We have a list of questions we always ask the listing agent on a short sale property before we show the home or condo to a buyer. This is important because although the short sale process has improved over the past year or two, the process is still fraught with problems and many short sale listings will never get approval. We don’t want to waste our time or the time of our clients on a property that will not get approval, so a little due-diligence up front can help save a lot of time and frustration later.
1) Is the short-sale package ready for submission to the lender(s)?
A successful short sale approval begins with a complete short sale package. Here is an example of the contents:
- Cover Letter
- Authorization to Release Information
- Sellers Hardship Letter
- Seller’s Financial information
- 2 years w2′s
- 2 months pay stubs
- 2 months bank statements
- Supporting Hardship Info – HOA liens, medical/disability statements etc.
- Repair Estimate for the property
- Comparable sales for the property
- Contract
- Net Sheet
- First mortgage holder may ask for a payoff amount from the 2nd
- Second mortgage holder may ask for a payoff amount from the 1st
- Lender may ask for an Initial Title Report
- FHA and VA may have their own forms and special requirements as well
It’s easy to see why it is important whether or not this package is ready. If the owner of the property is not organized or just not that interested in cooperating it could take months just to gather this information, if it’s even possible to gather it at all. Without all of this information getting short sale approval is much less likely.
2) How many liens are on the property and what are they?
Is there one trust or two? Any mechanics or tax liens? Every lien on a property complicates and delays the process that much more. If the first lien holder approves the short sale what about the second, or third?
3) What is the plan to satisfy all of the lien holders?
Do the lien holders know about the short sale, and have they agreed to it? It helps a lot if the owner has been in contact with the lien holders and they know what’s coming.
4) Who is negotiating the short sale with the lien holders?
I am a proponent of using professional short sale negotiators, attorneys, to negotiate short sales, and many listing agents operate this way. Professional negotiators have systems in place that can streamline the process and this can help speed things up. Unfortunately there are too many people out there trying to negotiate short sales who are in over their head.
So, what are we ultimately looking for in a short sale property? An agent who is using an attorney to negotiate with one lien holder (a first trust), who has already agreed to the short sale. Does this exist? Sure, but they are few and far between…
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