the bank may have people they have to talk to as well. Sometimes the bank just will service the loan and there are investors who actually own your note. So don’t complain if the bank seems unreasonable, it may be that their investor is calling the shots. I’ll discover all of this at the onset of the process so you and your buyer are as prepared as possible.
This can be a lengthy process. We need to disclose to the buyer how long this could take so you don’t loose them before we get to the end. The buyer’s motivation to stay in the contract is that they are getting a good price on the home. The buyer will be on an emotional roller coaster like you are, with the anxiety of wondering what the end price will be and how long it will actually take.
Once the bank has done their evaluating, they come up with an offer for you and the buyer. They tell us exactly what price they will accept, when closing will take place, if they will forgive you of your debt, how they will report it to the credit bureaus, and more.
Your attorney and I both go over this with you and explain what they are asking.
Once this happens and everyone is in agreement, (there could be some negotiating with the bank at this point), we move on to what is the normal part of most home sales.
The deadlines that are spelled out in your contract with the buyer usually start now for the sale – when the buyer has to have his extra deposit in, how many days he has to inspect the property, and so on.
On closing day, you may be feeling happy and sad, these are normal emotions. But now you can move on with your life, and you didn’t get a foreclosure against you. Yeah! I have done my job!
This is post 2 of a 3 part series on Short Sales
Post 1: 6 Steps to Closing a Short Sale
Post 2: Trouble Paying your Mortgage
Post 3: Negotiating a Short Sale