Where Short Sales are concerned, the REALTOR®’s role is crucial. Proper pricing is always important, but it’s even more important with a Short Sale, because the foreclosure clock is ticking.
If the house goes on the market at too high a price, valuable marketing time is lost. The majority of showings occur in the first few weeks of being on the market, so you want to make sure the house is priced properly when it goes on.
Once an offer is accepted and a contract executed, that’s when the real work starts for the REALTOR®. The first step of course is completing the paperwork and gathering all the necessary documents.
Sending a complete Short Sale package in to the bank on the first pass is important. Otherwise the package just sits there until someone decides to let the REALTOR® know what’s missing. This could be days. This could be weeks. Sometimes the bank won’t call at all. They will just let the file sit until the REALTOR® calls and asks for a status update. The bank will not process any part of the package until they receive the entire package. Again, the foreclosure clock is working against us so we can’t afford to waste any time.
Once the bank receives the entire Short Sale package, it will go to a pre-processing department where the information will be verified. Next, the file will be assigned to a negotiator who should contact the REALTOR® with an update. If it took longer than 30 days to for the package to make it into a negotiator’s hands, sometimes they will require updated documents – pay stubs, bank statements, etc. They always want to work with the most current information. Then it’s time to review the offer contract and the other documentation provided by the buyer. If everything checks out, the bank will forward the package to their investor for approval.
The investor will either approve or deny the Short Sale. If it’s denied strictly based on the numbers, the negotiator will typically submit a counter offer back to the listing agent. If the bank needs a higher price for the house, the listing agent has to go back to the buyer’s agent and negotiate that. Sometimes buyers walk away at this point; other times they will bring their price up to meet the bank’s counter offer.
The sales price of the property is usually the biggest reason that a Short Sale will be denied. However, after reviewing the borrower’s financial information, the lender may determine that the borrower can repay the note or has the means to pay off the shortage.
We’ve seen a huge increase in “strategic foreclosures” where borrowers have decided to walk away despite having the means to pay the note. They have decided that they are so upside down that it’s financially better to walk away than to suffer the huge loss of keeping the property. Some of these homeowners attempt a Short Sale to avoid the negative credit impact of a foreclosure
Once everything is negotiated and all terms are agreed upon, the Short Sale can move forward.
